How Do We Get to a $100 Billion Market? Growth Predictions, Market Consolidations ft. Ben Burstein

How Do We Get to a $100 Billion Market? Growth Predictions, Market Consolidations ft Ben Burstein

Ben Burstein: There's a prevailing sentiment that the industry isn't growing, that it's stagnant, that it's plateauing. That's just false. Bryan Fields: What's up, guys? Welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellan Finney. This week we've got a very special guest returning to the pod, Ben Burstein. Ben, thanks for taking the time. How are you doing today? Ben Burstein: Everything's great, thank you guys so much for having me back. I'm excited to dive in. Ben Burstein: Kellan, how are you doing? Kellan Finney: I'm doing really well, really excited to talk to Ben again, really excited to dive into the data again, and I'm just excited to be here. Bryan, how are you? Bryan Fields: Yeah, I'm stoked. I think there's a lot of topics to talk about, and I'm trying to make sense of the sector in the best way I can, and I don't think there's anybody doing a better job than Ben. I'm not even going to go into East Coast/West Coast — we already know his allegiance is on the East, so we'll skip right past that. There's a lot of hot topics we just want to quickly put on the record. Ben, we've got to dive in — the hemp market is booming. Thinking about it from an overall perspective, how do you look at it, and then let's dive into some specifics. Ben Burstein: Yeah, the hemp-derived THC market continues to accelerate over time. You've had continued development of infrastructure and capacity to produce those products. Today the hemp-derived THC industry is about $5 billion of total retail sales nationally. You also have industrial hemp products — animal feed, hemp oils, manufacturing — that's about $4 to $5 billion as well. So total hemp sales nationally are about $10 billion. That's grown a billion or two each of the last few years, so we continue to see pretty strong growth in that area. You're having a huge amount of interest from many of the regulated players in the hemp space — we've seen it over the last six months. We talked a lot about Total Wine when we were together six months ago — they now have hemp-derived THC beverages in every single store in states where it's legal. We recently saw the purchase of Agrify by Green Thumb Industries, which they then used as a shell to acquire Señorita Beverages — that Agrify shell was valued at over a billion dollars publicly at one point. That's a lot. You also have their licensing of The Incredibles brand to one of the largest hemp-derived product manufacturers, LFTD Partners. You had Rebel Rabbit just announce this morning their new distribution partnership with Anheuser-Busch — they're now going to take hemp-derived THC beverages into more than 30 markets directly tied to the large beverage distribution networks. That's a big deal. And then you have the huge regulated players that have come out with their hemp-derived product lines — like Curaleaf with their hemp company, Wana came out with their new marketplace, and other MSOs are starting to distribute hemp products. Everyone in the industry is looking to the hemp space as a way to expand margins, expand their revenue base, and ultimately get to the consumer, because the biggest difference between hemp-derived THC products and the regulated market is that it's just easier to market, scale, and distribute your product. With hemp-derived, you don't have the compliance and regulatory requirements, you have centralized manufacturing so you can achieve true economies of scale, you can advertise in traditional channels, you have access to traditional distribution networks, you have significantly more retail access. You have states that are starting to allow the sale of hemp beverages in their liquor stores — there are huge changes happening at the state level, and the big operators are responding with increased investment and attention to the space. So it's no surprise. Bryan Fields: 100%. But internally, are you looking at it as two different markets or one combined market? Ben Burstein: At LeafLink today, we're very focused on the regulated market. For us, we continue to focus on the non-hemp-derived space. We're interested in thinking through what the implications can be on the regulated market — in terms of retail accessibility, you have about 11,000 dispensaries nationally in the US, but more than 2.3 million locations where you can sell alcohol, and theoretically these hemp-derived beverage products. So being able to access that large retailer network is definitely interesting to us, but we're very much focused on directly supporting the regulated market. Bryan Fields: You mentioned the total combined hemp market, even with industrial hemp, is somewhere around $10 billion, and adult-use cannabis in the United States is like a $32.5 billion market. How come it feels like, when you talk to people in the hemp market versus the regulated market, that people in the hemp market are printing money compared to people in the regulated cannabis market? I get there are more regulations and more losses along the supply chain, but I'd expect those sentiment numbers to be closer. Do you think it's that the people on the hemp side are capturing more of the consumer dollar back through that supply chain, and that's why there's such a difference in conversational sentiment? Ben Burstein: I think you're directionally right. You have significantly larger direct-to-consumer reach with hemp-derived products — the brands manufacturing them have a direct relationship with their customers, and they have more margin than if they were selling through a wholesaler-retailer relationship. One key difference is that hemp-derived product manufacturers know who their customers are, they know how to market to them, they know how to directly target the consumer most likely to purchase their product, so they're able to realize revenue-based improvements that just don't exist on the brand side in cannabis. You don't have the data piping between your end consumer and your brand sales before you get to the retailer, so in the traditional US cannabis market it's just harder to sustain a business given state-level restrictions — there just aren't as many retailers to sell to as when you're targeting all states at once with a hemp-derived product. But also, most consumers don't know the difference between hemp-derived products and regulated market products, so it's much easier to purchase a THC beverage online than to go into a store and hope they have a stocked refrigerator. It's a much more difficult customer experience to buy a beverage-type product from the regulated market. There's a lot of discourse in the industry about hemp beverages, but when you take an outside view, you have a few companies in the hemp space doing really well largely because of the margin structure. I don't know what the long-term implications are for many of these companies — everyone's looking to invest in the space, and you're going to have the same dynamics as any frontier industry: increased production with very low marginal costs, which will likely increase capacity further over time and impact the balance of supply and demand, probably leading prices lower. But you have such a huge untapped potential — so many channels and avenues to sell hemp-derived products that don't exist in the regulated market today — that I think there's reason to be very positive on the hemp space. But we remain very focused on the regulated market and still think there's huge potential there. Bryan Fields: Kellan, real quick, I think that was a great point. Kellan Finney: I think the sentiment right now is super favorable in hemp for two reasons. One, hemp players do marketing efforts pushing across the whole United States, so there are opportunities where they spend $10,000 and hit as many people as they can, and when they see growth numbers go from 8% in January to 10%, 12%, 15%, they see that hockey-stick curve and the emotional feeling is that it's just going to keep going. What you're seeing in cannabis is more of a saturation of specific markets — you have a consumer base in, say, Maryland, you've done consistent numbers, and the growth isn't there, so it's more step-stone growth. I think that's the perspective from both sides — one side sees a hockey stick, the other sees incremental growth, and that shapes the emotional sentiment. Bryan Fields: That's a good point, honestly, and I appreciate you laying it out like that, because it does make sense — if you're witnessing growth you're going to be significantly more excited versus, say, 1-2% standard CPG growth, which Coca-Cola would still be thrilled to see next year. I just assume, like with BREZ, the really popular hemp beverage — they're posting insane growth, but they're also putting marketing dollars behind it and hitting the entire United States, not just Florida, Texas, or Maryland. They're putting cash down where they can see accelerated growth and get that return on investment. Other companies aren't able to do that as easily, given cash constraints and market dynamics, and that feeds the emotional sentiment. That's why you've seen players like Curaleaf come out and say, essentially, 'This is outrageous, we're coming in force' — they're playing in both spaces. So Ben, I was asking how we look at the total size of both markets, because for me, for example, I used to buy beverages at my dispensary and pay terrible prices, and now I can shop online and buy my favorite beverages, which reduces my total dispensary spend but I'm still participating in the category, probably even more — it's just not as easily tracked. So how do we understand the total size of the market if people like you aren't able to accurately track total spend for users like me? Ben Burstein: What's really important in the market is the disaggregation of pricing on the units themselves and the value mix of those products. In regulated cannabis, there's a prevailing sentiment that the industry isn't growing, that it's plateauing — that's just false. You see total sales starting to plateau, but it's primarily because pricing is falling very dramatically while units sold are increasing at a very fast pace. If you look at the last seven or eight years of US cannabis — in 2016 you had $34 billion in retail sales, today that's $32 billion. So total sales have stayed roughly flat, but pricing per unit has collapsed by about 70-75% nationally over that time. That means total units sold in the industry have increased by 30 to 40 times over that span. So it's not that the US regulated cannabis market isn't gaining huge adoption in units sold — it's just a pricing mechanism tied to the small market sizes you have in the regulated space, which makes it very difficult to compare on a total-dollar-sales basis. From a unit-growth perspective, the regulated market is growing at a much faster clip than the hemp-derived market, on a much larger base, and you still have far more units of regulated product sold year over year than in the hemp market. I don't want to discount what's happening in the regulated market — it's just very difficult from a pricing perspective, and you haven't seen that same pricing pressure yet in the hemp-derived space. Bryan Fields: Do you know off the top of your head — total employees in the hemp space versus total employees in the adult-use space? Ben Burstein: I've done some research on it. Total hemp employees are about 40,000, very much geared toward cultivation. You have large hemp cultivation primarily in California and the West Coast, Kentucky, and parts of Northern Florida. Hemp is very cheap relative to regulated cannabis — you sell a pound of hemp for about $30-40, versus regulated cannabis, which varies a lot by market but is somewhere between $200-$4,000 a pound. So you have a lot of hemp cultivation, which has created a lot of jobs — about 40,000 employees in hemp. You have a little over half a million employees in the regulated cannabis space, and that's with much smaller company sizes, especially in distribution, brand, and retail. Bryan Fields: So the number of individuals the cannabis market is actively employing and impacting is significantly larger than the hemp industry. From a capitalistic perspective, you'd assume as these two industries continue down their paths there's going to be some sort of merging event, just because there's so much shared knowledge and the products are so similar. You're seeing moves by Curaleaf and other large public companies getting into the space somehow. Do you see, in five years, some sort of strong merging where some products are derived from hemp and some strictly from the cannabis plant? What are your thoughts? Ben Burstein: I don't really view them as two separate sides of the market long term. If you look at the development of any other market in history, it all moves toward the lowest-cost production with demand from the greater industry. If the US population is willing to purchase hemp-derived THC products — which they've shown they are — it's much cheaper to produce THC synthetically than to actually grow, process, and sell the plant. So I see a huge shift, and I'd even go further and say that as many of the larger beverage and alcohol companies enter the space, they're much more likely to do so on the hemp-derived side than the regulated side, because of cost, regulatory structure, and because it fits more naturally into their distribution networks. Personally, I'm a purist on the regulated market — I prefer regulated beverages to Delta-THC infusions — but I think it's very likely the hemp-derived space continues to grow, and given the cost structure, is probably what many large eventual winners in the space would pick. But there are many years ahead for that development — it'll be 5 to 10 years before any real large national non-cannabis-focused companies start entering the space. It's just too much of a regulatory risk, especially with the Farm Bill still being decided. In the last iteration of the Farm Bill negotiated in '24, hemp-derived products were going to be banned. That bill wasn't able to come to resolution, so it's been pushed into next year. Who knows what the decision will be on hemp-derived products, but there's clearly interest at the federal level in banning a lot of these products. We might be talking a year from now and there's no hemp-derived market — we have no idea, and that regulatory uncertainty makes it very difficult for companies in the space to raise capital and continue operating the way they want. Kellan Finney: I think those are incredible points, and when you combine both markets together you see the type of growth everyone envisions. I think one aspect the hemp market really benefits from is economies of scale with beverages — consumers win because the price comes down and becomes more affordable, so spending $2-3 on a beverage versus $12 becomes way more accessible. Beverages are easy and social — people can pass them around, try them, and go, 'Wow, I didn't get as messed up as I thought, and I don't get a hangover — maybe I'll start supplementing these for my regular drinking.' Then you get upscale adoption, and maybe people become more comfortable with edibles too — so the categories work together. It's just a matter of how it's looked at and how we calculate the data, because it's really impossible to track them all together. Once you start putting the pieces of the puzzle together, you get that real hockey-stick excitement all three of us feel about this industry long term. Ben Burstein: I think you're spot on. I always come back to the idea that we're still so early in the development of the US cannabis industry. The comparison I always make is to the repeal of alcohol prohibition after the 21st Amendment passed in '33 — you had similar market dynamics, a huge gray market with moonshine more popular than legal alcohol until the '50s, state-by-state restrictions that didn't end until Mississippi legalized alcohol in the '60s, and a huge illicit market for alcohol that produced some of the first mobsters in New York and Chicago. It's very similar to US cannabis today. It's going to take decades for this industry to mature, and these different product categories, ways of deriving THC, margin structures, and regulations are all part of this very early development. We're still at the beginning, and there's a lot to come. Bryan Fields: How much do you think rescheduling to Schedule III — assuming it passes — moves the needle in terms of this comparison between the hemp and adult-use markets? Does it make it a more even playing field? Ben Burstein: By far the biggest impact of Schedule III passing — which we at LeafLink still believe will happen at some point in '25, given the consensus of the bureaucratic agencies and the Trump administration — is the 280E savings. We estimate those at about $2-3 billion of annual cash going back into the industry; just the MSOs alone report over a billion dollars in 280E taxes. For comparison, so far in '24 there's been about $800 million of capital that's gone into the space, almost all of it refinancing maturing debt, versus $500-600 million last year. So the amount of cash 280E savings would bring back into the industry is more than has been invested into the industry over the last 24-36 months. That's a huge recapitalization opportunity for the large multi-state operators. Outside of the 280E savings and some increased allocation to research, I don't see much change in how cannabis is sold or the channels it's active in — so probably not a big difference outside of those tax savings. Bryan Fields: If you're a C-suite executive at one of these companies and you get that cash coming back in, what do you think you'd do with it? Would you go after a new state, or shore up infrastructure to decrease your price and increase margin? Ben Burstein: I work in M&A at LeafLink, so my entire job is evaluating assets in the space. If it were me, with capital and a footprint, I'd first consolidate upstream — stores are so cheap right now that you can internalize your product and remove financial services and collections risk. If you're a large retailer that's already reached penetration or the cap in a state, you can go buy retail stores in new markets. One idea I've spent a lot of time thinking about is that in many legacy markets, assets can be purchased for negative equity, almost — you don't pay for the assets, you assume the debts, renegotiate liabilities and leases, to a point where you're actually getting paid to take on underperforming assets. Get a good retail operator in there, keep the smallest footprint with the lowest overhead in a high-foot-traffic, low-competition area, and that's a recipe for success. So I'd go into legacy markets and acquire assets that have basically been left for nothing. But what's actually going to happen in the industry is a lot of that cash going back to shareholders through buybacks or dividends — a lot of these companies have already reached the maximum footprint they can build in their markets, so there's limited benefit to additional investment. You've already seen capex collapse in the space over the last two years, with almost all those dollars going to corporate needs. Bryan Fields: Let's say we're a C-suite exec — my pushback would be, what about the hemp market? They're siphoning off our customers, people are buying products online — why do I need 12 more stores that are just going to burn cash when I could de-risk that portion of the business and put resources toward hemp instead? The cost of capital is so hard to get, and doubling down on a problematic area given the Farm Bill uncertainty seems risky. What's the balance there? Ben Burstein: The hemp-derived space is very interesting, but also very risky — we have no idea what regulations will look like over the next several years, and there's a huge amount of competition entering the market trying to access traditional distribution networks. If it were me, I'd wait a bit to see what happens with the new Farm Bill and the regulated space. I also don't believe all stores and assets are necessarily cash-burning in challenged markets — it has more to do with how those stores are operated. For instance, the average store in a state like California or Oregon is stocking over 150 days of inventory, which is so expensive — you have to discount aggressively, often eliminating margin entirely, plus pay overhead. If it were me, I'd run a dispensary as similarly to a convenience store as possible, activate marketing and loyalty channels — the main form of ad spend in the space to date — and aggressively go after customers. As long as costs are low, you can make money. So I'm not quick to abandon the regulated market. I very much believe it's the eventual winner of the industry, and I think the hemp-derived loophole is being exploited right now but probably won't be there forever. That regulation is taking time to develop, but it will happen, and I don't believe the market will remain this freewheeling forever. Bryan Fields: What cannabis state are you most excited about from a growth perspective? Ben Burstein: New York. I don't believe the industry has accepted how amazing New York has done over the last year. When I came on the show six months ago, New York had gone from about $20 million in sales a month to about $60 million. Today they're doing $140 million a month. New York has added the most retail sales of any market in one year in US cannabis history, and we're not talking about it enough. Kellan Finney: Because, if we're being totally honest, it's a marathon, and out of the starting blocks we fell flat on our face and laid there, and everyone said New York was so bad. Then all of a sudden they start running and catch up so fast. They did themselves no favors getting out of the blocks, and as expected, you knew the market would be incredible — you just hoped it wouldn't take as long as it did. But at the end of the day, looking back on it historically, no one's going to remember how horrendous the start was — they'll just see the total numbers and think, 'That's a nice market.' Ben Burstein: Let's not forget that when almost every legal market legalized for adult use, or even for their initial medical programs, it took years. Kellan Finney: Why though, Ben, why? Ben Burstein: I advocate a lot more for the Missouri/Maryland-type approach, where you legalize and license the medical stores already in your state and start selling through comprehensive licenses right away — that's clearly proven to be the most effective from a retail sales perspective. But New York's focus was very much on the equity angle, and I don't think that was wrong, it just took longer. Now we're at a place with over 250 stores, and another 500 stores coming online — New York is setting up to be the largest market in the country by some point in 2026. That's a huge green shoot that hasn't really been identified in the market. You also have other states adding growth — Michigan continues to perform really well with new stores, Massachusetts just had its best few months after years of struggle, and Ohio, which legalized adult use in August, will keep accelerating, with another 150-200 stores licensed over the next year. Things are looking pretty good across many of these markets, but there's a lot of room for improvement. Bryan Fields: What's the potential market size based on total population and spend per person, and how do you forecast projections as an operator knowing 500 more stores are coming online, since what you're doing today will look very different in 6-18 months? Ben Burstein: The most important thing for a retailer is density — how many people live within a few minutes of your store, since people like to purchase close to home. You have to know the licensing and zoning requirements at the municipal level. New York does a pretty good job of at least telling operators which regions will get licenses, with minimum distance requirements to avoid stores clustering together like in legacy municipal markets. You also get the benefit of a lot of lead time with high revenue — at the beginning of the year you had about $30 million in monthly sales on a base of 50-60 stores, about $9 million in annual sales per store. Today stores are doing about $5-6 million annually — that's still huge margin for a store, likely profitable at that level. The state has at least a focus on not oversaturating markets. Even in New York City, there are thousand-foot minimum distance requirements between stores, which has been pretty effective in preventing cannibalization. It's inevitably going to happen somewhat as more retail comes online, but margins and revenue per store are still healthy in the state. As more stores come on, more consumers enter the legal market and total state sales increase. Kellan Finney: Sorry, Ben — that's where you see the hockey-stick growth, then it tapers and comes back down, and that's not an unhealthy market, that's just early market dynamics maturing and stabilizing, which needs an experienced investor who understands the dynamics to put a fair valuation on it, taking into account both historical and forward-looking factors. Ben Burstein: If you're an operator in New York today, the average pound is going for somewhere between $1,500 and $2,000. You can't forecast that pricing to hold for the next three or four years — that was a mistake in very early markets, where operators expected $6,000-$7,000 pounds to continue for years. We've learned quickly that pricing in New York is going to fall, and that's okay — it normalizes to levels similar to the rest of the market, and you can be profitable as a producer at $200-400 a pound. It's about optimizing your cost structure and running your business like any other, and there's a lot of margin opportunity in a state like New York. Bryan Fields: How many of these new stores are new operators coming into the space versus existing operators expanding? Ben Burstein: What's great about New York's program is that essentially all the stores that have come on so far are either owned by a nonprofit organization in the state or by a former felon convicted of a non-violent cannabis offense, through the CAURD program. It's taken a really long time to build this equitable program, but now you have 250 stores owned entirely by people who weren't previously in the legal cannabis space and don't have experience running stores in other markets or the demands of running assets across multiple states. So you have a lot of first-time cannabis operators with a really good opportunity, and as long as more stores keep coming on to absorb the additional cultivation capacity that's entered the state, you'll have healthy supply and demand dynamics. Bryan Fields: We've seen a big push toward unit economics for vertically integrated companies — do you think that's because they're trying to run profitably and understand every aspect of their balance sheet, so they can deploy 280E resources back into more profit-driven products? Ben Burstein: You're spot on. Operators in 2020 and 2021 were focused on acquiring as much revenue as possible, at whatever price, hoping to be in the markets that would grow most over the next few years. Over the course of '22 and '23, as capital dried up, focus shifted to profitability — operators pulled out the 'recessionary playbook,' cut spending, increased liquidity and working capital, reduced inventory, shored up days payable, and accommodated the lower prices they experienced in their markets. Pricing has fallen very quickly in markets like Arizona, Massachusetts, and Illinois — Arizona has had the steepest price decline of any market for two consecutive years, making it very difficult to operate there. To accommodate these dynamics, big MSOs internalize as much product as possible — they want to own retail, sell at whatever price clears, and cultivate at a per-gram cost low enough to still profit at that retail price. When you have heavy price competition, especially at retail, it's all about producing units as cheaply as possible. Today, a lot of operators have figured out how to generate at least some profitability at the state level and cash from operations, even though high lease and debt payments still cause many to lose cash overall — but from an operating standpoint, they're generating cash flow. Bryan Fields: One thing I've seen pushed heavily online is for MSOs to segment their businesses by state — hypothetically, showing they do well in Ohio but lose money in two of three other markets. Do you think they didn't do that before because they didn't have the numbers clearly articulated, or because some markets were so bad they didn't want to expose that? Ben Burstein: A few operators report at least sales by market, and a few give more of a P&L view — companies like Verano or Curio give a really good perspective into what each market is doing. I think it's mostly a function of not wanting to give away competitive information like price per pound or margin structure in each state. So most operators don't divulge state-level information publicly, but they certainly have it internally and use it to decide whether to keep or sell an asset based on the investment needed to achieve profitability. You're going to see more MSOs sell off state assets over time if they're not profitable and there's no clear path to profitability — get ready for Florida asset sales. Margins in Florida used to be very positive for these operators; today they're negative, and you have a doubling of licenses coming on, with many new license holders lacking existing cultivation or retail assets. It'll take years to build out, so they're going to purchase assets from MSOs with existing infrastructure — I promise you that's going to happen, and it'll come down to a calculus of investment cost versus profitability at the state level. Bryan Fields: Speaking of Florida, how disastrous was it from a projection standpoint that it didn't turn? Ben Burstein: I'm from Miami, so I'm sad Amendment 3 didn't pass — I wanted to move back to my hometown at some point and have a legal market. It's unfortunate, but I want to focus on the positives: 57% of the state voted for it, the second-strongest legalization vote in the last three years, second only to Ohio, which had an independent ballot with abortion as the only other issue. Florida got a much stronger approval rate than many expected — it's just difficult with that 60% threshold. You've only achieved 60% on a legalization vote once before, in Maryland, never in Florida. Trump endorsing Amendment 3, along with Democratic support, certainly helped, but it wasn't enough to get it over the line. Florida would have been by far the largest market — all the medical facilities would have been licensed for adult use, and Florida has 130 million tourists visiting annually, the most of any state, and tourists are very high-propensity consumers. Bryan Fields: What would that have made the total US cannabis market projection, if it were included in the numbers? Ben Burstein: We expected Florida to reach about $6 billion on a run-rate basis once fully scaled across stores, so it's unfortunate we don't have it — we pulled back our estimates by a few billion dollars over the next several years, like any other forecaster in the space. But we remain optimistic about Florida's potential. It's a very large medical market, the third-largest in the country, with just under a million patients. Over time you'll probably see more saturation and price compression that makes it difficult to operate, but because of the full vertical nature of the market, you can still make money at really low prices. Bryan Fields: With different margins across states, are MSOs looking at an aggregate margin across all states, or treating each state as a silo with its own set of levers? Ben Burstein: Operators are organized in two camps — some have regional directors at the corporate level controlling what happens in different states, and others organize into independent operating teams per market, because you have to know what's happening on the ground locally for it to work. Everyone tries to get as much local focus as possible, but a few operators still make decisions from corporate headquarters rather than as independent state P&Ls. Bryan Fields: I was asking that because, with Florida having an awful lot of assets, if I'm an MSO operating there, am I looking at margins to figure out which assets to eliminate to keep my footprint, or is it more of a playbook, state by state? Ben Burstein: Ultimately you get a rate of return on each dollar invested in different markets, and operators are deciding which markets they expect to be the most consistent generators of cash over time — they keep those and sell off extra assets. Florida is complicated because many operators expected Amendment 3 to expand the market, and it's still a great market with a large consumer base, just not as big as it could have been. Kellan Finney: I'd assume they understand their burn rate per year, their expectation of when it'll turn, and when they can recoup investment, comparing all of that against how their other assets are performing — an incredibly complicated formula with endless variables, made even harder because you can't sell assets unless there's a buyer, which is another problematic variable. Bryan Fields: I asked because, regardless of the current environment, I'd assume the three of us strongly believe there will be a day adult-use cannabis is available in Florida. If you share that belief, how do you navigate the data and the business to still support that belief given the current environment? Are you selling assets? How does that work? Ben Burstein: It's probably a balance — is Florida the key asset in your portfolio for investors, do you have the operating cash internally to navigate turbulent times, can you ramp down other efforts, like pausing a massive cultivation facility or closing an extraction facility, to reduce internal burn in order to afford a few extra months, hopefully get some cash infusion from Schedule III, and then eventually turn Florida back on. It's a very difficult balance, no doubt. Bryan Fields: But we can all agree, Ben — a $6 billion market with a small player pool — if you can survive, which in this industry is a monumental task, you can get to the other end of the rainbow and get all the gold. Ben Burstein: Well, what everyone needs to remember about our industry is that the top 30 MSOs by size, many of which have a presence in Florida and other limited-license markets, owe about $3 billion in debt maturities in 2026. There's not much room for refinancing left, and there's not much capital available for it, so those companies are going to have to find ways to pay their creditors, or their creditors are going to sell those assets. Many companies with Florida operations are part of that maturity wall — they're going to look to sell certain assets, and Florida is a market with all these new license holders who have capital and are looking to acquire already-built infrastructure. It's going to be a hotbed for consolidation, and that's fine — it's the area the market needs. Bryan Fields: 100%. And if we're going to take strong predictions — I'd assume it'll be other industries with excess cash, maybe a dying consumer base, looking to diversify revenue. This is going to be controversial, but the tobacco industry has excessive resources and cash looking to potentially expand into new areas — there's overlap there. I'd assume they'd come in, shell up a company, come into Florida, clean it up because they have the cash to survive two to five years short-term, pay out the cash, and if they can make it to the hockey-stick end, plus have their other business to help them through the short term. What do you think about that? Ben Burstein: That's already happening — you have the Organigram relationship, where Organigram bought one of the largest brands in Canada, Motif. All these outside players are looking for the eventual winner, because the total US cannabis market cap is about $15-20 billion across all public companies combined, while a company like Southern Glazer's Wine & Spirits does $90 billion of revenue a year — they're willing to wait for the eventual winner in the space, and it's no problem for them to be worth several billion dollars while they wait. I don't think you're going to have many large national players enter state markets in the way they exist today — they'll wait until there's a winner, whoever can produce the most at the lowest cost and understand the consumer best, and then they'll be acquired by large tobacco, alcohol, or possibly pharma companies. You're spot on — you're going to see many large vice manufacturers enter the space; it's just too natural a complement to their portfolio. Bryan Fields: Is there anything from an investment standpoint that concerns you — if something continues to get punted? Ben Burstein: I want to stay optimistic, but in reality cannabis continues to be used as a political pawn, and if we're four years from now and it's still just a pawn, we wouldn't be shocked, we'd be disappointed but not shocked. Bryan Fields: Is there anything specific — if Schedule III doesn't happen, are you concerned? Ben Burstein: I think it's a really long game, and I don't want to be too optimistic. There are going to be challenges — I believe more than 80% of all licenses are going to go out of business, and we're still at the very beginning of that cycle. You've seen it in legacy markets like California, where licensed cultivation square footage is down over 50% over two years; Oklahoma, where more than 40% of licenses have been given back and aren't being renewed due to regulatory issues; Oregon, with a moratorium on new licenses. Those dynamics will continue across all markets as capacity is right-sized — you have severe oversupply in basically every market that's legalized in the last 10 years, so I expect many businesses to go out of business, limited capital availability, and debt maturities leading to companies failing, and that's okay — it's the normal reverberation of the industry. Those assets will be acquired by the best producers who can produce at the lowest cost with the best product, and 20 years from now we'll be sitting with a much more developed, mature industry, possibly owned by large tobacco and beverage companies, but one that looks very different than today, because 11,000 points of retail distribution is nowhere near enough. You have to get a lot closer to what alcohol or tobacco looks like to achieve those industry sizes — US alcohol today is a $270 billion industry, tobacco is about $75 billion, and cannabis is $32 billion. There's huge room for growth that will come from additional retail access. How do we go from $32 billion to $100 billion? You need more places for people to purchase product, not just dispensaries — you need people to walk into the convenience store next to where they live and buy a THC beverage next to where they'd buy beer. That's how this industry grows, and that's what I'm watching for — increased retail accessibility. The states leading growth are doing an amazing job of that: New York is going to issue another 500 retail licenses, Minnesota at least 512, New Jersey another 700, Illinois still has social equity retailers coming online, Ohio has another 200-250, Maryland is going to have another 900 licenses. There's a lot of retail accessibility coming, and that's going to be the main driver of additional sales growth — those markets adding retail are where all the sales growth in the industry will come from, period. Bryan Fields: Do you think more needs to be done to let retail locations diversify their product offerings? If a store only sells cannabis, and now there's this whole other hemp beverage industry available in grocery stores, the person who used to make a special trip just to buy a beverage doesn't need to anymore — so dispensaries lose that foot traffic and only have cannabis to bring people in, maybe some apparel, but that's state by state. Do you think something needs to change to let these retail locations diversify? Ben Burstein: You're spot on, the answer is yes — just like pharmacies have convenience-store components to entice people in for reasons beyond pharmaceuticals, cannabis needs to be available alongside other shopping mediums. I'd actually push further and say cannabis needs to be sold in traditional channels — supermarkets, convenience stores, bars — places people naturally go, rather than having to go to a dispensary, which is intimidating for a new consumer: showing ID, going through a security door, selecting products they've never heard of. It's a lot easier if they're walking down the beverage aisle at the supermarket, like in Minnesota where that's legal — you see a can of hemp beverage, it sounds great, you buy it, try it, like it, buy it again. Those easy ways to experience the product just don't exist in cannabis today. Total legal cannabis consumers over the next five years are expected to grow by about 18 million people, while legal alcohol consumers are probably going to drop by a few million. So cannabis is adding tens of millions of new consumers while alcohol is losing consumers, which means many places that sell alcohol have to sell THC beverages or some other consumption medium to make up for it. It's why certain states are allowing their liquor stores to sell cannabis products — in Connecticut and New Jersey they can sell regulated legal market products at places that aren't dispensaries, which is huge for growth. In New Jersey there are 7,000 liquor stores now able to sell regulated THC beverages — that's more locations than every dispensary in the US combined. Large opportunities are going to come from additional retail. Bryan Fields: Last question on this topic, the hardest one — what do you think will be the biggest product category within beverages? A seltzer, or something more like a bitter or a beer? Ben Burstein: I'm not sure — I think you'll match the tastes of your consumers. You have your standard liquor replacement, your seltzer, your beer — I think a full product portfolio will get built out. Almost all operators have chosen seltzers so far, partly because bottling lines are easier for seltzer than beer, but I see no reason you won't eventually have a beer with both alcohol and THC in it — that's a really interesting way to consume, with a lot of potential for product innovation. I've personally tried seltzers and a liquor replacement and liked both, and with the rise of NA beer and other formats, I can see THC in them too. Kellan Finney: My favorite pushback on serving THC in bars is when people say, 'What happens if they consume too much?' — but that's the same concept as someone consuming too much alcohol in a bar. Adults making adult decisions is the same either way; if you drink ten shots of 151 the result isn't good, and if you consume a high-THC product without normal tolerance, the result isn't good either. It's just about understanding and normalizing the category. Ask people if they'd buy a THC drink at a bar and see their response — that'll show how far we still have to go in normalizing THC as a category. Bryan Fields: All right, Ben, prediction time — one year from now, what has changed? Ben Burstein: The industry is going to add a few billion dollars to sales again this year — 2024 was the strongest growth since 2021, and you'll get that again with all the new retail stores coming online. Margins and cost structure will improve a bit versus the last couple of years — cultivation offtake, collections, AR management, and days payable will keep getting better in legacy markets. I expect Schedule III to go through by the time we talk again a year from now, which will create opportunities for a lot of operators. More personally, LeafLink has been very involved in M&A over the last few months — in just the last four months we've acquired two of the largest acquisitions in cannabis tech history, two spectacular businesses we absolutely love, and we're looking at additional opportunities, so expect us to close more of those. Kellan Finney: I think you'll see a lot more positive sentiment because of 280E. I don't think it'll drive people to build massive new factories, but psychologically, C-suite executives and investors will sleep easier — investors are going to get returns, which matters because they put a lot of money into standing up this industry eight years ago and need to see it pay off to prove it's a functioning industry. A year from now I think it'll be more stable, more mature — the last of that 'tech boom' excitement where you could start a company and get rich overnight is probably behind us. That's my two cents — what do you think, Bryan? Bryan Fields: I'll take the low-hanging fruit. I think toward the end of next year we'll see a combining of the hemp and cannabis industries — I think there'll be a regulatory push where both are folded into one compliance framework, operators get a six-to-twelve-week window to get compliant, and anyone outside that window is considered non-compliant. I think the sooner they combine those, the better. Curaleaf has already put its hat in the ring; I'd expect another MSO — we've already seen Green Thumb — to make a bigger push there, because if companies are looking for growth, hemp is a great avenue, and at the end of the day it's the same product, maybe delivered differently. Once combined, I think you'll start to see the type of returns on growth metrics people want, along with a heavier push toward profitability, which excites people and brings cash back in, moving everything toward positive sentiment. So maybe that's a long-winded way of saying there's more chaos on the horizon, but survival of the fittest is real in a new industry, and I'd expect by the end of 2025 the narrative of these two industries coming together to make the numbers for 2026 really exciting. Bryan Fields: Ben, for our listeners who want to get in touch and learn more, where can they find you? Ben Burstein: Check out LeafLink.com — a lot of my work on insights and thought leadership is posted directly on our platform. Please feel free to reach out to me directly at ben@leaflink.com. The last time I was on the show we got a lot of feedback from the audience, and I actually got a few opportunities that turned into pipeline on our M&A side — so if you're looking to sell your cannabis tech business, please reach out, I promise we'll take a look. Bryan Fields: Love it. Thanks for taking the time, this was a lot of fun. Ben Burstein: Yeah, thanks so much, Bryan, Kellan — appreciate you both.