Three Findings From Emerald Intel’s Q1 2024 Market Brief

In Emerald Intel’s inaugural market brief, we took an extensive look at licensure and multi-state operators in the United States with the goal of answering the following questions:

1. What does the current licensure landscape look like and what are the similarities and differences between licensing models across the United States?
2. The good, the bad, and the ugly: how are state licensure structures impacting the growth of the cannabis industry?
3. MSOs—cannabis giants—which states have the most, and why? And what correlations are there between MSOs, licensure, and a healthy (or unhealthy) competitive marketplace? 

While still in its infancy, the cannabis market has quickly become a complex ecosystem—and licensure is just the tip of the iceberg. Whether you’re an investor, a sales or marketer, a consultant, or a small business looking to carve out your piece of the market, understanding the licensing landscape is critical to success. 

Following are three findings from our market brief: Licensure and Multi-State Operators in the United States. To read the complete findings, download a free copy of the report here.

1. Quick turn-around states from medical only to adult-use are facing uphill challenges that have allowed cannabis black markets to thrive.

In examining some of the most recent states to legalize adult-use, there was only a 3.5-year gap from the time in which the state first legalized medical cannabis. New York, Washington D.C., and Virginia have struggled to make the transition, begging the question—were these regulatory bodies ready or did they succumb to public pressure?

• In New York, the state’s emphasis on conditional licenses, high barriers to entry, and higher taxes than surrounding states have created a perfect storm for the cannabis black market. An estimated 8,000 illicit dispensaries are in New York City alone. 
• “Legalized” in 2015, The District of Columbia has yet to implement a formal adult-use licensure program, leading to its own thriving cannabis black market and missing out on millions in tax revenue. 
• Virginia legalized the possession of adult-use cannabis, however, its executive and legislative branches have failed to align on how to move forward. The state’s black market is estimated to be worth $2.4B in 2023.  

Section three of our market brief, Who Got It Right?, analyzes the differences between these emerging adult-use programs and the states that have successfully made the transition to adult-use. Download your copy here.

2. Vertically integrated states are providing MSOs with an opportunity to thrive, while small businesses currently stand little chance.

Vertical integration is where a single company controls multiple stages of a supply chain. For the cannabis industry, it’s often referred to as “seed to sale”. 

Emerald Intel researched every state where 50% or more of the state’s market share is controlled by MSOs, and found that 8 out of 9 of these states require vertical integration. These states legalized medical cannabis 10+ years after California, Oregon, Washington, and Colorado and because they began their programs requiring vertical integration, small businesses didn’t stand a chance.

So, who benefits from vertical integration? From a regulatory perspective, this arrangement gives states significant oversight across cannabis operations while keeping license structures simple and convenient to manage. It also means operations can get up and running faster—and the state can recognize tax revenue at an accelerated timeline. 

From a small business perspective, vertical integration requires significant initial investment, thus making it much easier for an MSO to benefit from this arrangement. This also gives an MSO total control over pricing—eliminating any potential competition. 

Section four of our market brief, Multi-State Operators, takes a deep dive into the current MSO landscape and what it may mean for the US cannabis industry. To read the full report, download your copy here.

3. Social equity programs—are they really giving people a leg-up?

Throughout Emerald Intel’s market brief, we explore social equity programs and their success—or lack thereof. 

Each state with a social equity program has slight nuances but the concept remains largely the same: to provide those with low income, individuals or families impacted by the War on Drugs, or under-represented groups (e.g. women owned, veteran owned, distressed farmers, etc.) with the opportunity to be one of the first to kick-start the cannabis industry in their state. 

While great in theory, most social equity programs have their share of challenges, and resources to support and help these novice business owners are in short supply. In New York, for example, the state faced numerous lawsuits due to its Conditional Adult-Use Retail Dispensary (CAURD) program and the way in which the state determined qualification. 

New Jersey also applied a social equity focus to its gradual addition of retailers when the state legalized adult-use, however, cultivation and processing capacities created cannabis shortages throughout the state, resulting in more than 60% of New Jersey municipalities opting out of having cannabis businesses in their jurisdictions. For many, their doors closed before they even made their first dollar.

Illinois, however, has demonstrated their dedication to the cause, passing a $30M loan program in 2020 to assist with start-up costs—an investment the state government hopes will pay off when they reap the tax benefits of a booming cannabis economy.

Are social equity programs hurting more than they’re helping? For more on social equity programs in the cannabis industry, download the market brief here.

What’s next?

What good is all this data and research if you don’t know how to action it? Don’t worry—we’ve got you covered! At the end of our market brief, we provide actionable advice for how to use the information in our report to help guide your next steps and pull together a strategy for targeting and winning your ideal customer. 

Ready to download your free copy? Click here.