C2022635_RFP_OEI Market Analysis - Cannabis Attach D White Paper~2.pdf

C2022635

OREGON EMERGING INDUSTRIES RFP

WHITE PAPER

OREGON’S CANNABIS AGRICULTURE AND PRODUCTS SECTOR

This white paper reflects an overview information received from Business Oregon’s Cannabis Agriculture and Products Sector advisory committee and other resources and is intended to provide an industry-based perspective of the value the market analysis may provide. It is not intended to represent the required scope of work or methodology for analysis but can provide insights to consultants as they develop a proposal.

BACKGROUND

The legal adult use cannabis industry is unique for four primary reasons. 1st, it is essentially brand new with the first legal sales happening in Oregon in 2016 with the first legal sales happening anywhere in 2014 in Colorado.

2nd, it is still federally illegal all while 19 states have legalized the sale of adult use cannabis within their borders, 38 states have some form of legal medical cannabis, and only 12 states have no program for the legal sale of high THC cannabis either medically or adult use. 3rd, while the legal cannabis industry is very new and still federally limited, cannabis consumption has an exceedingly long history in America and across the world.

Numerous studies and analysis estimate that the combined legal and illicit market for cannabis is between eighty and a hundred billion dollars. 4th and finally, federal legalization and interstate commerce is almost inevitable at this point due to popular support and the corollary growing support in Congress. When it happens is the bigger question.

KEY AREAS OF FOCUS

These key areas of focus are important groundwork for framing the scope of work to be done in the EICMA for the cannabis industry. Specifically, these inform three core paradigms/periods that define the industry's future and need to be analyzed to illuminate how the Oregon Government and Legislature can support Oregon's cannabis industry and grow its positive economic impact. The seven pillars of industry ecosystems highlighted in the Common Element section of the RFP naturally fall as subcategories of each of these paradigms.

These three paradigms/periods or opportunities for economic growth are:

1) The present in-state only market where sales are limited just to Oregonians and Oregon tourists.

Specifically, what can be done in the immediate future to improve the financial situation of the industry today without interstate commerce.

2) Preparation for federal legalization and interstate commerce for existing cannabis businesses that are still limited to in-state only sales. What can be done in the immediate future to help the industry build the resources necessary to compete on a national level. And how can the state and industry develop a regulatory scheme and products to be ready for a national market.

3) A future market with federal legalization and interstate commerce. What are the potential economic benefits to Oregon of interstate commerce as an export state? How can the industry and state prepare for those economic opportunities and competitive markets?

Within these three paradigms we suggest the SOW cover the following industry aspects:

1) Analyze each sector of the industry Production (farming), Processing (manufacturing), Wholesale (transportation), Retail (consumer sales and education).

a) Analysis of the production sector should look at the positive impact it can and does have on rural counties especially Jackson, Josephine, Lane, and Clackamas, which represent 65% of the farm licenses in the state but also the smaller rural counties like Curry Coos, Polk, and Yamhill. Ways to create value to brands through things like, appellations, sustainability standards/labels, organic/craft standards/labels, protected genetics, and energy sustainability incentives.

b) Processing analysis should look at the things hindering product development and innovation. The ability to meet consumer tastes and adapt quickly. The impact of consumer knowledge and awareness (or lack thereof) of products. The potential use of developing new products or product awareness from research into terpenes and cannabinoids (discovering new molecules and/or developing a better understanding of the effects of known molecules and compounds). Ways to create value to brands through things like purity standards and GMP/ISO.

c) Retail Analysis should look at opportunities for new consumer sales like consumption lounges, consumption events, and cannabis tourism. Like processing, look at the positive and negative impacts of consumer knowledge or lack thereof and the market's ability to meet consumer demands.

2) Financial support - The federal illegality of cannabis creates unique financial hurdles that are especially harmful to small, rural, women, and minority owned businesses. Providing an analysis for ways to increase the availability of funds for entrepreneurship and expansion would be valuable.

a) In the context of interstate commerce, analyzing how financial resources could help the growth and expansion of homegrown companies trying to compete on the national scale is an important metric.

3) Regulatory Reform - As we are a new industry and one of the earliest states to legalize adult cannabis our regulations were crafted with very limited knowledge or experience of how the market would function. A thorough review of what regulations pointlessly harm the industry financially and provide little to no benefit to health or safety would be invaluable. Additionally, any regulatory reform that would allow the industry to be more innovative and nimbler would be helpful. It is important to note that often the impact of costly regulations is more harmful to small, rural, women, and minority owned businesses.

a) Within the context of interstate commerce regulatory alignment with other states would be an important metric.

4) Workforce development - As we are a new industry, the number of individuals with expertise is limited especially for the sectors of the industry that are especially knowledge based, production and processing.

This problem may be exasperated by the growth of legal markets in other states that may be able to pay people more. Analyzing the workforce needs and how the state could help develop a talent pipeline would be significant.

5) Research and Development - The cannabis industry generated over $1.1 billion in sales last year.

Identifying ways for the state to support research into cannabis and ensure that we have a high level of expertise is integral to ensuring the competitiveness of Oregon's market in the long term.

FOUNDATIONAL RESOURCES

The following firms provide market level data to the cannabis industry and may be valuable resources, especially in relation to consumer trends, brands, strains, and product types both locally and nationally.

• Surfside - www.Surfside.io

• Cannabis Benchmarks - www.cannabisbenchmarks.com/

• Weedmaps - www.weedmaps.com

• Headset - www.Headset.io

• BDSA - www.BDSA.com

• New Frontier Data - https://newfrontierdata.com

• State Data - The Cannabis industry is required to track cannabis from “seed to sale” in a “cannabis tracking system” CTS. The State of Oregon Liquor and Cannabis Commission uses a system call Metrc to do this. Because of the amount of data the industry is required to track, Metrc contains large amounts of valuable information, it contains for example:

1) Consumer sale data - price, product type, number of units or amounts.

2) Wholesale Data - price, volume, units or amounts.

3) Every license

4) Every cannabis worker

5) Harvest wet weights

6) Other Additionally, they have conducted surveys about the diversity of licensees and might have other valuable information.

The data is not perfect but there is a lot of it and if there is an intergovernmental agreement, Business Oregon may be able get access to data.

Here is a webpage that displays of the data they have on hand:

https://data.olcc.state.or.us/t/OLCCPublic/views/MarketDataTableau/MainScreen?%3Aembed=y&%3A iid=1&%3AisGuestRedirectFromVizportal=y Here is their 2021 report on supply and demand as another example of the help they may be able to provide.

https://www.oregon.gov/olcc/Docs/Legislative_docs/2021-Supply-and-Demand-Report-Executive- Summary.pdf http://www.surfside.io/ https://www.cannabisbenchmarks.com/ http://www.weedmaps.com/ http://www.headset.io/ http://www.bdsa.com/ https://newfrontierdata.com/ https://www.oregon.gov/olcc/marijuana/pages/default.aspx https://data.olcc.state.or.us/t/OLCCPublic/views/MarketDataTableau/MainScreen?%3Aembed=y&%3Aiid=1&%3AisGuestRedirectFromVizportal=y https://data.olcc.state.or.us/t/OLCCPublic/views/MarketDataTableau/MainScreen?%3Aembed=y&%3Aiid=1&%3AisGuestRedirectFromVizportal=y https://gcc02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.oregon.gov%2Folcc%2FDocs%2FLegislative_docs%2F2021-Supply-and-Demand-Report-Executive-Summary.pdf&data=05%7C01%7CDonna.GREENE%40biz.oregon.gov%7C3cd6a828d15e4b83b90e08da5b8a0877%7Caa3f6932fa7c47b4a0cea598cad161cf%7C0%7C0%7C637922945666723216%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000%7C%7C%7C&sdata=lbcEIfzpXAz8gkisWJcF%2BYFxtahjwMjuPbPTTJI1mGw%3D&reserved=0 https://gcc02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.oregon.gov%2Folcc%2FDocs%2FLegislative_docs%2F2021-Supply-and-Demand-Report-Executive-Summary.pdf&data=05%7C01%7CDonna.GREENE%40biz.oregon.gov%7C3cd6a828d15e4b83b90e08da5b8a0877%7Caa3f6932fa7c47b4a0cea598cad161cf%7C0%7C0%7C637922945666723216%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000%7C%7C%7C&sdata=lbcEIfzpXAz8gkisWJcF%2BYFxtahjwMjuPbPTTJI1mGw%3D&reserved=0