Hey,
welcome back guys between bells and chatter news
2021 a big year for the cannabis industry.
Hannah has several key states legalized adult use cannabis.
While federal lawmakers introduced a dozen legalization bills
plus big tech took a stand in m and a warmed up in a very big way and that's,
that's quite the stage for next year here.
Yeah.
So with the new year just around the corner,
it's time to pull out our crystal balls
here with more is chatter correspondent Chloe Aiello.
Hello, my friend. Great to see you. Let's talk with about politics first.
What can we expect from 2022 as far as federal policy reform goes,
Hey Hannah.
Well, there is potentially a lot on the table in 2022,
but let me back it up and give a quick review of 2021.
So that was supposed to be the year of federal reform.
We had major ceos including David Klein of canopy growth betting on it.
But of course that wasn't the case. Uh, but we can see why he was optimistic.
So for one thing we had Senator Schumer
Wyden Booker released their comprehensive decriminalization bill,
the cannabis administration and opportunity act.
Um, it's served, you know, as I mentioned,
comprehensive legalization in equity provisions,
but it also had a 25% proposed tax rate and proposed increased FDA involvement,
which the industry found difficult to get on board with.
And with this type of more comprehensive bill,
it is a tough sell in the Senate where it needs 60 votes to pass
Republican from south Carolina.
Representative Nancy Mace did release her answer to that bill later on in the year,
The state's reform Act, it proposed regulating cannabis similar to alcohol,
a significantly lower tax rate, as well as minimal FDA involvement.
But it doesn't have any equity provisions which
could make that a tough sell among democrats
safe banking, which we talked about all the time on here,
does actually have broad bipartisan support,
but it faces opposition not only from more conservative lawmakers,
but also from more progressive ones who have a
very specific idea of how cannabis should pass,
namely with equity provisions.
So that contributed to of course,
it's removal from the National Defense authorization Act at the close of 2021
yet another defeat for this bill.
But Cowen analyst Vivian Azar, who spoke to us a couple of weeks ago,
believes that we will see some form of reform in 2022 either leading up
to the midterm elections or in afterwards in the the lame duck session.
The timing, of course, is vital because, you know, in spite of Macy's bill,
it's not clear whether a Republican controlled congress, which, you know,
could be the outcome of the 2022 midterms will prioritize cannabis.
Um,
as for what this bill could look like as a
anticipates it might look something like the state's act,
which of course leaves regulation largely up to states whether
they want to legalize or not with some equity provisions.
Um, you know, if that can't happen then she anticipates safe banking.
Should should Senator schumer come around to it?
All right. Chloe this year was a robust year when it came to M and A.
How do you sort of think that that's going to set the stage for next year?
And are we expecting any other sort of big mergers and deals to happen next year?
Yes. Well, a lot of folks think so. So as you mentioned, this was a big year.
Viridian capital advisors with tracks transactions
in the cannabis industry noted that through
the week ending december 37th there were 306 transactions in uh you know,
year to date in 2021 compared with 86 in 2020
which of course was a bit of an outlier year.
But of those 209 targeted us companies and there was a record $10 billion US.
Notable deals did include truly is $2.1
billion acquisition of Harvest Health and Recreation,
which did usher in the return of billion dollar deals in U.
S. Cannabis. We had the $4 billion Hillary a free merger.
We also have the pharmaceutical industry getting involved.
We had a $7.2 billion acquisition of GW pharmaceuticals by Jazz pharmaceuticals.
And of course Pfizer just announcing its
$6.7 billion intended acquisition of Arena pharmaceuticals.
Um you know,
in 2022 MJ biz ceo chris Walsh anticipates mm They will continue to heat up with at
least three or four major mergers on the
horizon or acquisitions occurring in the US and Canada
brady in says discounted valuations will drive M and A and that
all but the biggest multi state operators are in play for acquisitions.
It did identify a couple of, you know,
targets namely forefront harborside local farms,
planet 13 and Swazi among others.
As the industry, of course, moves to consolidate in advance of major,
significant federal reform
And brand building is notoriously difficult in cannabis.
Could 2020 to be the year we see national brands emerged here.
You know,
I spoke to BDS is Jessica Lucas about this and she
thinks that it could be the year of the brand.
Brand building, as you mentioned, is difficult in cannabis.
Um, do you know, mostly to the fact that regulations differ on a state by state basis,
sometimes even on a county by county basis.
So it's really difficult.
It's really expensive for cannabis companies to expand this way
and get their products and brands out to the world.
That's why we tend to see multi state operators having, you know,
the most success in terms of brand building.
Um, and, you know,
brand loyalty in general and cannabis doesn't tend to be
much of a driver of purchasing according to BDS.
A as much as other factors like a positive experience with a product for example.
But 2022 could be the year that that changes.
And the brands that are sort of on BDS is radar include cookies, water brands,
wild Kiva speakeasy and certain mso brands like Cresco labs.
These could start to earn more customer loyalty
and consistency and drive more consistent spending.
You know the cannabis industry is going to be a
little bit different still from you know the beverage industry,
the tobacco industry when it comes to brand um you know building as well as loyalty.
Um But you know that's going to be the case at least until we see more
comprehensive federal reform and you know one of the ways that
brands are spreading right now is through licensing out their I.
P. And that's what cookies for example has had a lot of success with Chloe.
How will US operators and even CPG companies maybe think
about global cannabis opportunities heading into next year here.
Well you know we talk all the time here about the U. S.
Cannabis opportunity and even the Canadian cannabis
opportunity but we don't spend a lot of
time talking about europe talking about latin
America and these are really promising markets.
So in december malta became the first european country to legalize cannabis.
Others including Germany are expected to follow soon.
Meanwhile draft legislation of you know cannabis legalization
is you know reportedly on the table in
Mexico and multiple other South and central american
countries are considering working on legislation as well.
So you know,
while these markets pose a potentially more modest opportunity compared to the U.
S.
Which is expected to of course be the biggest cannabis market in the world once,
you know, it is fully online.
Um It's nevertheless an attractive opportunity for a
lot of cannabis operators who you know,
potentially can have, you know, first mover advantages in that area and you know,
expand beyond the US.
Um but just from B. D. S. A.
Doesn't anticipate many CPG companies seizing on this opportunity.
Instead they're kind of waiting and seeing and you
know sort of getting exposure to the U.
S. Market, the Canadian market when they can.
But instead we might see mso is you know, multi state operators here in the U. S.
And Canadian companies which are already focused,
you know pretty heavily internationally
continue to kind of expand.
But I do want to mention that viridian
capital advisors is warning investors that these markets
could actually be a distraction for companies particularly
those in the US away from the U.
S. Market.
And to you know, if they're going to invest,
invest in a more pure play international cannabis company
cheddar correspondent, Chloe Aiello, Great