Like so many other things in 2020, the future of the cannabis industry remains very much clouded by circumstance. Although many dispensaries and growing operations have been classified as essential businesses during the COVID-19 pandemic and thus able to remain open, lower consumer spending and far stricter lending practices could put a big squeeze on both small and big vendors.
A Forbes report from January of 2020 painted a very rosy picture: the "green rush" would have not just created thousands of jobs and billions of dollars of revenue, but was thought to have built an entire global industry for the first time as major nations begin to legalize marijuana wholesale. In addition, the cannabidiol (CBD) industry was set to mature as a flood of investors, researchers, and marketers flocked to take advantage of the curative properties of this chemical, creating everything from CBD gum to CBD dog food. With more customers comes more scrutiny for higher standards, furthermore, and Forbes predicted that CBD testing would accelerate while customers shunned bad products. A similar industry report from February of 2020 had green-tinted glasses, anticipating the global market would grow to some $90 billion dollars within seven years, while medical-grade marijuana would enjoy a 70% market share relative to recreational.
Nevertheless, there were cracks in the foundation for the industry that COVID-19 has widened. The "liquidity crunch" faced by cannabis businesses that cannot effectively scale without a big infusion of cash, combined with reluctance from lending institutions, has only grown as too few dispensaries and grow-ops have received emergency funding. The rapid expansion of multi-state businesses proved a poor investment, as they are now spread too thin without a solid foundation of customers to maintain their operations and size. Finally, the ballot initiative to legalize cannabis in more states (and international markets) has stalled as voters now face much greater preoccupations and concerns when they head to the ballot box.
Recent reports have looked more conservative for the industry's growth. A Grand View Research growth projected pegged the cannabis industry at $75 billion by 2027, meaning a potential drop of 25% relative to previous expectations. COVID-19 accounts for a great deal of that in both direct and indirect spending. A drop in research and development may be the most serious financial crunch of the pandemic: the cannabis industry, like all other industries, have to tighten belts and have much less operating money available to develop everything from new strains to new consumer packaging. The Grand View report also mentioned how mom-and-pop pot shops will face the heaviest burden of the pandemic: while bigger dispensaries can leverage assets or capital, the smallest growers have the thinnest margins and may be the most squeezed. It remains to be seen how less competition and more monopolies will affect the industry, with some analysts believing it will drop prices overall, while others argue that quality will decrease with the "McDonaldization" of the industry.
Accelerated healthcare spending, however, will see marijuana research get a boost. With the negative correlation between respiratory diseases like COVID-19 and overall marijuana use, researchers will attempt to find new ways for customers to get their THC fix without needing to actually inhale smoke. Furthermore, as CBD provides pain relief and better mood, it offers an inexpensive, no-prescription option for patients struggling with health concerns.
If you are one of the businesses feeling the effects of 2020 and are facing a liquidity crunch, you can benefit from financing in order to get your cash flow moving. Get Pre-Approved today.
Posted by Canna Business TeamFacebook
In an industry that is constantly evolving, Canna Business Financing provides business owners with a reliable source to gather the most up-to-date information. From resources to fund the growth of your business to insights on best practices to scale, look no further!