In my experience, lobbying is truly an art and not a science, and a very important art at that. And there’s been no shortage of cannabis lobbying over the years on both the state and federal level. Typically, cannabis trade groups (and there seems to be one for every cannabis topic now, including a recently formed one for cannabis regulators) focus on overall federal legalization and decriminalization of cannabis, but they are also committed to addressing commercial issues, like the notorious banking and tax situations faced by cannabis businesses.
2021 is seems different though when it comes to the cannabis lobby. Why? There are now a significant number of states that have cannabis legalization and/or medicalization and more are contemplating jumping on the bandwagon through legislative action (rather than a vote of the people through the initiatve process). More importantly, the democrats now control the Senate and maybe for the first time in recent history there is a legitimate chance that we’ll see federal legalization of cannabis within the next two years before midterm elections.
What’s even more interesting is to see which companies are joining the cannabis lobby. Probably the biggest splash of all in recent weeks is the slow-but-increasing crawl of Altria to get a piece of the action in the U.S. And this, of course, is the stuff of dreams for the majority of cannabis licensees that seek to potentially sell their state licensed cannabis businesses to that kind of “Big Marijuana” operator.
But are such events even realistic in the event of federal legalization? I’m here to make the argument that those juicy exits will only exist for a select few business operators. What that means then is that cannabis lobbying and advocacy to both Congress and the federal agencies that will oversee any kind of federal legalization just went from a potentially obscure task to one of great importance for existing cannabis businesses.
In any event, what kind of operators will the Altrias of the world look to acquire when the iron cannabis curtain falls in the U.S.? In my opinion, those kinds of companies will seek out state-licensed, large operators that have already scaled their operations, and that will only be in certain states where the costs of operation make sense (for example, California will be a target state for cultivators because we allow outdoor cultivation, and you can aggregate small licenses into vast 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 outdoor possibilities, and/or where energy costs are sky high and/or the environmental impact is significant).
Another criterion will be compliance–even now, purchasers only look to acquire “clean” operators with no history of state violations or regulatory issues, and that tends to be the already well-capitalized and larger cannabis companies that have teams of people dedicated to constant compliance with state cannabis laws and regulations. The larger cannabis operators have also built some of the most recognizable brands in a multitude of states, and no doubt a large acquirer like Altria will also be attracted to the consumer goodwill built up by those “household” brands.
Not to burst anyone’s bubble, but the above contemplates that an Altria-like company would even be interested in acquisitions; maybe they would just head straight into competing with existing brands, building off of their existing market share in the tobacco world (or maybe they’ll just use Cronos, apparently already in the U.S. CBD space). Altria could go from there with targeting the U.S. cannabis vape market first (where Altria’s recent focus has been on proprietary vaping technology).
That is an equal possibility that Altria already has the money and the well-established power to lobby local and state governments over real estate, zoning and development issues, taxes, and operational requirements. So, even our large U.S. multi-state operators (MSOs) could feel the pain of federal legalization if companies similar to Altria start to compete in the space when interstate commerce is allowed (though there’s no doubt that MSOs will have a head start just by having been first to market during federal prohibition).
Earlier in the month, George Parman, an Altria spokesman, told Cannabis Wire that “Altria supports the federal legalization of cannabis under an appropriate regulatory framework.” And undoubtedly Altria is going to be lobbying our Democratic Congress to ensure that the “appropriate” regulatory framework fits their needs and wants from a competitive standpoint just like they’ve done with cigarettes (and now nicotine vaping) for the past several decades. Note that, among its many federal lobbying registrations, Altria is planning to lobby on “non-tobacco excise taxes“, “FDA Cannabidiol Enforcement Policy: Draft Guidance for Industry,”and “Issues related to hemp-based cannabidiol“). Altria also recently registered in the State of Virginia to lobby on issues related to the “Responsible and Equitable Regulation of Cannabis Sales in Virginia“.
It’s more important than ever now for existing, state-licensed cannabis companies to really organize and unify to ensure that they too have a seat at the table with Congress alongside the Altrias in the room. Failure to do so will very likely result in those companies becoming regulatory cannon fodder under any kind of federal reform, assuming the states don’t step up to protect the more cottage nature of the existing industry.
Unity around lobbying has been tough over the years in the state-licensed cannabis industry, mainly because cannabis companies are more immediately affected by their state’s laws and regulations rather than any federal movements (other than banking and taxes)– especially since the advent of the Cole Memo in 2013. Things are getting increasingly serious though when it comes to federal reform that will definitely impact all cannabis companies in this country. State-licensed cannabis companies should certainly be re-examining their ability to access lawmakers and regulators at the federal level before it’s too late to make any kind of a difference over future laws and regulations.
To learn more about the current lobbying scene and challenges under the Biden Administration, be sure to join us on March 24th for a free webinar with Capitol Hill Policy Group where we’ll cover the current and proposed federal cannabis reforms and how lobbying efforts from various interests are taking shape around them.