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Here's why the US cannabis industry will be 'hourglass-shaped'
Today, Marc Hauser's Cannabis Musings is taking over Cultivated.
Welcome, welcome.
I hope you all had a great weekend and are off to a good start this week.
On that note, I hope you all read and enjoyed Hirsh Jain’s opinion piece last week.
Another reminder: If you have a burning opinion on a cannabis-related issue and you need to write about it, I’m open for pitches. Just reply to this email and we’ll get the conversation going.
Okay, I’ve got a special edition of Cultivated for you all today.
My friend Marc Hauser, a longtime lawyer who literally teaches the class on cannabis law and business at Northwestern, has been writing Cannabis Musings, a sharp newsletter with commentary on deals, policy changes, and other major cannabis developments since 2018.
I’ve always found his writing to be a useful (and often irreverent) guide for when I need to understand something in a deeper way. I’d encourage you all to subscribe.
Since he started writing, Marc left the lucrative pastures of big law to found Hauser Advisory, a firm that provides advice and strategy to growing cannabis companies.
Today, I’m letting Marc takeover Cultivated with a piece of his own. Let me know what you think.
-Jeremy
Cannabis Musings: Last week, news hit that international tobacco company, Philip Morris, is acquiring Israel-based Syqe Medical, producer of a metered-dose inhaler used for pain reduction treatment using medical cannabis (such a blessing!).
This represents yet another multinational company planting yet another a stake along the perimeter of US cannabis.
Previous examples include:
Constellation Brand’s ill-fated investment into Canadian cannabis company, Canopy Growth.
Altria’s 2018 investment into cannabis company, Cronos Group.
Alcohol distributor Johnson Brothers’ circuitous investments into US cannabis distributor, Humble & Fume.
The launch of cannabis-infused beverages in Canada by US-based Boston Beer Company.
And Wine & Spirits Wholesalers of America, issuing a white paper and launching a lobbying blitz to shape the future of cannabis distribution in the US.
The US cannabis marketplace will become ‘hourglass shaped’
I’ve been predicting for years that, post-legalization, the US cannabis marketplace will eventually become hourglass-shaped, akin to the beer industry — a handful of producers owned by multinational alcohol, tobacco, and consumer packaged goods companies will make up the vast majority of national distribution and sales volume, offering highly-branded, relatively commoditized product (likely grown outside of the US) for the masses, while countless regional, local, and hyperlocal offer create craft, specialized cannabis products to connoisseurs.
There’s a reasonable debate to be had about whether this is “good” for the cannabis industry, but I think it’s nonetheless inevitable — these companies have infrastructure, know-how, and, most importantly, access to cheap capital.
Of course, no one of this will really happen until the US legalizes cannabis — the terms “money laundering” and “aiding-and-abetting” still strike fear in the hearts of in-house lawyers, particularly at highly-regulated companies.
It’s the reason why most of these companies haven’t yet directly invested in, or engaged with, US cannabis, and it’s also the reason why they’re methodically working along the perimeter.
I suspect this will accelerate as the industry continues to struggle, and maybe it picks up if the SAFE Banking Act ever passes (that’s a big if), because of its protections for ancillary businesses.
It’s all about building relationships within the industry, developing know-how, and getting ready for the day when the risk of federal illegality is removed, when all of these multinationals can have fun storming the castle.
Marc Hauser is President of Hauser Advisory, providing advice and strategy on business lifecycle events and cannabis industry engagement. Previously, Marc practiced deal and capital markets law for nearly 25 years, most recently as a Partner and Chair of the Cannabis Practice Team at Reed Smith LLP, a global law firm.
For nearly five years, Marc has published Cannabis Musings, a weekly, irreverent perspective on things happening in the cannabis industry. Marc is a frequent industry speaker, and co-teaches Cannabis Law, Business, and Policy as an Associate Professor at Northwestern University Pritzker School of Law (his alma mater).