In my experience, lobbying is really an art, not a science, and it is a very important art. And over the years, there has been no shortage of cannabis lobbying at both the state and federal levels. Typically, cannabis trade groups (and there seems to be one for every cannabis issue right now, including a recently formed one for cannabis regulators) focus on general federal legalization and decriminalization of cannabis, but they also campaign for commercial issues like the infamous a banking and tax situation of cannabis companies.
However, 2021 seems different when it comes to the cannabis lobby. Why? There are now a significant number of states legalizing and / or medicalizing cannabis, and more are considering jumping on the bandwagon through legislative action (rather than popular voting through the initiative process). More importantly, Democrats now control the Senate and, perhaps for the first time in recent history, there is a legitimate chance that we will see federal cannabis legalization in the next two years before the midterm elections.
It’s even more interesting to see which companies are joining the cannabis lobby. Probably the biggest splash of all in the past few weeks has been Altria’s slow but increasing scramble to get some of the action in the US. And, of course, this is the dream for the majority of cannabis licensees potentially seeking to sell their state-licensed cannabis businesses to these types of “big marijuana” operators.
But are such events even realistic in the event of federal legalization? I’m here to argue that these juicy exits will only exist for a few entrepreneurs. What this then means is that cannabis lobbying and advocacy by both Congress and federal agencies who will oversee any kind of federal legalization has moved from a potentially opaque task to one of great concern to existing cannabis companies.
What kind of operators will the world’s Altrias definitely want to acquire when the iron cannabis curtain falls in the US? In my opinion, these types of businesses will be looking for state-licensed, large-scale operators who have already scaled their operations, and only in certain states where the operating costs make sense (for example, California will become a target state for its cultivator because we have the Allow outdoor cultivation and you can group small licenses into large acres. These states already have a robust agricultural scene where cannabis cultivation is treated like any other agricultural product (as opposed to, for example, states with bad weather half the year and no opportunities in Outdoors, and / or where energy costs are sky high and / or the environmental impact is significant).
Another criterion will be compliance – even now, buyers are only trying to acquire “clean” operators who have not had any past violations of the state or regulatory issues. These are usually the already well-capitalized and larger cannabis companies whose teams are constantly dedicated to ensuring compliance with state cannabis laws and regulations. The larger cannabis operators have also built some of the best-known brands in a variety of states, and no doubt a large acquirer like Altria will also be drawn to the consumer goodwill that these “household” brands have built.
Not to burst anyone’s bubble, but the above suggests that an Altria-like company might even be interested in acquisitions; Perhaps they would just compete directly with existing brands and build their existing market share in the tobacco world (or they would just use Cronos, apparently already in the US CBD space). From there, Altria could target the U.S. cannabis vape market initially (with Altria having recently focused on proprietary vaping technology).
This is the same possibility that Altria already has the money and established power to assist local and state governments with real estate, zoning and development issues, taxes and operational requirements. Even our large U.S. multi-state operators (MSOs) could feel the pain of federal legalization when companies like Altria compete in the area where interstate trade is allowed (though there’s no doubt that MSOs only have a head start will be the first to come onto the market during the federal ban).
Earlier this month, George Parman, an Altria spokesman, told Cannabis Wire, “Altria supports the federal legalization of cannabis under an appropriate legal framework.” And no doubt Altria will stand up for our Democratic Congress to ensure that the “appropriate” legal framework meets their competitive needs and wants, as they have with cigarettes (and now with nicotine vapor) for the past few decades. Note that among its numerous federal lobbying registrations, Altria plans to advocate for “Excise Taxes,” “FDA Cannabidiol Enforcement Policy: Draft Industry Guide,” and “Issues Associated with Hemp Based Cannabidiol” . Altria also recently registered in the state of Virginia to advocate for issues related to the “responsible and fair regulation of cannabis sales in Virginia.”
For existing, state-licensed cannabis companies today, it is more important than ever to really organize and unite to ensure that they too have a seat at the table with the congress alongside the Altrias in the room. Otherwise, these companies will most likely become cannon fodder as part of a federal reform, assuming states don’t advocate protecting the cottages of existing industries.
Unity on lobbying has been tough in the state-licensed cannabis industry over the years, largely because cannabis companies are more affected by their state’s laws and regulations than any federal movements (other than banks and taxes) – especially since the advent of the Cole Memo in 2013. However, things get more serious when it comes to federal reforms that will definitely affect all cannabis companies in this country. State-licensed cannabis companies should definitely review their ability to access lawmakers and regulators at the federal level before it’s too late to make a difference about future laws and regulations.
To learn more about the current lobbying scene and challenges under the Biden administration, join us on March 24 for a free webinar with the Capitol Hill Policy Group, where we will talk about current and proposed federal cannabis reforms and lobbying various organizations report interests are taking shape around them.