Cannabis market stalls

Cracks that started to appear in the horticultural lighting market a few months ago could be set to widen, given a reversal of fortune that has beset the cannabis trade.

Those are not the exact the words of Fluence CEO David Cohen, but his candid remarks in a recent webcast leave no doubt that business has turned tougher for any company in the cannabis value chain, including LED lighting suppliers such as Austin, Texas–based Fluence.

“It’s a very interesting time in the market,” Cohen said while interviewing his guest on the latest installment of the Fluence-produced Fluence Unfiltered YouTube video series. “We’re seeing monumental changes negatively almost at the same rate or faster than we were seeing monumental changes positively at the beginning of COVID.”

He asked interviewee Janeen Wright, managing editor of publication Greenhouse Grower, whether she also notices market pressures.

“Yes, certainly,” Wright concurred.

Between the two of them they rattled off a variety of challenges such as rising costs, declining prices, expensive capital, regulatory complications, and competition from the black market, to name just a few.

Indeed, in its December report Cannabis trends in 2022: A year in review, Seattle-based cannabis research firm Headset noted that U.S. sales declined 1% for the year (the smaller Canadian market, also covered in the report, grew by a modest 7%).

Looking at end user sales, the firm also noted that “average item prices have decreased in both countries,” that “average basket sizes decreased in all cannabis markets over past years,” and that “in the U.S., Gen Z was the only age group to see sales growth over the past year.” (Gen Z, for “zoomer,” is the period of births roughly between the mid-1990s and early 2010s).

Despite a constant expansion in the number of states and other authorities that are legalizing cannabis, the decline set in months ago. Back in August, Headset noted in the summary of another report — An analysis of declining growth in recent US cannabis sales — that “Sales are softening, operators are going under, layoffs are ramping up, retailers are closing doors, financing is drying up, and the list goes on.”

Fluence’s Cohen and his guests have been forthright in earlier episodes of Fluence Unfiltered about the rough and tumble of the cannabis trade and the aforementioned regulatory uncertainties, which include financial aspects.

Some observers also believe that cannabis use had benefitted from a boost during the COVID pandemic, as usage increased amid stay-at-home tendencies. The general end of lockdowns has negated that sales benefit, the thinking goes.

A continuing rocky cannabis road would be a blow to the horticultural lighting market, as cannabis represents a significant percentage of sales in the sector. It’s still the foundation of business for Fluence, which rode the cannabis wave to grow into a $141 million company in its first 8 years, drawing the attention of lighting industry leader Signify, which agreed to acquire Fluence from ams Osram in December 2021.

Signify now runs two separate horticultural lighting groups — Fluence, as well as one that sells the Philips brand through Signify’s Horticulture LED Solutions division, which itself last June took notable steps toward fortifying its cannabis lighting capabilities.

But for the moment, at least, horticultural lighting has hit a rough patch, and not just at Signify.

Both Signify and LED supplier ams Osram reported slowing horticultural activity — not limited to cannabis — after their third quarters ended last fall, as growers are finding it difficult to afford the upfront expenditures on LED lighting.

One previously high-profile grower, Pittsburgh vertical farm and former Current lighting customer Fifth Season, recently closed its doors.

Signify, based in Eindhoven, Holland, and Austria’s ams Osram are due to report year-end results soon, starting late next week for Signify, and early February for ams Osram, based in Premstaetten. LEDs Magazine expects both companies to provide more horticultural business insights in those reports.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

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