Late last year, the MGO | ELLO Alliance launched its inaugural Cannabis 50, a selection of the pioneers, leaders, and innovators making a positive impact on cannabis, hemp, and CBD. During the course of the project, we were pleased to have in-depth conversations with our honorees, a diverse mix of businesses, investors, researchers, nonprofits, athletes, and entertainers. We learned about their trials and triumphs, gaining an understanding of where they see the cannabis market today and where it will go tomorrow.
For many in the cannabis sector, 2019 was a wake-up call. Stock values were unstable, many mergers and acquisitions deals were unwound or restructured, and layoffs affected many companies.
However, some believe the difficulties posed by market shifts in 2019 were exactly what the industry needed. “There was a lot of hyped and exuberant capital moving too quickly leading into this past year,” offered Emily Paxhia, co-founder and managing partner at Poseidon Asset Management. “A lack of corporate governance and a prudent operational mindset has led to disappointing results… This cycle has been the necessary wake-up call that acts as an important period of any emerging market.”
Robert Flannery, Ph.D., founder and chief executive officer at Dr. Robb Farms, agreed: “I am a firm believer that ‘you need to break down before you break through,’ so I see 2019 as a necessary step toward building a stronger and healthier industry to come in the next few years.”
Already in 2020, we’ve seen cannabis businesses respond to the disruptions of 2019 by focusing on fundamentals, including operational efficiency, profitability, and corporate governance. These are hallmarks of a maturing industry that has learned a lesson and is moving forward.
The most widely shared sentiment among Cannabis 50 honorees was the essential role social equity and restorative justice initiatives play in building a responsible, sustainable industry.
“The area we must do better in is social justice,” said Kevin Murphy, chief executive officer for Acreage Holdings. “As the industry grows, we must not forget to take care of the people and communities that have been disproportionately hurt by the war on drugs.”
Seke Ballard, founder of Good Tree Capital, expressed his belief in the healing capability the cannabis industry presents. “I believe wholeheartedly in the concept of restorative justice,” he said. “The potential for this industry to be a catalyst of change is high. We cannot miss this opportunity to build social cohesion and rebuild communities.”
On January 1, the Illinois adult-use market opened, featuring a groundbreaking social equity program many hope will serve as a model for other states as they enact their own legislation. Additionally, a growing number of businesses—including Green Thumb Industries and Harvest Health and Recreation—are launching innovative social equity programs that show the industry understands how important it is to give back while growing up.
Where will the industry go in 2020 and beyond? Some of the Cannabis 50 were optimistic about industry growth this calendar year, including law firm Duane Morris LLP: “Revenues for the industry will continue to grow in 2020 as the adult-use and medical programs that were implemented in the past few years begin to mature. More and more operators will become profitable, which will lead to continued mergers, acquisitions, and market consolidation.”
Michael Steinmetz, co-founder and chief executive officer at Flow Kana, believes change at the state and local level is the key to building a strong industry. “Every legal operator in California is looking to state leadership to join us in producing sustainable solutions that will allow us all to thrive—including the state—and we won’t settle for anything less,” he said. “With that said, I predict we’ll see a wider path for illicit retail operators and cultivators to join us in compliance, effectively increasing California’s regulated cannabis retail footprint while decreasing the potential for dangerous illicit products to be sold.”
Ultimately, the growing pains of 2019 haven’t dimmed the prospects for the industry in 2020. Many more obstacles await the cannabis sector, but the major players are stronger, leaner, and more focused for 2020 and beyond.
