After the absolute roller coaster of a year that was 2020, it may be tempting to throw away every market analysis and throw up your hands. Predicting the future may seem like a futile exercise, but change always brings opportunity, and there will be ample opportunities for the cannabis industry throughout 2021. Here are the five biggest predictions for the year.
While it is not totally clear how the new Biden-Harris presidential administration will address cannabis law and policy, it is likely that it will be friendlier towards legalization than the outgoing Trump-Pence administration. Although Biden was the sole Democratic presidential candidate not to mention marijuana legalization, Kamala Harris specifically mentioned decriminalizing cannabis on a national scale during her debate. Furthermore, Democratic control of Congress could usher in new laws and policies, such as furthering the Strengthening the Tenth Amendment Through Entrusting States Act (STATES Act) to give banks and insurance companies more protection for their investments in the cannabis industry.
Much like other industries, such as broadcasting or food production, a lot of small fish can band together over time to create a few sharks. Consolidation in the cannabis industry slowed in 2019, as greater scrutiny on cash flow led to fewer deals. However, mergers and acquisitions are facing a bull market where there's more capital and more opportunities to consolidate businesses. Investment deals are expected to grow well past the 120 from the first seven months of 2020; Marijuana Business Daily CEO Chris Walsh expects “a big mega-merger” in 2021.
The opportunity for a company to grow and become the McDonald's, the Coke, or the Wal-Mart of cannabis is ripe for the taking. Branding will be a major initiative in 2021 as the largest dispensaries may hit customer saturation levels, requiring them to pivot their business strategy and start to peel away customers from competitors. Currently, most states with legalized cannabis have state-specific brands; building these brands across state lines will be the key goal for the largest players. As brands get larger and more recognizable, the industry itself will benefit from the leadership and cohesive customer experience.
There are now more states that offer medical marijuana licenses to businesses than states that do not. With 15 states now providing full legalization, and the potential for several more to bring cannabis to the ballot this election cycle, it's clear that decriminalization and legalization have all the momentum in the world behind them. Not only are states realizing that ending prohibition leads to greater tax revenue and less spending on law enforcement, but many are looking for a shot in the arm to get their economies going following COVID restrictions. For many legislatures, the prospect of decriminalizing and/or legalizing marijuana may be too tempting to pass up, leading to availability in regions that had harsh prohibition laws just a few short years ago.
The big picture of cannabis funding for 2021 is that a lot of different people want to put their money where their mouth is. Investment in cannabis is set to grow in several ways, most notably the increase in cannabis stocks, as most cannabis stocks came out almost unscathed by the crisis of 2020. Cannabis stocks are looking like a safer and more productive option for those who love to buy low, while direct funding through banks will grow as more laws ease up the lending process. The bottom line is that cash looks a lot more plentiful for industry owners dreaming of expansion in the new year.
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