In the past few years, the performance of cannabis investment is not ideal, and there is still great uncertainty in the cannabis market in 2023. In the short term, the risks of bankruptcy and financial instability remain, but the stability and opportunities of long-term investment in the cannabis industry are certain.
Looking forward to 2023, these 6 trends in the cannabis industry deserve special attention.
1. US political uncertainty will continue
Politics plays an extremely important role in the American marijuana market, so marijuana investors pay close attention to the dynamics of the United States Congress. In 2022, the market has high expectations for the reform of the marijuana bank in the United States. It is hoped that the financing environment of marijuana companies will be improved. But so far, lawmakers have not reached an agreement on whether the Safe and Fair Implementation (SAFE) Banking Act will be included in other bills. Charles Taerk, president and CEO of Faircourt Asset Management, said that if the Democrats really want to seek common ground, they should have done it in the past two years. In 2023, the US Republican Party will control the House of Representatives.
2. Cash flow of some interstate marijuana operators in the United States will increase significantly
The US marijuana market is very fragmented, which brings difficulties to stock selection. Taerk, the fund manager of Ninepoint Alternative Health Fund, is optimistic about MSOs such as Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) and Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) based on their sound balance sheets, high operating efficiency and higher profit margins. In addition, Taerk pointed out that the large-scale capital expenditure plans of interstate operators are expected to end, which will drive the substantial growth of cash flow of these companies. Cannabis packaging industry will remain hot.
3. The sale of adult marijuana in New York State has attracted much attention
Experts predict that more states in the United States will start the cannabis market in 2023, of which New York is undoubtedly the most concerned state. The opening of New York State may overturn the status quo of the cannabis market. The existing medical cannabis operators in the state are also expected to start selling recreational cannabis. However, the first 36 temporary licenses issued by the regulatory authority are preferred by entrepreneurs and non-profit organizations. In addition, experts said that the cannabis market in New York State will face fierce competition from the black market, with various regulatory barriers. The cannabis market in New York State may not have the high growth as expected.
4. Inflation shock will gradually fade
Inflation affects every industry, and its impact on cannabis is reflected in consumption patterns and prices. The consumer's wallet has shrunk, and the consumption expenditure, at least the optional consumption of marijuana, will naturally come down. According to the analysis of financial experts, the change of consumption mode affects the fundamental adjustment in the hemp investment logic, but this change is temporary rather than the new normal. The manager of Purpose Marijuana Opportunities Fund (NEO: MJJ) said that cannabis consumption is expected to rebound in 2024. However, cannabis is still an emerging frontier market, which will be very difficult in the next 12 months.
5. In Canada, survival is victory
The outlook for the Canadian cannabis market remains challenging, with various market restrictions inhibiting investor interest. In the future, the Canadian cannabis industry will be defined by the surviving companies, and the market share of the selected companies will also expand. Experts said that the Canadian cannabis market still needs to slim down, further eliminate excess capacity and retail distribution points, and companies like Village Farms International Inc (TSX: VFF) (NASDAQ: VFF) that master agricultural skills will be more secure. Cannabis operators in Canada should focus on local companies with overseas market expansion opportunities, especially in Europe.
6. Legalization of cannabis in Europe
The potential of the European cannabis market has been a hot topic among cannabis investors. Germany is a wind vane in the process of legalizing cannabis in Europe. It is expected that the sale of cannabis for adults will be approved in 2023, and the revision of relevant laws and regulations on cannabis is being rapidly promoted. Karl Lauterbach, the German Health Minister, said that his country did not want to copy the more open cannabis regulatory model of the Netherlands, but wanted to control the entire cannabis market. It is encouraging that some European countries are also paying attention to Germany and have announced their plans to legalize cannabis. At present, there are only the United States and Canada in the cannabis market, and the legalization of cannabis in Europe will improve the diversification of the cannabis market.