Discover more from Four PM
High Expectations 🌿
An additional attempt is made to federally legalize cannabis in the U.S...
This edition of Four PM is brought to you by Greenline POS.
There are few companies I admire more in the cannabis industry than Greenline, so I’m really proud to have them as a sponsor of Four PM today.
Greenline is the best point-of-sale platform I’ve personally used — and their team constantly innovates. Back in 2019, I needed a way to track which products were not being scanned in our stores, so I reached out to them. Not only did they get back to me crazy fast, but they built and shipped the feature I wanted within two weeks.
Plus, Greenline offers financing for their customers. Get loans and/or lines of credit so you can grow now, not later. Need marketing? Holiday staff or inventory? Rent or renovations? Greenline Capital’s got you covered.
Try Greenline. They actually provide the support you need to grow.
In Today’s Issue:
→ U.S Legalization Plans. 🌿
→ Canadian Taxation Reform. 💰
→ Cannabis Sales In Illinois. 🚀
A Divided Democratic Party
Can the democratic party reach a consensus on the right path forward?
For the past 12,000 years, we humans have been safely consuming cannabis.
Less than 80 years ago, lawmakers successfully enacted legislative reform that prohibited adults from accessing this plant.
Fast forward until 2021, and albeit 36 states have legalized cannabis for medical purposes, 18 for adult-use purposes with 68% of Americans now supporting the legalization of cannabis — U.S politicians remain at a standstill.
Democrats vs Republicans
With such a large percentage of the American population supporting the legalization of cannabis — a great deal of effort is now being made to once again allow every adult to access cannabis.
The problem, however, is that up until the most recent elections — any & all attempts to intact this reform were crushed by the Republican Party.
As of January 2021, the odds of this reform coming into effect significantly increased as the Democrats claimed control of the Senate for the first time in 6 years, while maintaining control of the House.
This control was obtained by the slimmest of margins with the Democrats having 51% of the votes, whereas they require 60% of the 100 votes to successfully pass new legislation.
MORE vs SAFE Banking…
There are currently two pieces of legislation making progress in Congress, however, let’s start by clarifying the primary goals of each.
→ The MORE Act would federally legalize cannabis, with a strong focus on social equity.
→ The SAFE Banking Act would protect financial institutions that work with cannabis companies from federal regulators.
The problem as things stand today is the divided opinions within the Democratic party as to which legislation should be passed, with Democrat leaders working in opposition to one another.
→ V.P Kamala Harris is the lead Senate sponsor of the MORE Act.
→ Senate majority leader Chuck Schumer supports the cannabis administration and opportunity act.
→ Chuck Schumer & Cory Booker stand in opposition to the SAFE Banking Act passing.
The inability of the democratic party to achieve a consensus on the right course of action to legalize cannabis is undermining any & all progress underway to achieve federal legalization.
To successfully resolve this standstill, one key question needs to be answered — is the democratic party willing to accept moderate reform for cannabis and use this as a stepping stone for future reform?
Or is the democratic party willing to risk gaining nothing, in favor of achieving much broader legislative reform for cannabis?
With the republican party strictly in favor of keeping cannabis illegal — until such a point is reached where the democrats can present a united front, nothing will change in the United States.
I empathize with the desire to prioritize social equity reform over banking reform, however, both issues inevitability need to be resolved, such that it might be time to prioritize the issue that has the highest likelihood of receiving the required support.
Time For Change In Canada?
Cannabis leaders call for immediate tax reform…
In the three years since Canada legalized cannabis for adult-use purposes, sales have been soaring, however, craft producers are calling for change.
→ In May 2019, monthly cannabis sales reached $50 million CAD.
→ In May 2020, monthly cannabis sales reached $200 million CAD.
→ In May 2021, monthly cannabis sales reached $313 million CAD.
Despite the ever-increasing sum Canadian consumers are spending on cannabis, the issues that plagued the Canadian cannabis industry in its earliest days remain in place.
Leading the charge…
After Canada legalized cannabis, craft producers had to wait many months such that they could participate in the legal industry.
Thankfully, these issues were successfully resolved, however, craft producers still have to contend with some of the highest tax rates for cannabis products in any region where cannabis is legal.
Earlier this month, Dan Sutton — CEO of B.C based Tantalus Labs took to Twitter to share his perspective on how Canada’s cannabis tax policy was damaging small businesses.
“It is no exaggeration that under the current excise regime, craft cultivators and processors across the country are marching rapidly towards insolvency in a systematic way.”
With an outpouring of support agreeing with Sutton’s criticism of the Canadian cannabis industry — he took the initiative to launch a campaign to raise the issue with lawmakers.
Craft producers in Canada are currently paying as much as 30% of their total revenues in taxes, which is causing many producers to reconsider the viability of keeping their doors open.
“We are watching our peers go insolvent under the burden of excessive taxation, and we want to believe in a future of Canadian cannabis that includes small businesses.”
With average wholesale prices at less than $4.50 CAD per gram, craft producers are still paying $1 CAD per gram of cannabis.
“If craft farmers cannot make a living, we will see the sharp transition of market share to large conglomerates” — Sutton added.
The campaign is recommending two policy changes:
→ Remove the $1 minimum per gram tax per gram, and maintain a floating percentage on every gram of cannabis sold.
→ Tax cannabis businesses based on their scale, as is currently the case with the Canadian beer industry.
On the 17th of October, Canadian policymakers will begin their scheduled review of the Cannabis Act.
In theory, Canadian policymakers could enact the requested changes, however, Health Canada which regulates the industry has emphasized that “limited resources” are available for the review.
I commend the action Dan Sutton is taking to bring awareness to this issue, and wholeheartedly agree with his analysis of the situation.
That said, with Health Canada very clearly suggesting that they intend to make little to no changes to the existing policies in place — I remain skeptical that such seismic changes will come into fruition from this upcoming review.
Illinois Cannabis Sales Soar
Adult-use sales in Illinois are on track to surpass $1 billion USD in 2021…
On the 1st of January 2020, Illinois became the 11th State to legalize cannabis for adult-use purposes.
Although ten States moved faster than Illinois — they were in fact the very first state in the nation to legalize adult-use sales by an act of the state legislature, as opposed to voter initiatives.
The Illinois General Assembly passed the Compassionate Use of Medical Cannabis Pilot Program Act in 2013 which legalized medical cannabis for a very limited number of cases.
This law came into effect in August 2013, making Illinois the 20th state to legalize cannabis for medical purposes.
By October 2020, medical cannabis sales were soaring with over 143,000 qualifying patients have enrolled in the program with medical cannabis sales surpassing $366 million USD in 2020.
It wasn’t long until Illinois expanded this access to every adult in the State.
On January 1st, 2020, the first day of legal adult-use sales, over 77,000 customers spent $3.2 million in legal sales at stores across Illinois.
Since then, sales have been soaring with the State well on track to surpass $1 billion USD in adult-use cannabis sales in 2021.
Per headset, Illinois is now just $400K away from surpassing Michigan as the 3rd largest market for cannabis sales in the United States.
Since January, cannabis sales have been steadily increasing, however, the products consumers are purchasing have remained much the same.
→ Vape sales have remained between 25.3% — 27.2% of sales.
→ Pre-roll sales have remained between 6.4% — 7.8% of sales.
→ Edible sales have remained between 12.9% — 13.9% of sales.
→ Concentrate sales have remained between 6.9% — 8.5% of sales.
→ Dried flower sales have remained between 41.8% — 43.3% of sales.
It looks very likely that the 11th state to legalize cannabis for adult-use purposes will soon become the 3rd largest cannabis market in the U.S.
That said, with over $40 million of the $121 million in adult-use sales coming from out-of-state visitors last month, it will be very interesting to see how federal legalization could potentially impact this figure.
For more like this, subscribe to Four PM today to receive the next edition:
If you gained value from this edition of Four PM, share it with your favorite cannabis professionals. 🌎