By Mark Seavy

Just a few years ago, the cannabis industry had a ‘grow at any cost’ mindset. In recent months, however, that strategy has given way to a new economic reality.

Because while U.S. cannabis sales in the 24 states where it is legal have blossomed into a multi-billion-dollar industry, there are signs that expansion is slowing.

Some of the bloom, for example, has come off 420 day, which is marked on April 20th each year to celebrate cannabis and its culture. The event traces its roots back to 1971, but in recent years enthusiasm for the holiday has declined. In fact, a lack of sponsors and citywide budget cuts forced Sound Bazaar in March to cancel the long-running 420 Festival at San Francisco’s Golden Gate Park.

That doesn’t mean there won’t be promotions and discounts around 420, but the marketing around the holiday—and cannabis in general—has lost some of its luster.

This is in part due to a lack of federal legislation legalizing cannabis in the U.S., which has lessened the appetite for licensing connected to the category. Several Democratic Senators wrote a letter to Attorney General Merrick Garland and DEA Administrator Anne Milgram urging the de-scheduling of marijuana. But even if the DEA de-schedules the drug, that does not make it legal, and the patchwork of existing state laws has made fashioning a broad marketing campaign problematic.

Much of the success that has been found in cannabis-focused licensing has emerged as a result of celebrity partnerships. Seth Rogen’s smoking accessories and home goods company Houseplant has seen significant success, for example. Rogen participates in the cultivation process, something that is popular with cannabis consumers craving authenticity, licensing industry executives said.

And Hip-hop artist Berner has combined celebrity, cannabis legacy, and highly rated products to form Cookies, which has stores across 14 states, including one on Herald Square in New York City, and is known for the light blue background on its bags.

Comedian Richard “Cheech” Marin’s Private Stash brand, meanwhile, has proved popular with consumers owing to its high potency. Marin and his partner Tommy Chong also rolled out their High & Dry THC-infused seltzer last fall in the Boston market with an in-store appearance at Liquor Junction in Reading, MA.

Even with star power, a lack of diverse products has ultimately hampered sales, said Adam Terry, CEO and Co-Founder of Cantrip, a THC drink company that combines plants and natural flavors.

“There are not enough different products out there and it got to a point where the same bud might have four or five brand labels on it sold under different celebrity names,” Terry said. “The product was either identical or too much like other offerings to make a brand proposition. That is why most celebrity products have failed.”

Licensing efforts in the category have been further hampered by logistical issues. Retailers typically need to funnel payments through a co-packer and, with the administrative costs tied to adult-use and medical cannabis, the take home for licensing is “very low,” Terry said. That is in addition to setting up specific systems in each state for manufacturers and retailers.

“Most licensing plays require national scale to achieve success,” said Terry.

The inability to create national scale has forced Canada-based supplier Tilray Brands to delay expansion into the U.S. market until federal legislation is passed legalizing cannabis, said CEO Irwin Simon. In another effort to expand, Tilray has purchased a series of craft breweries—including long-time cannabis proponent Sweetwater Brewing Co., which first produced its 420 Extra Pale Ale 26 years ago. Additionally, Tilray acquired eight craft beer brands from Anheuser Busch last fall.

“Our strategic playbook is already in play to expand our beverage alcohol business across the U.S. and Canada, getting our cost structure right, transforming the productivity and profitability of the breweries we acquire,” said Simon.