2020 was the perfect storm the Cannabis Industry was waiting for after being labeled essential. The plant swept every ballot measure and pro-cannabis candidates were elected at the federal level. The economic destruction in the wake of COVID-19 has greatly accelerated legalized cannabis within the US and this market phenomenon has brought new opportunities along with risks for all those eager to enter the space.
2021 Important Stories: Shaping the future of the business of cannabis
- Federal Legalization – We’re not sure in what form, but some cracks in the federal prohibition dam are bound to occur in 2021. Banking, taxes, and investment are the lowest hanging fruit.
- COVID-19 – Labeled essential was a great step for the industry, and the economic Titanic COVID-19 leaves will prompt civic leaders to consider the taxes and jobs of legalized cannabis stronger and faster than ever before.
- Steep rise in demand for cannabis as a consumer packaged good - For several reasons, cannabis as a CPG vs bud/flower is taking off at an incredible rate, foreshadowing the future.
Cannabis advocates along with social and criminal justice warriors are making a hard push on the Biden/Harris administration to decriminalize cannabis. Along with the goal to turn back the impact of the failed War on Drugs, including mass expungements, releases from prisons and more. While others, particularly those big cannabis companies, looking for protection from even bigger corporate giants are focused on the practical, economical side of reform. This would start with easier access to Wall Street and Bank funding, non-punitive tax treatments (see IRC Section 280e), and in some cases, gain the ability to move their products across state lines; all without getting the FDA involved in the least bit.
Where this movement ends if anyone’s guess, and Biden’s personal track record does not give the movement hope. But if you are a small business operator, or hopeful, you should be hoping for a full relaxation of the most harmful federal roadblocks (tax, banking) but a measured, State’s Right version of legalization. You want enough runway to get your local burger joint off the ground before competing against McDonald’s.
The core opportunity for the smaller player is still in the uncapped states with great to decent market share either within their markets or adjacent states – see CA, MI, OK, MA. Your future rests mostly in the surviving the local approval juggernaut, but once you do, you should have some nice opportunities to succeed.
500k dead, massive heartbreak and enormous impact on all our lives, but perhaps cannabis is the silver lining of the COVID-19 pandemic disaster. The industry got a strong emotional endorsement when it was labeled and treated as essential, including emergency adoption of curbside pickup and expansion of delivery in several markets. There was some really strong buying, somewhat fueled by the stimulus checks and lack of other outside entertainment options, but most of that uptick has subsided.
The real impact COVID will have on cannabis will be felt in the corridors of City Hall and state capitals around the US and world, where the struggle to pay for essential services is bubbling to the surface. Cannabis is the Help button that even the most reluctant leaders now have to consider pressing, unlocking taxes, jobs and commercial development regardless of their moral opposition to the plant.
States are beginning to implement fast tracking medical and adult use legalization without ballot initiatives attempting to cash in on cannabis and defend their market from nearby states and the illicit market. Cities in already legal markets are doing the same, removing local prohibitions and/or rethinking the tight restrictions they may have in place
Perhaps never has the relief provided by cannabis to stress and anxiety been more needed by such a large swath of humanity, nor have some many been flat out bored locked up in their homes. Whichever the case, cannabis is just what the doctor ordered in so many homes and lives.
The collision of a market still throbbing from the vape crisis only a few months prior, the need for discreteness made even more difficult under quarantine, cannabis as a finished, non-combustible product, such as edibles, drinks, tinctures have put cannabis on a tear. And we haven’t really let the science community add their incredible skills in the way of innovation and research.
What does this mean for you?
New investors and operators: The time to strike is now or approaching quite fast depending on your location, so the need to be decisive and place the right bets is crucial. Due diligence has never been more important but also so difficult.
Operational businesses: It’s time to recalibrate your business plan, adjust to the new normal and throw out bad ideas that either no longer or never work. Vertically integrate internally of via trusted partnerships to fill the holes in your program.
Real estate investors and agents: The cannabis industry is in desperate need of qualified, green-zoned properties in new areas or ones with attractive taxes and utility rates. If you are considering a property, make sure that any property has been vetted by trained, non-conflicted professionals with an eye towards approvals despite potential political fallout.
How to take action
The best way to take advantage of this generational moment in cannabis, when the CPG brands of tomorrow will be born is to be fully informed on what can, may and will likely happen along the way both in the industry as a whole but most importantly, in your small corner of it.
Covey’s Habit of Seeking First to Understand could never have been more advised. When the history books are written, you want your dreams and legacy to most resemble Ford’s and not Studebaker.
Regardless of your state, business model, level of funding or resources, certain factors can not be overlooked, such as (i) properly zoned property, free from political backlash, (ii) the timing of your efforts and somewhat like Goldilocks, not too early or too late, and (iii) the long-term sustainability of your business model. Just because you can get a facility permitted and licenses, may not mean you (or anyone) should. Relatively mild market forces are at work in the industry now but the magnitude of them will only grow more ferocious over time.
BeGreenLegal crafted a program for newcomers to the industry that has proven incredibly valuable, enabling clients to cut through the noise, identify opportunities and risks and take decisive, confident action as a result. Learn more or book your package here.
