The Bengal Bite - "Canna"nomics - Jan. 29, 2021

Arizona has avoided the delay that often comes with states’ implementing a new cannabis regime. Undoubtedly having a well-established medical market, estimated at over $700m in 2020 sales, helped establish a good foundation, and Arizona also had the experience of other states to draw on as well. Nonetheless, as the chart below shows, the 80 days between legalization and first adult-use sales is incredibly quick, and hopefully indicates a trend towards faster adult-use implementation by new states going forward. 

In the coming year, cannabis companies that have doubled down on single-state organic growth will be competing or supplementing with acquisition-based growth strategies. Either way, investors will likely be more focused on profits or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) going forward, rather than just revenue.

2020 saw the opening of many new state recreational and medicinal cannabis markets, and 2021 is expected to mirror that. Arizona just opened up recreational doors, and we know that already Kentucky, Kansas, Alabama, and South Carolina are looking at legalization of medical cannabis. These regulatory catalysts will continue to push gross national cannabis sales to new heights. 

Ice cream-style delivery features an employee with a stocked up van who roves in an area, and can quickly stop by customers as they order on their company’s app (or consumers might just hear the jingle as the van drives by). Pizza style-delivery is hub based, where the delivery driver makes trips to and the hub for one or a few orders, potentially is slower but may give the customer more choice. We found this writeup by an industry veteran on the ins and outs of ice cream vs pizza, and the potential of mixing both, insightful.

Two qualities differentiate the East Coast from other cannabis markets: the region’s dense population and the number of limited license states. These unique conditions might potentially create the optimal environment for established brands to build lasting brand loyalty. As cannabis becomes an increasingly mainstream product, consumers will also expect legal brands to engage with them in the same ways that conventional CPG brands do. These audiences are looking for companies with distinct brand voices, along with consistent yet bespoke cannabis experiences that address their specific lifestyles and preferences.