Amazon formally endorses Cannabis Legalization
This week Amazon, which is the nation’s second largest private employer, formally endorsed the Republican legalization bill (see Tweet below) that was brought to the table by Republican Nancy Mace in November 2021. Last year Amazon pro-actively changed its cannabis policies internally and has ended drug testing for cannabis for most workers. Part of the reason for the policy change and endorsement of legalization is so that Amazon can hire more workers that otherwise might not qualify due to their drug tests. In addition, we believe Amazon will likely want to enter and compete in the cannabis industry and likely to make acquisitions in the space to jumpstart their efforts vs trying to build a business organically.
Amazon doesn’t always try to do things organically as evidenced by recent and historical acquisitions such as PillPack (pharma), Whole Foods, Quidsi and Zappos. Bottom line we see e-commerce as a massive opportunity for our portfolio companies to get acquired or carve out a vertical market niche that is standalone.
East Coast Sales Set to Soar
With several states having legalized in the last year, we are poised to see massive sales and growth on the east coast driven by the new states of NY and NJ alongside existing markets in Florida and Pennsylvania. For 2022, New Frontier Data estimates combined sales on key east coast markets to reach close to $6.8b (see chart below) and growing to close to $11.7B by 2025. For context, the entire legal cannabis industry in 2021 was roughly $27B and CA is the single largest market at close to $5B in sales. This is a huge deal for industry sales and growth bringing on new markets that can potentially unlock 20-30% of total industry sales.
Conclusion
Large corporates like Amazon are starting to openly support legalization, as they see the opportunity as we do, which will create more political pressure as Amazon yields a lot of political influence given their size and importance to the country for employment and taxes. At the same time, states are not waiting for the federal government and sales of cannabis are set to soar on the East Coast. We also just saw that for the first time Cannabis related taxes surpassed those of Alcohol in certain states. Cannabis is too big to ignore and with the right set of players pushing it, legalization remains inevitable with very few industries experiencing these types of growth rates.
