The article is based on an interview with Hirsh Jain, founder of Ananda Strategy and an expert in government policy. 

Ohio, Florida, Georgia, New Mexico, Illinois, New Jersey, Michigan, and Mississippi currently are poised to move the cannabis industry forward depending on the outcome of recent initiatives. As each state grapples with setting rules and regulations to successfully roll out its cannabis industry, the state-by-state patchwork of policy is laying the framework for nationwide legalization and business success.

Ohio’s Midwest Cannabis Culture Is A Game Changer

There will be two things on the Ohio ballot referendum this November 7th. One will be abortion rights, and the other will be cannabis legalization, two topics that are sure to shine a national light on the outcome.

Just as the laws around cannabis vary state by state, so does the culture and its importance in shaping the industry. For the first few years, adult-use legalization has been concentrated on the coasts of this country with its own sort of culture. Once a red state like Missouri came online, it changed the dynamic by expressing the Midwest version of cannabis culture, and hopefully, Ohio is not far behind. It would be hard to get the progress needed in Washington DC without the heartland embracing it through legalization.

Ohio is the quintessential midwestern red state and a bellwether for middle, right-leaning Americans which is significant because it will communicate to the rest of the country where conservative America is on the issue of marijuana.

Will Florida’s Supreme Court Give The People The Vote?

Florida Supreme Court arguments will be held on November 8th to review the potential for a November 2024 ballot initiative where voters can decide if adult-use cannabis should be legal in Florida. The “single subject rule” has stopped the referendum on Florida’s ballot 2 times in the past because the court deemed it unconstitutional because of an additional subject line on the ballot.

The Florida Supreme Court is overwhelmingly made up of Ron DeSantis appointees, and the Florida GOP power structure is signaling what they want. At the same time, the people who developed this initiative did so in a legally thoughtful way. And so most people think it will stand up to scrutiny.

Many of Florida’s medical dispensaries are well positioned in the panhandle to attract consumers and trigger legalization in bordering states like Georgia, Alabama, and Mississippi. And if all goes well, the similar timing of the Florida Supreme Court decision and Ohio’s referendum could be the perfect storm to cause a domino effect of red states softening on cannabis legalization.

Is Minnesota Leading The Normalization Of Infused Beverages?

Minnesota has a unique adult use model and is revolutionizing the future of THC beverages by testing the co-mingling of alcohol and cannabis beverage sales.

Minnesota law allows hemp-derived THC beverages for sale in bars, restaurants, and breweries. It not only normalizes cannabis when you can order it in that setting and consume it as a replacement for alcohol, but it also helps states like California gain traction as they try to adopt similar measures.

As states adopt more permissive and unique models of regulation, and the sky doesn’t fall, it will be an important part of how we destigmatize the plant and move past this restrictive model.

In addition, the ability for breweries in Minnesota to manufacture or sell beverages is a real economic lifeline because their craft brewers have been struggling to survive for a while.

Michigan Versus California

The similarities between California and Michigan are strong. You can say Michigan, by some metrics, has the most successful and exciting market in the country.

Michigan is generating total monthly sales of around $277 million. That’s a 3 billion dollar run rate and makes it the second biggest market in the country, right behind California. California is a 5 billion market but would be at 12 to 15 billion if two-thirds of the market wasn’t in illicit sales.

Michigan has $300 per capita sales that residents spend on cannabis yearly, and California has 1/3 of that.

Michigan is 25 percent of California’s population. Ten million versus forty million people. The fourth of California’s population, but doing two-thirds of California sales.

How does Michigan generate so much in legal sales? Well, first they’ve had a robust retail expansion since they launched adult-use sales in 2019. Month after month new dispensaries have opened across the state. They’ve had more points of distribution open up, the opposite of California, which has local control and prevents new stores from opening.

And unlike California, which by most measures has the highest tax rate in the country, Michigan has one of the lowest tax rates in the country. It’s not that complicated, there’s huge economic potential if we just allow these points of distribution to expand and don’t dramatically overtax them.

Subtle Changes Are Chipping Away At The Deep South

You can’t buy flower in Georgia, but they recently announced that independent pharmacies can carry low-THC oil products. There are about 600 pharmacies in Georgia and 120 of these pharmacies are already participating.

This acceptance in pharmacies plays a role in the way this product is framed and the stigma around it. When you are administering this oil as a product in a pharmacy, you are saying cannabis is medicine and it’s not a drug.

Mississippi has a medical program that is the fastest-growing and most robust medical program ever. They already have more than 100 dispensaries open within the first year of legalization. Similar to Georgia, it announced that topical hemp-based THC products can be sold without a medical card. As conservative states, these subtle changes are the things that will begin to break down the stigma in the Deep South.

New Mexico Takes A Quiet Lead In Social Equity

Some states talk a big game about social equity and there are other states, like New Mexico that have adopted a licensing structure without all the fanfare and are making it easier for ordinary people to participate.

New Mexico is a very small state of 2 million people and one of the poorest states in the country but has generated about $48 million in sales in the last month. The reason they’ve been able to achieve this level of success is because of their open licensing system and low barrier to entry. The average cannabis business owner in New Mexico is not a titan of high finance, essentially anyone could obtain a license without huge barriers to entry. And those barriers normally serve to keep people without wealth out, which are disproportionately minorities.

Connecticut, one of the richest states in the country, with twice the population of New Mexico, legalized cannabis around the same time in early 2021. New Mexico, a much poorer state, and half the population is doing twice what Connecticut is doing in sales- $25 vs $50 million.

Neither system is perfect or is inherently wrong, but if you look at the ownership of most Connecticut cannabis businesses, it would not be nearly as diverse as New Mexico’s, despite having an equity program.

Some states have tried to present themselves as being the paragons of virtue, but the point is they all need to keep tinkering until goals are achieved, whether they be economic or diversity-related or whatever.

Illinois and New Jersey On The Move Again

These two markets showed promise for potentially healthy markets but have stagnated over the past 12 to 18 months and have only grown moderately, but that’s about to change.

Illinois, a big state of 12 million people had about 110 stores scheduled to open initially, and another 185 issued through the equity licensing process that got caught up in a lawsuit or the licensing process. And then there was COVID where people ran out of funding and slowed the process for a few years. With new stores finally slated to open, many are social equity licensees who will be sourcing a lot of their products from MSOs in the state who have not been able to turn on their full cultivation capacity because of the lack of store growth.

New Jersey probably should have a thousand stores open and are still undersupplied, but new licenses have recently been issued and more stores are scheduled to open with large MSOs in the state interested in developing products to serve these operators as well.

We want the industry to reflect the racial and ethnic character of our country, and we want ordinary people to be able to participate and ideally gain ownership in the industry. These stagnant markets are now growing and bubbling up into what is an exciting story.

What Makes These States Ripe For An Expansion Strategy?

If you’re trying to break into a new market, you could arguably say that the New Mexico market would be one of the more interesting because of its lower barrier to entry. It might be a little harder to break into the Illinois market as a CPG brand because so many of those dispensaries are currently controlled by the MSOs and you’d have to have a relationship with one of them.

There’s no perfect formula because all of these markets are quite bespoke, and it’s important to think about which of them might be the best fit for your kind of strategy. And regardless of which markets are a good fit, you need to understand how those markets will evolve.

For example, if you were to get into Ohio, knowing that the Kentucky suburbs are practically in Cincinnati is key. It’s a way to identify a part of the market that will be overperforming. Or if you have eyes for Illinois, you better understand who the eight operators are that comprise 60 percent of the retail space and to what extent your strategy hinges on working with them.

Anytime you want to establish a physical presence it’s really important to do your due diligence on which towns are receptive to cannabis and to make a robust effort to build relationships in those communities. And just as important, assess who the players are in that space and what your level of relationship with them is.

“I think about the information in the architecture of these different markets, and then focus on building authentic relationships with potential partners and with local stakeholders. So, not anything that people don’t already know. But get to know your regulators, particularly at the local level, and get to know your market participants, especially if you’re entering into a new state because you’re going to have to find the right allies.” -Hirsh Jain