Blog Detail

Cannabis Industry Worth $100.03b Despite Government Restrictions

The effects of the Coronavirus pandemic have hit every industry, and the Cannabis industry is no exception. However, it is an exception for having difficulty starting operations or getting any government loans or benefits. So far, only private investors have been investing in the Cannabis industry, and the wave of the deadly virus may wipe out smaller businesses that cannot afford to run. Excluding US Cannabis companies from Federal COVID-19 relief funds has been infuriating a lot of people. Liquor stores opening and restrictions on cannabis- even medical cannabis- is deemed unfair, especially to those patients who rely on the drug. As furloughs and business shutdowns continue, there is still of hope on the horizon.

Things Are Changing

In the most recent COVID-19 relief bill, the SAFE Banking Act has finally given a chance for Cannabis workers to take advantage of government funds worth $3 trillion. Another bill last month would allow companies to access relief programs related to COVID-19. Legalizing medical and recreational cannabis would further boost the cannabis industry, which is already set to be very promising, as public misconceptions are cleared up and more evidence for the health benefits is found. Whereas legalization of Cannabis is a slow process that’s happening across several States, Canada achieved the full legalization of cannabis in 2018. An unexpected after-effect of legalization of cannabis in some states is increase in hotel bookings- in Colorado, there was an increase of around 51,000 bookings per month, according to Marijuana Moment. That aside, small companies are still walking on thin ice, if not shutting down completely or furloughing their employees until they can get back up again.

How Is Cannabis The Industry Affecting Individuals?

Although a lot of small businesses are shutting down, those who can afford to stay afloat are hiring- a lot. This means that legalization would further boost job creation in an era of rising unemployment. This is a blessing for those who have lost their jobs or even the potential for pursuing their career for the next few years. People like stage artists would jump at the opportunity of a job that would pay them well- $58,511 per year, which is 10.7% higher than other industry workers’ annual salary. Another outcome of the expansion of the cannabis industry would be even more job opportunities for women, who, even at this age and time, face an uncalled-for amount of unfairness in terms of career growth and opportunities. However, the average number of women holding executive positions in the Cannabis industry is 36%. In other fields, the average for female executives is only around 15%. The Coronavirus is shaking things up in the industry, but we still see signs of stability.

How The Cannabis Industry Is Currently Faring

Nevada and Massachusetts have seen the most sales reductions due to government restrictions. Banks are afraid of legal issues they might face by working with these companies. The difficulty in getting capital poses as a great issue for companies that operate in cash. The bills and gaps between federal and state laws are slowly fading, so it’s not hard to imagine banks being more comfortable dealing with the cannabis industry.

But that’s just one side of the story. Things are better in other states, and the boost in the cannabis industry would also instantly create opportunities for cannabis stocks. Cresco Labs is a cannabis company operating across 9 states in the US. Last week, they announced that they’re tripling their growing capacity in Pennsylvania. Recreational marijuana retailers in LA and other states where stores have opened saw a 159% increase in sales as compared to last year. As compared to January, the sale of cannabis for medical use went up to 52%. (Politico) The increase in demand has increased the need for more workers. Although for workers, it’s a boon, it’s actually a bane for smaller companies, who see an eminent future of a few “big fish” monopolizing the industry inadvertently. However, if small companies can enjoy banking services and freedom from federal restrictions, there’s a great chance for growth, even in these unprecedented times.

What Are The Prospects For Investors?

Owning and running a cannabis business isn’t cheap, especially when each state has its own rules and there’s a lack of sources for capital like equity or loans through Small Business Administration. Those funds were controversially accessed by bigger businesses that didn’t need them. For an average cannabis dispensary, the startup costs mount up to $775,000, with $3 million in annual revenue and $1.92 million in operating costs. This year looks good for those already afloat or those who have been wise with their investments and operations

Source for information above:

There is more legalization on the way, since Cannabis companies now have the Essential Business Status. This opens opportunities for smaller startups. According to Politico, a lot of cannabis companies are adding thousands of workers to their workforce, mostly for ongoing health-related projects.

What’s The Future Of The Cannabis Industry?

On the legalization side, 975 cannabis related bills are in the process of going through state legislature for the 2020 sessions. (Marijuana Moment).

The estimated value of medical marijuana by 2025 is $100.03 billion, while the annual growth of the cannabis market till 2021 is expected to be 21%. Global Sales by 2025 are expected to be $47 billion. The first year of sales in Maryland, alone, saw $100 million in revenue. Last year, cannabis companies raised $116.8 billion in capital, according to Viridian Capital Advisors. Annual revenue in the US (2018) has been $10 billion as we move towards more legalization. These numbers are expected to go higher, especially with more and more public information about the benefits of CBD for treating various medical conditions.

Source for stats above: Finance Online


Share on facebook
Share on twitter
Share on linkedin
Share on email

Leave a comment

Your email address will not be published.

Follow Us
Most Popular
Subscribe To Our Newsletter

Get inspiring money tips, economic updates & access to financial insight with our newsletter.