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New Report Highlights Global Cannabis Industry Investing Trends In 2022

Written by Hazel Norman on . Posted in Business.

A new data analysis report was recently published involving cannabis industry investing, merger, and acquisition trends from last year. The data analysis study was performed by New Frontier Data and sponsored by Viridian Capital Partners.

Last year was a banner year for the emerging international cannabis industry as a whole, although financial trends varied from market to market. Below are some of the key findings from the recently published data analysis report:

  • In 2021 virtually every sector of the industry received blockbuster investments, leading to over $12 billion in capital raises; a combination of economic headwinds and dampened expectations for federal action shrank North American capital raises to $4 billion in 2022.
  • The United States continued to attract the majority of investor capital in 2022, growing as a percentage of total capital raised, from 71.7% in 2021 to 80.6% in 2022.
  • The United States drove the majority of M&A activity in 2022, growing from 59% of M&A activity in 2021 to 68% in 2022.
  • Cultivation and retail remained the leading sectors for M&A activity at 57% in 2022; however, the cultivation/retail sector represented 70% of the activity in 2021.
  • The average size of equity raises decreased 44% from $22.17 million in 2021 to $12.40 million in 2022, whereas the average size of debt raises decreased from $45.72 million in 2021 to $21.48 million in 2022.

“Investors are in the process of recalibrating their strategies for the cannabis market. By bringing together two of the most-trusted cannabis industry data companies, we provided an unbiased view of the current opportunities and challenges,” said Gary Allen, New Frontier Data CEO, in a press release. “Simultaneously, the report offers a sobering view of the capital markets for cannabis business owners who must adjust their own expectations for outside investment to construct healthier businesses.”

“Capital investment and M&A activity in the cannabis industry has become more narrowly focused on those states, countries and operators that have proven management teams, business models, and corporate strategy. This report, buoyed by data from the Viridian Cannabis Deal Tracker, provides the insight and actionable data for investors, lenders and acquirers to make smart capital allocation decisions.” added Scott Greiper, President and Founder of Viridian Capital.

The emerging legal cannabis industry will continue to expand across the globe, with new reforms being pursued and/or implemented in 2023, and in some cases, new markets launching.

Additionally, many existing markets will continue to expand in size throughout the year, and it will be interesting to see how statistics from 2023 compare to 2022 once this calendar year is over and the relevant data is compiled and analyzed.

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263 Million Cannabis Consumers and Taxation – A Delicate Balance

Written by ICBC Staff on . Posted in Berlin, Business, international cannabis business conference zurich.

With 263 million estimated global cannabis consumers and a total addressable market of $344 billion (illicit and legal combined), cannabis is poised to make a material impact on the global economy. As the cannabis markets in Europe, Latin America, Asia and even Africa are beginning to take shape, one commonly overlooked regulatory detail is the effect of taxation on the potential success of these new markets. Specifically, how higher than needed taxes can not only inhibit new market entrants ability to operate effectively, but can also fuel growth within the illicit market.

To that point, while still federally illegal, existing U.S. state cannabis markets provide crucial lessons for emerging legal markets. California, for example, imposed an effective tax rate of nearly 40-50% on retail products causing many consumers to stay loyal to the illicit market. It resulted in a massive dip in projected state tax revenue in their first year of legalization- nearly 90 million dollars short of their goal.

“Tragically, this is not the first time we have seen poorly thought-out imposed taxes have the exact opposite effect than intended;” said Giadha Aguirre de Carcer, Founder and CEO of New Frontier Data, “during our early years observing new U.S. states legalize, consumers in both the states of Oregon and Washington turned to local illicit producers offering more affordable pricing, leading the states to experience growth in their respective cannabis black markets instead of generating additional tax-revenue for the state.”

Anticipating the elasticity -the sensitivity of consumers to prices and price changes -along with other crucial factors such as identification of consumer preferences, is critical when establishing new cannabis markets. Without understanding such delicate market drivers, countries and states alike will fail to meet projected socio-economic goals. Leveraging lessons learned from existing cannabis markets, policy makers can today better plan ahead and avoid such pitfalls to instead maximize growth opportunities of a healthy and balanced legal cannabis domestic market.

“Data and reporting” Beau Whitney, Senior Economist at New Frontier Data says, “are crucial for understanding how to generate maximum revenue, to identify and to eliminate bad actors, and to ultimately better serve consumers and patients so that they do not turn to the black market.” Oregon’s standardization process is one program Whitney believes is currently effectively utilizing data management. For example, Oregon’s model on certifying testing labs and standardizing laboratory testing help elevate minimum quality standards expected by consumers and making it difficult for bad actors to compete.

In short, regions and nations with heavy pockets of cannabis consumers, looking to transition into a legal and regulated market, must better understand consumer preferences, including price sensitivity, so that state imposed taxes work in favor of domestic and regional socio-economic goals, rather than fuel crime and continued illicit trade.

For more insights into the global cannabis industry, follow along with New Frontier Data’s research at www.newfrontierdata.com.

Next up for the International Cannabis Business Conference: Zurich on May 15-16. Discounted, early bird tickets are on sale until April 24th.