The Bounceback for Cannabis Businesses

The cannabis industry faced an uphill battle in 2019, but developments suggest that it is positioned to rebound in 2020. See what consultants, growers, business leaders, and marketing experts have to say about the industry’s future. 

The cannabis industry is often unpredictable. However, this unpredictability has nothing to do with the sustainability and long-term feasibility of cannabis products, but rather, it is merely the standard life cycle of any new product introduced to the market.

The cannabis industry is still relatively young, and any new industry is going to deal with ups and downs as legislators try to determine the best way to regulate the various products now saturating the market. Lawmakers are constantly changing and ratifying rules and regulations, while new cannabis companies are springing up as others are folding.

All of this, not to mention the ongoing global pandemic, has made for an uncertain landscape for cannabis businesses. After a cannabis boom in 2018, the industry had a sharp recession in 2019. However, there is optimism that 2020 could prove to be a bounceback year for the industry.

Below, find out why 2020 may be a promising year for cannabis businesses. We provide eye-opening insight from industry leaders explaining what caused the downturn in 2019 and the reasons why they are so optimistic about the future of the cannabis industry.

Why Did Cannabis Businesses Struggle in 2019?

Before explaining why many believe that the cannabis industry is due for a bounceback in 2020, it is important to discuss why many cannabis businesses struggled in 2019.

Cannabis Businesses Grew Too Quickly

2018 was the year when the cannabis industry finally broke through. In 2018, Canada and many U.S. states moved to legalize recreational cannabis, and as a result, the number of interested consumers in cannabis products exploded in size.

However, the cannabis business may have expanded a bit too quickly, in a way that was unsustainable. As Colin E. of SISU Consulting observed, “Many companies have overextended themselves by purchasing facilities and licenses in multiple markets, without having the requisite capital to sustainably operate them, and are now forced to sell said assets at extremely low valuations.”

Investors Expected Quick Profits From Cannabis Businesses

The rapid growth of the cannabis industry led to raised expectations, and cannabis companies could not show the kind of profits that many investors expected. Disappointed investors caused the stock value of cannabis companies to quickly plummet.

“Speaking from an investor standpoint, last year we went through the excitement, the plateau, and then the reality of Wall Street, which says we only run companies that actually present value as a business,” explained Serge Chistov, the chief financial investor of the eco-conscious cannabis grower, Honest Marijuana Company. “Since the profits weren’t there, I believe that is what caused stocks to be depressed and sold out.”

All told, cannabis businesses lost around $25 billion in market value in 2019.

Restrictive Laws, Taxes, and Regulations

The biggest hindrance to cannabis businesses making a healthy profit is the various rules, regulations, and taxes put in place by the legislators. Seemingly overnight, the industry went from being largely unregulated to having what feels like an endless list of regulations.

Marijuana is still considered a Schedule 1 drug at the U.S. federal level, which, according to Dr. John Oram, founder and CEO of NUG, “has caused stocks to plunge for some of the larger companies by as much as 65-80 percent.” There are also heavy and restrictive taxes on cannabis products, which makes it difficult to offer cannabis at a price point that the average consumer would consider fair.

Why Will the Cannabis Industry Bounce Back in 2020?

So if 2019 had so many issues that led to an economic downturn for cannabis businesses, why will 2020 be different? Below are some of the main reasons for optimism.

Cannabis Legislation is Constantly Evolving and Changing

Dr. Oram of NUG believes the downward trend in 2019 will continue until we “correct the issues of lack of banking and interstate commerce, high taxes, slow licensing processes/lack of retail, [and] over-regulations by local municipalities.”

While that may sound like a lot to overcome, think back to the state of the cannabis industry just a few years ago. Since then the U.S. House historically approved cannabis banking reform. There has been a cannabis movement around the world, and as governments continue to figure out how to regulate cannabis products, the regulations should evolve and change.

In 2020 the coronavirus pandemic has brought unprecedented challenges, such as 20 state and federal-level cannabis reform movements that have been paused as lawmakers focus on pandemic relief efforts. Additionally, shelter-in-place orders and social distancing requirements have made the collection of signatures for ballot initiatives difficult.

More Cannabis Data to Analyze

There is uncertainty with any burgeoning industry, mostly because nobody knows what the future will hold. The cannabis industry saw this with a rapid rise in 2018 followed by a brutal fall in 2019. However, as cannabis businesses increase in size, age, and customer base, they will have more data to give to investors and consumers so that they can make more well-informed decisions.

David Metzler, CEO of investment and operating company CBDCapitalGroup, believes that “hard data is what can help bring the cannabis industry into legitimacy and bring investment dollars into the businesses that can prove they stand out from the pack.” More data in the hands of investors can hopefully act as a stabilizing force for cannabis businesses.

Grey Market Cannabis Companies Need to Enter Legal Market

Another big problem for cannabis businesses is that there are still illegal cannabis companies that are posing as legal, and they are selling cannabis products online. Not only that, but these illegal cannabis companies can undercut the price of legal cannabis businesses, as they do not have to pay the taxes, fines, and fees that drive up the price of cannabis products.

These companies are referred to as “grey market” cannabis companies, and they pose a serious threat to cannabis businesses. However, instead of shutting down grey market cannabis companies, Reece M., a marketing expert for The Chrono and Toke Club, wants to find a way for them to legally join the market.

Reece argues that the best thing the cannabis industry could do is work “with legislators to create a sustainable model for grey market cannabis companies to enter the legal market.” He says, “By supporting the grey market to come into the legal market, public companies are helping grow the sector, while also potentially using the currently illegal facilities as an asset”.

The Boom in Cannabis Delivery

One big trend in 2020 is the increase in cannabis delivery companies. If the cannabis industry continues to invest in making cannabis products more accessible to the average individual, the industry should continue to grow. Dusti Arab, a brand strategist, believes that “continuing to invest more in the retail experience in dispensaries [and] offering options like pick-up and delivery” will play a major role in the advancement of the industry.

The growth in cannabis delivery is already being amplified by the 2020 pandemic, with consumers relying more than ever on cannabis delivery and curbside pick-up services.

Cannabis Considered an “Essential Service”

The new pandemic has been absolutely devastating for most industries and the economy as a whole. However, the cannabis industry has emerged relatively unscathed because the cannabis industry was labeled an “essential service”.

“Given our current health concerns throughout the world and the fact that cannabis is medicine for many people here in the US and worldwide, cannabis employees and businesses are now considered ‘essential service’” explains Medical Marijuana, Inc. CEO Dr. Stuart Titus. “This is a huge step forward for the industry and certainly legitimizes cannabis as a much-needed wellness product in these challenging times.”

Not only that, but Dr. Titus reports that “Cannabis is just being researched for potential benefit with the pandemic via a new group out of Canada.” Given all of these factors, Dr. Titus believes “that 2020 will be a banner year for cannabis companies.”

Medical Marijuana, Inc. Is a Cannabis Industry Leader

Medical Marijuana, Inc. is a cannabis industry leader, providing customers around the world with all of their favorite cannabis products. Medical Marijuana, Inc. was the first publicly traded cannabis company, first launching in 2009 and continuing to be an industry leader over a decade later. We offer a wide selection of high-quality cannabis and CBD products, making our online CBD shop the perfect place to experience the health and wellness benefits of CBD oil and other cannabis products.