The new year brings renewed optimism and hope for the marijuana industry, which could see a raft of impactful trends for cannabis business executives.

Overall, 2022 was a tough year for the cannabis industry, with macroeconomic headwinds including inflation as well as industry-specific obstacles such as overproduction and a lack of capital investment.

Looking ahead, the marijuana market can expect, to name a few:

• A prolonged slowdown of mergers and acquisitions.
• Calls for moratoriums in mature markets struggling with too much supply.
• Product segmentation at the retail level as consumers become increasingly sophisticated in buying habits.

Here are the top 10 marijuana industry trends to watch for in 2023, as determined by MJBizDaily staffers:

1. Major consolidation in key markets

After the boom times during the COVID-19 pandemic lockdowns, the cannabis industry doesn’t appear as recession-proof as it once did.

Companies in mature recreational markets such as Colorado and Washington state are struggling with falling prices.

Other markets such as Michigan and Massachusetts – which are on the younger side for adult-use sales – have already reached a saturation point.

In response, ancillary and plant-touching companies alike are cutting employees.

Despite the cost-cutting measures, many companies will still fail this year, licenses will be absorbed by bigger, corporate-style businesses and only the most-cost-efficient players will survive.

2. Mergers and acquisitions grind to a halt

In 2022, M&A activity slowed dramatically, and with ongoing reports that access to capital has all but dried up across the U.S., the trend is sure to persist.

There was a period where MJBizDaily frequently reported on company deals above $100 million. But those are now few and far between.

Many deals in 2022 that we covered were below $25 million.

Even the value of all-stock or partly stock deals agreed upon last year has fallen significantly, along with the stock market.

It’s not likely that trend will turn around.

3. Delta-8 THC remains a burr in the industry’s saddle

Almost every state-legal marijuana market made some type of rule to govern delta-8 THC in the past year.

States with limited or no legal marijuana markets – and even those with robust laws – saw delta-8 products proliferate nearly unregulated, providing a major source of competition for the licensed industry.

According to the 2018 Farm Bill that legalized nationwide hemp production as well as hemp “derivatives” and “extracts,” cannabinoids made from extracted CBD are legal as long as the plant where they began met the legal definition of hemp.

So it’s no violation of the U.S. Controlled Substances Act to extract CBD from a hemp flower and then put the CBD through a manufacturing process.

Without any change to the law, and that’s unlikely, the delta-8 market is likely to continue as is, which is a major headache for the cannabis industry.

4. THC potency obsession and lab shopping draw more attention

The issue of the industry’s obsession with THC potency will finally come to a head.

A long-running problem, the potency issue really bubbled up in 2022, with testing laboratories being sued for misrepresenting THC numbers as well as state regulators from Florida to Nevada moving to fine and suspend labs for violations.

Industry watchers hope this could lead to less lab shopping and better consumer education on the many other beneficial components of the cannabis plant.

That, in turn, could shift the focus of the industry away from cannabinoid content.

5. Calls for moratoriums grow louder

As growers in mature markets experience price compression and oversaturation while more cultivation capacity comes online, some are calling for help from state governments.

Companies in states such as Colorado and Michigan are asking state regulators to step in and put a moratorium on new licensing.

It remains to be seen what the effects of such artificial market controls have on business success.

Similar action in Oregon a few years ago did not solve that market’s overproduction problem.

6. Product segmentation and consumer sophistication at the retail store

Flower sales will continue to grow in virtually every market, but flower is losing market share to other products such as vapes, concentrates and edibles as consumers become more sophisticated.

Frequent users are not replacing flower with other products but, rather, are smoking flower at the same rates while adding other form factors into their consumption habits.

Live resin will continue to be popular as a consumer-favorite extract, both as a stand-alone concentrate and as something infused into pre-rolls, cartridges and edibles.

The product is becoming more popular than distillate, and distillate, while not exactly disappearing, will decline in appeal in the face of live resin preferences.

New consumers make up only 6% of the cannabis market and don’t spend that much money, according to Chicago-based cannabis analytics firm Brightfield Group.

Rather, most sales come from frequent marijuana users: 47% of cannabis users consume multiple times daily, 17% consume once per day and 10% consume five times per week or more.

That trend will only roll on.

A couple of other segments to watch:

• Sales of infused pre-rolls have grown by a multiple of 5 since January 2020, according to data-analytics firm Headset.
• Vapes have not only bounced back from the 2019 vape crisis, but they also are now the No. 2-selling marijuana item.

7. New York will struggle to contain the illicit market after launch of recreational cannabis

The conventional wisdom has long been that it’s easier to order cannabis delivered to your New York apartment than it is to order a pizza.

Couple that with the exuberance entrepreneurs showed this year in the state by setting up pop-up cannabis shops, unlicensed dispensaries and vans selling marijuana out of their backdoors, and the licensed market has its work cut out for it.

The state is trying to think outside the box to distinguish between licensed and illicit cannabis companies, but slapping a QR code on a store window likely won’t be enough.

To lure consumers away from the illicit market, regulators will need to make business conditions friendly and keep taxes low.

Simply leaning on the safety and testing of licensed products won’t cut it.

8. Canada business woes might be cut short

In recent years, large Canadian companies have been selling cannabis at a loss, losing billions of dollars and undercutting competitors in the process – with the help of Wall Street financing.

That trend might come to an end if Wall Street’s easy money runs dry, forcing large companies to sink or swim on their own.

On the cultivation front, Canada has produced far more cannabis than it can sell. That won’t change in 2023, but inventory might peak and start falling thereafter.

By way of retail, some stores have started closing in certain provinces, particularly in parts of oversaturated urban markets.

Retail consolidation and closures will continue, but despite that, more stores will continue to open in other places. Expect a net gain in stores.

9. Unionization efforts will see sustained success

Unionization of the cannabis industry will continue.

Organizers such as the United Food and Commercial Workers and the Teamsters view the cannabis industry as ripe for their efforts, considering it’s one of the largest industries in the United States with abundant growth.

In Canada, labor organizers say unionization and strikes among cannabis retail employees are being driven by worker concerns including low pay and health and safety issues.

Not all cannabis companies are friendly to union efforts, so expect to hear about more fights between workers and businesses.

10. Legalization efforts redouble after mixed success of 2022

Marijuana legalization’s momentum hit a red wall in conservative states in the South and West, but the 2022 election did bring victories in Maryland and Missouri.

On the federal front, industry watchers were hopeful for the incremental success of banking reform. That didn’t happen, but this year will bring another opportunity.

Of course, the ultimate goal is federal legalization, and President Joe Biden’s announcement that his administration would review whether marijuana should remain a Schedule 1 drug is going to put wind in the sails of advocates and reformers.

Also worth watching are the states that failed to legalize via their legislatures in 2022, including, Delaware, Kansas and North and South Carolina.

Source: https://mjbizdaily.com/10-cannabis-industry-trends-to-watch-for-in-2023/