What Lies Ahead for U.S. Cannabis Markets in 2023?
February 28, 2023

With cannabis markets opening and expanding across the United States, many lessons are being learned by industry participants from niche cultivators and entrepreneurs to multi-state operators (MSOs) and state regulators. As we continue to study industry trends, we explore the outlook from a cannabis consultant for companies large and small across the U.S. Below is an excerpt from our latest interview.

Van McConnon, a consultant to the cannabis industry, has helped write rules governing cannabis licensing in multiple states and has been a cannabis entrepreneur for a number of years. Cannabis Benchmarks spoke with him to ask about his outlook for the industry in 2023. At the outset, McConnon made it clear that 2023 would see multiple failures of MSOs due to their owning the entire supply chain in states where it is difficult or impossible to grow cannabis outdoors and very expensive to grow indoors.

McConnon puts much of his prediction down to falling prices, which have revealed bad business plans. “MSOs are toast this year,” he said, because “almost all of them were set up to keep raising money to buildout infrastructure” and raising capital has become very difficult due to higher interest rates. “MSOs thought they had an asset in their marijuana licenses,” but are finding out the licenses are not worth as much as they were when the MSOs started in the business. In fact, McConnon said, “every project over $5 to $7 million has stalled out,” calling market conditions difficult.

On the other end of the spectrum, McConnon sees smaller growers – those producing around 1,000 pounds per year – doing pretty well, as they sell their “1,000 pounds at $100 per pound.” McConnon is referring to small farms where just a portion of the acreage is dedicated to cannabis and the rest to traditional crops. He sees cannabis as a viable farm product.

Looking around the U.S., McConnon is seeing legacy markets as the standard for good, smokable flower. He thinks Oregon’s bottom-shelf product is an order of magnitude better than Illinois’ best cannabis. He puts this phenomenon down to “consistency” in Oregon’s cannabis production. Regarding Colorado’s product quality, “the bottom’s really bad,” but the top crops in the state are “as good as anywhere else.”

Asked about the slow pace of the New York adult use roll-out, McConnon said enforcement is one of the biggest issues. The state “decriminalized before standing up the legal market,” so law enforcement is no longer pursuing cannabis crimes, the result of which is a surging illegal market that will weigh on the licensed system.

Right now, McConnon is seeing a good flow of business out of Illinois and into Missouri, where the cannabis is significantly cheaper and “dramatically better” than that found in the Land of Lincoln. He said there are “50 to 55 small producers” and “a more rational testing” regime in Missouri, making growing cannabis cheaper and resulting in quality, non-mass-produced crops.

Regarding California, McConnon said, “this is the year Humboldt died,” citing the failure of the Flow Cannabis partnership with Humboldt growers. The company “took all the small Emerald Triangle farmers and bundled their crop into [the] Flow Kana” brand, only to find out there was little retail interest in such a venture. Flow Cannabis might no longer be considered a “going concern.”

Is all lost for the cannabis business? Not according to McConnon, who likes the seed business because “it’s legal and avoids 280E issues.” He also likes the firm Honeybee Collective because it’s focused on making pre-rolls and has great purchasing and salespeople; “they know what they’re doing.” In fact, McConnon says 2023 is not only the year of MSOs and other large firms losing their footholds, it’s also “the year of the pre-roll.”