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This newsletter did not know Toys R Us still existed
TAM, Cali, and Toys R Us
Programming note: You might notice an explicit ‘cannabis’ tag on this edition of Money Puff. This is still a cannabis finance newsletter, but now we’re segmenting the content a bit. Mondays and Wednesdays will be more about cannabis, and Tuesdays and Thursdays will be more about finance. More on the finance newsletter tomorrow, but for now…
The cannabis newsletter needs more retailers, cultivators, and processors! That’s according to the results of last week’s pricing poll:
Money Puff readers are more likely to come from the financial side of the business, which is part of the impetus to segment our content. Hopefully Mondays and Wednesdays will prove more useful for cannabis industry operators (while still engaging and interesting for finance professionals).
We’ll talk more about pricing data, but as for why it’s so important…
New TAM report just dropped! And it’s clear that moderating expectations is going to be a theme of 2023.
According to New Frontier Data, ‘if the pace of state-level legalization continues in the absence of federal policy reform, legal cannabis sales are projected to reach $71 billion by 2030’ in the US. Moods are dampening around the feds making meaningful change; the DEA is ultimately responsible for Biden’s mandated scheduling review, and the Senate Banking Committee is punting on SAFE to deal with the SVB fallout.
Bloomberg, citing the data this morning, qualified the $71 billion projection with the phrase ‘even in the absence of federal policy reform.’ But Money Puff has a different read of the report. Federal policy reform will not increase the potential for legal cannabis sales. I think New Frontier Data is hedging with their language, because they know that federal policy reform will decrease 2030 sales.
Why? Arbitrage, like we talked about last week. Once interstate commerce is permitted, prices will normalize, meaning they will come down in the new markets where they are currently ‘high.’ Sales equals price times volume; no one disputes that volume will increase as legalization spreads, but prices are very unlikely to hold steady or increase.
California prices impact New York
Even in the absence of federal legalization, California still dominates the US cannabis market. Why? Because, anecdotally, most of the ‘illicit’ flower and products come from Cali. Merida Capital Holdings broke down an interesting theory on Twitter today:
Pricing is important, and Money Puff will continue to cover state by state dynamics in our cannabis newsletter.
Toys R Us
Anyone else have no idea that Toys R Us still exists? Apparently they do, and they are spending their time suing illicit dispensaries in Brooklyn:
Last week a lawsuit was filed in a New York Federal court by Toys R Us also known as Tru Kids against an unlicensed cannabis dispensary that uses the name Zaza R Us and Nedhal Y. Saleh. According to Law360, Toys R Us is accusing the dispensary of copying the toy store’s font and graphics. The dispensary copies the Toys R us logo and replaces the star image in the backwards “R” with a cannabis leaf image instead.
Once they settle with Toys R Us, I hope the store formally known as Zaza R Us registers for Operation P.R.E.-R.O.L.L. (pending regulatory approval/acknowledgement).