With each passing year, the cannabis industry matures and continues to grow exponentially. Not only in the size of the market, but also in the methods of production and cannabis consumer behavior.
The cannabis industry has been fighting for legalization for decades.
In this article, we’ll review the cannabis industry trends that have emerged in 2020 and that will drive 2021 forward. And we’ll cover current industry statistics underlying these cannabis industry trends.
INCREASING BENCHMARKS FOR THC
At the top of our cannabis industry trends list is the race to the highest THC %. There’s an interesting two-way communication between producers and marijuana consumers in the legal marijuana market. Breeders and growers define what cultivars they choose to grow each year. And consumers vote with their dollars to signal back to brands, distributors and cultivators what strains they prefer.
What we’ve been seeing over the last few years, is an increasing demand for high THC strains. While we’re learning more about how the present terpenes in a strain might play a more important role in the effect or ‘high’, consumers consider their options in a simple way: highest THC for lowest $.
Cultivators have to play the game and stay on top of the preferred strains in the market. Or better yet, one step ahead. Tastes and preferences change very frequently in this market, partly fueled by breeders constant production of new cannabis strains.
Growers who have access to a breeder or employee who can start a program, would be wise to develop and name their own strains. When you’re the only producer of a certain strain, your competitive edge improves.
THE DOMINO EFFECT OF CANNABIS LEGALIZATION
We’re way past the 50% tipping point for United States cannabis legalization. Today, 36 states and 4 territories have some level of cannabis regulations in place. November 2020 elections added New Jersey, Arizona, South Dakota, and Montana to the roster.
What to watch for in 2021? Two very large, legal marijuana markets are likely to be brought online: New York and Texas.
New York has really felt the economic impact of Covid-19 this year. And it seeks to use cannabis tax revenues to assist in economic recovery. The state is projecting to go live in April of 2021. Governor Andrew Cuomo, asked the legislature to include a measure in the January budget to enact cannabis state law.
With New Jersey and Pennsylvania both facilitating legal cannabis, New York finds itself in a legal cannabis sandwich, and it doesn’t want to miss out. The East coast is turning on quickly.
We’d love to see novel agreements between these densely packed, neighboring states. A reciprocity of some sort, or potentially some kind of trade bubble across state lines. That would set a precedent for the rest of the country and set a route for federal cannabis legalization and inter-state trade.
Texas is another state whose total potential market is huge. SB 140 bill filed on November 9, 2020, seeks to legalize cannabis and establish a commercial cannabisindustry in the state. Legal marijuana could produce more than $1.1 billion in Texas state tax revenues.
CANNABIS BUSINESS DURING COVID-19
Covid-19 has impacted every soul on this globe, in one way or another. Luckily for cannabis operators in the US, this industry was deemed Essential. This allowed cannabis businesses to stay operational while many other industries had to shut down.
Mandated changes to how marijuana businesses operate in this new world were introduced. Winter is upon us and so is an increase in Covid cases. More lockdowns and restrictions are coming, but cannabis operators are addressing the new requirements.
Most retailers who weren’t previously delivering are most definitely doing it now. At the least they’re offering drive through or curbside pick up transactions to support their retail sales. In-store shopping is no longer the same. Social distancing is mandated and display cases and shields everywhere make it more difficult for consumers to evaluate cannabis products.
This makes it extremely important to ensure your product listing on a cannabis delivery site or online dispensary stands out visually and provides all the information a marijuana consumer is seeking. High-resolution photography, cannabis product description, and ingredients or cannabinoid profiles should be highlighted. Cannabis retail sales are more determined by marketing than at any other time in the past.
Cultivators with brands in the marketplace would also be wise to think about point of sale promotional materials to help communicate their legal marijuana brand’s unique selling points to potential customers.
ACCESS TO BANKING MORE IMPORTANT THAN EVER
All eyes are on the United States Senate this coming year. Many believe they will finally pass legislation to grant legal cannabis businesses access to banking and financing services. The cannabis industry’s ‘Essential’ designation is ironic when many have to lug around bags of cash, putting them into vulnerable and dangerous situations.
Opening up banking services alone will make a huge impact on the legal marijuana industry as a whole. Investment would flow in more, valuations might increase, and most importantly, marijuana business transactions will become much easier.
A cannabis company could seek bridge loans from the bank rather than taking hard money loans which come at increased risk and high interest rates. In the expanding legal marijuana industry, scaling is important to maintain market share. But scaling requires an injection of money that operators may not have.
The ability to turn to banks for traditional financing would help organizations of all sizes grow their business in the legal marijuana industry.
In October 2019, the United States House of Representatives passed a landmark cannabis banking bill called the SAFE Banking Act. This legislation would indemnify banks from federal prosecution for working with cannabis companies.
However in early 2020, the senate version of the bill was held up and then Covid-19 hit. The SAFE Banking Act has the best chance of any federal government proposals of becoming law in 2021, even though the Senate is likely to block most democratic initiatives heading its way. Banking-focused legislation has significant bipartisan support and we hope to see movement in the Senate in 2021.
In California, the nation’s oldest regulated cannabis market, Assembly Bill 1525 was passed in October encouraging banks in the state to do business with cannabis businesses. Although banks still have to report to the federal agency FINCEN, this lays the groundwork.
“The goal of AB 1525 is to make it easier for financial institutions to adhere to federal law reporting requirements. Now, it will be easier to be assessed for loans and other services.” (Harris Bricken)
CANNABIS INDUSTRY STATISTICS
New Jersey, Arizona, South Dakota, and Montana became the newest states to legalize marijuana. This addition raised the total number of states with recreational cannabis use from 11 to 15 states and 3 territories.
In total, 36 states and 4 territories (District of Columbia, Guam, Puerto Rico and U.S. Virgin Islands) have enacted measures in the medical marijuana industry. (source)
The market value of the U.S. cannabis industry is projected to reach $30 billion annually by 2025, according to industry research group New Frontier Data. This projection comes at a time when cannabis remains federally illegal despite state legalization of medical marijuana by 33 states and Washington, D.C., and the legalization of adult-use cannabis (often referred to as recreational marijuana use) programs by 11 states and Washington, D.C.
The compound annual growth rate (22%) of the cannabis industry continues to defy expectations every year. Cannabis consumers across the country are showing incredible support for legal marijuana in new markets and old. The stigma is fading away slowly but surely as cannabis sales skyrocket. Medical marijuana regulations are the first steps for some states to open up to fully legalizing marijuana for all adults.
The CBD market in the US faces less regulation than the THC market, which is regulated state by state. Since the passage of the 2018 Farm Bill, the hemp industry has taken off – CBD products are found in many brick and mortar stores as well as in online stores. Brightfield Group has released a report forecasting CBD market total sales to reach $12.4 billion by 2023 and $16.8 billion by 2025. The CBD industry around the world is exploding as well as inter-country trade is active.
As a software provider to marijuana businesses, we regularly speak with a diverse range of operators. From our first-hand conversations, the cannabis industry trends covered above are of great importance to operators all over the US.
This coming year will be monumental to widespread growth of the legal marijuana industry. Legalizing marijuana across the country and beyond is increasingly the most important trend to watch and only a matter of time.
Ella Alpina via (https://trym.io/cannabis-trends-2021/)
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