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5 Things to Watch in the Cannabis Industry in 2023


As 2022 draws to a close, we are looking ahead to try and anticipate what 2023 has in store for the cannabis industry.

Missouri & Maryland

Voters in five states were asked to consider legalizing adult-use cannabis and two states, Missouri and Maryland, voted to approve implementing adult-use cannabis programs. These two states are home to approximately 12.3 million people between them, dramatically expanding the population of people with access to legal cannabis. These two new markets will likely see a flurry of activity as licenses are issued and national players seek to increase their market share.


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Missouri voters approved Amendment 3 which established the State’s adult-use cannabis program on November 4, 2022. The adult-use program will be administered by the Department of Health and Senior Services (DHSS), which is also responsible for the State’s medical cannabis program. Beginning December 8, 2022, adults in Missouri have been allowed to legally possess up to three ounces of marijuana.

Under Amendment 3, current medical cannabis operators are eligible to submit requests to convert their operations to serve medical and adult-use customers. Thanks to this provision, individuals in Missouri could be able to purchase adult-use cannabis as early as February 2023. Individuals and businesses who do not currently operate medical cannabis businesses will be able to apply for an adult-use microbusiness license beginning in June 2023.


In November, Maryland voters approved Question 4 legalizing adult-use cannabis in the state. Under the new law, adults 21 and older will be able to possess up to 1.5 ounces of cannabis flower, 12 grams of cannabis concentrate, or any amount of cannabis products that contain less than 750 mg of THC starting July 1, 2023. The regulatory framework governing the adult-use cannabis program in Maryland will be created during the 2023 legislative session which runs from January 11 to April 10, 2023.

Given the fact that the rules and regulations for the program still need to be developed, a full-fledged adult-use cannabis industry likely won’t take root in the state until 2024. This could occur earlier if the State of Maryland gives current medical cannabis operators priority position to serve the adult-use market as other states, including Missouri, have done when implementing their adult-use programs. However, nobody will know how many licenses will be issued and who will be eligible to receive one until the Maryland General Assembly finalizes the program’s regulatory framework.

Oversupply and Downward Price Pressure

In the early years of the cannabis industry, everything was “up and to the right” i.e., experiencing a state of consistent growth. However, as many of the early adopting states start to reach a state of market maturity, we are seeing that the traditional rules of economics apply even in the cannabis industry. In particular, much of the industry is likely in for a thorough lesson in supply and demand in 2023.

Growth in Cultivation & Production

As more adult-use markets move towards maturity, cannabis cultivation and products manufacturing capacity has greatly increased in many states. Most states start off with a deficit of cultivation and manufacturing infrastructure when the begin their adult-use programs which initially results in high wholesale prices for cannabis flower, trim, distillate, and other cannabis concentrates. High wholesale prices incentivize investment in cultivation facilities and manufacturing facilities as operators rush to capture their share of the available market.

Many states are reaching a point where production capacity is rapidly catching up to the needs of the market. As long as wholesale prices remain high, operators continue to invest in cultivation and products manufacturing which increases the amount of cannabis available for purchase. At some point however, the market adjusts to the increased production and reflects it in the wholesale price.

Supply > Demand

When production capacity exceeds total demand, the market inevitably begins to intervene as cultivators and product manufacturers compete to sell their products. Given cannabis’ four-month crop cycle, it is difficult for cultivators to simply stop production when wholesale prices begin to drop. Many cultivators are forced to continue growing their crop through to harvest even in the face of declining prices leading to an even greater amount of cannabis on the market.

The increase in cannabis production capacity eventually causes a glut in supply of cannabis product on the market and results in downward pressure on wholesale prices in these markets. This oversupply in the market leads to a race to bottom for producers as they are forced to sell their product at lower and lower prices in order to stay afloat. In a case of extremely bad timing, inflation looks to continue to increase the cost of cultivation and product manufacturing inputs while wholesale prices continue to decline.


As individual state markets continue to mature, the number of small operators will likely decrease as the industry consolidates. Mom and pop businesses will slowly be replaced as large operators emerge in-state and multi-state operators continue to expand into new markets. Downward pressure on wholesale cannabis prices will likely exacerbate this trend as smaller operators struggle to compete with reduced profit margins.

Price Wars & Small Producers

In a business environment with reduced profit margins, operators with large balance sheets and operators with low cost of production are most likely to survive and thrive. As profit margins decline across the industry, inefficient operators are unable to turn a profit at market prices and must either improve their operations or go out of business. This is creating the conditions for consolidation as efficient and/or well-capitalized operators already operating in the industry are perfectly positioned to increase their market share at the expense of inefficient, failing operators.

While increased supply of cannabis and lower wholesale prices are typically a boon to retailers and consumers, low prices squeeze the bottom line of cultivators and processors. Larger, more efficient operators are better able to withstand reduced profit margins, but smaller mom and pop operators will be disproportionately affected by declining wholesale prices and may be forced to close up shop. This will create opportunities for more efficient and better-capitalized operators to acquire additional assets and market share at bargain prices.

Growth of MSOs

In 2022, multi-state operators (MSOs) completed a number of high-profile acquisitions and dramatically expanded their operations across the country. These acquisitions furthered the trend of large MSOs capturing market share at the expense of smaller competitors. Continued downward pressure on wholesale prices in certain markets will likely further this trend towards consolidation throughout 2023.

Increased consolidation favors MSOs thanks to their economies of scale, exposure to multiple state markets, and the size of their balance sheets. This small handful of businesses are best positioned to take advantage of price instability in various state markets and acquire new assets at distressed prices. It is safe to assume that these MSOs will continue to grow through acquisition, resulting in further consolidation of the cannabis industry within these companies.

Brand Development & Expansion

Brands are becoming increasingly important with cannabis consumers, especially in more mature markets. More and more cultivators and products manufacturers are reacting to this and investing in developing their brands. These well-developed brands are an important asset as operators look to expand beyond their home state.

One way that smaller operators are able to compete with bigger, better capitalized businesses is by licensing brands and products in other states. This allows product manufacturers to compete in and gain exposure to new markets without going through the licensing process, building out a facility, and developing new sales channels in each state. Thanks to the relative ease of entry through licensing, it is becoming increasingly common to see established brands from Colorado, California, and other established markets in dispensaries nationwide.

As producers in other states expand their brands into new markets, local operators are forced to compete at that level or lose market share to out-of-state rivals. This has the potential to create a “Red Queen” scenario in which operators must continuously adapt and evolve their brand and product offerings in order to stay relevant. Businesses throughout the cannabis industry will likely continue to invest in brand and product development in order to maintain and gain market share in each state.

Continued Gridlock in DC

Any hope of cannabis reform coming from Congress in 2023 likely died on election day when the Republicans acquired a thin majority in the House of Representatives. In this new era of divided government, it seems unwise to put any faith in Congress’ ability to pass much legislation at all, much less meaningful cannabis reform. Considering how contentious votes for the continued funding of the government are, it is difficult to imagine the legislature passing any of the cannabis reform bills that have been circulating Washington for the last several years.

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