The Win-Win for THC Drinks

In this two-part series, we explain why, if you’re bullish on rescheduling, you should be bullish on low-potency THC drinks. Part II is only available to subscribers of the Delta Dispatch (https://deltaemerald.substack.com)

Progress can compound, like knowledge, or interest. As Bill Gates once said, people tend to overestimate what can be done in two years, and underestimate what can be done in ten.

We’ve passed the tipping point with cannabis. Federal political “knockout risk” has virtually disappeared in the last six, and especially last three months. Simultaneously, sophisticated CPG and logistics companies are investing in and/or earning incremental margin dollars from THC products, today. The wheels are in motion for mass production and distribution of THC products in the U.S.

So, what will “mass THC” look like? What patchwork of regulations will sit atop? What sort of footing, if any, might combustible and high-potency products have in this future state? And why is Delta Emerald so bullish on THC drinks as a consumption modality?

Progress is like bankruptcy: it happens a little at first, then all at once

It took 11 years for same-sex marriage to expand from Massachusetts, in 2004, to all fifty states, in 2015. Even Obama was against gay marriage until he publicly changed his position in 2012.

It’s been 12 years since the first two U.S. states legalized adult-use cannabis. Today, 79% of Americans live in a county with at least one dispensary1 and 9 in 10 Americans say cannabis should be legal for medical or recreational use.2 For comparison, over 70% of the U.S. population lived in a state with legal same-sex marriage one year prior to the Supreme Court’s landmark 2015 decision.

The court of public opinion moves faster than the wheels of justice and the hypocrisy of politicians

In a world where Snoop was essentially MVP of the Summer 2024 Olympics, does it really matter that we finally have proof that the Nixon administration intentionally misled the public about the danger of cannabis for political gain, despite Nixon acknowledging on tape that cannabis is “not particularly harmful” and more akin to alcohol or caffeine?

We live in a world where THC and mushrooms are openly sold at Oklahoma MAGA festivals hosted by Kid Rock:

The conservative movement once proudly defined itself in opposition to the recreational drug use of the leftist counterculture. At Rock the Country, a cannabis tent did a brisk business in prerolled joints and Delta-9 space pops. Another company sold gummies containing a “proprietary mushroom and nootropics” blend, the packaging said, for a “mind-bending experience.”

We live in a world where veterans are publicly criticizing Republican governors for trampling on their right to THC drinks:

“We’ve got vets who are on a lot of medications that interact with alcohol. We are more than a bar. We offer these [THC] drinks for people who are more cannabis consumers,” said Annie Stanfield, Junior Vice Commander of VFW 2661.

Yes, a world where country music’s 2023 New Artist of the Year is a strong proponent of cannabis and gives congressional testimony about the harms of Fentanyl.

And now, within a matter of weeks, the last legitimate bear case to federal cannabis reform has virtually disappeared.

The politics of cannabis changed on July 21st, 2024

If the last six months have been positive for the outlook of the cannabis industry, the last three months have been nothing short of extraordinary. We point to Kamala Harris’ nomination as the catalyst.

Prior to Harris’ nomination, the cannabis rescheduling process was already well underway. And two weeks ago, the DEA set its cannabis rescheduling hearing date to December 2nd, notably after the election. This de-politicizes what is essentially an administrative process and adds legitimacy to the final outcome, in our view.

Prior to last week, the only legitimate downside scenario to federal rescheduling was that Trump wins the election AND decides to halt the rescheduling process.3

Trump has correctly intuited there’s no upside to opposing cannabis

Last week, Trump aligned his position on cannabis with his opponent by announcing that he will vote “Yes” on Florida’s Amendment 3, which would legalize adult-use cannabis in Florida4, and by pledging that, as president, he would push for rescheduling cannabis to Schedule III.

In hindsight, it was obvious. Public opinion aside, all but one of the seven key election swing states5 have legal cannabis, and over half have meaningful THC drink markets.

With rescheduling looking highly likely, THC drinks are ideally positioned to bring cannabis to the masses

Delta Emerald has invested the last 18 months researching the THC drink category. We’ve learned that THC drinks scratch some really important itches for regulators, politicians, powerful alcohol interests, and major CPG companies. In Part II of this series, we’ll explain why we think low-potency THC drinks will drive the lion’s share of the cannabis industry’s growth over the next decade.