Marijuana sales declined across the U.S. markets after the sale spike at the onset of the pandemic. This slowdown came after the industry faced economic and regulatory tests, causing people to channel their spending money elsewhere. Small enterprises find it hard to penetrate the populated market because there isn’t sufficient investment money. The cannabis industry is also on hold, awaiting regulation by the federal government to boost its sales nationwide.
Oregon and Washington states, where the cannabis market is already established, are recording low sales at the retail outlets, a cannabis data firm Headset reports. In addition, sales were 11% lower in June since the same time last year in the nation’s longest established cannabis market: Colorado.
The year 2020 saw a mega spike in sales as people were confined indoors with little to do, with many qualifying for government stimulus packages, said Chris Wash, the CEO of a trusted Canadian legal cannabis publication.
Between March 2020–2021, the monthly business year average sales went up 25.8% in Colorado. But when the pandemic eased, both cannabis purchases and their spending power frequencies took a nosedive, Headset reported. People spent about $55.21 on each visit to the Median store in Colorado in July 2022, approximately $4 lower than the average $60 in July of 2021, Headset research recorded.
Discounts are being offered during a high inflation season by retailers in a bid to move product; this is coupled by fierce competition from the sales of cannabis product in the untaxed black market. Troy Datcher, the CEO of the Parent Company, a cannabis firm, says it’s a challenge to operate in a competitive environment where the biggest competitor is the black market.
Analysis by Marijuana Business Daily indicates both recreational and medical marijuana sales in the United States are projected to reach $33 billion by the end of 2022, an increase from last year’s $27 billion; the forecast note that by 2026, sales are projected to hit $52.6 billion. This projection is encouraging inasmuch as the industry has teething problems in its growth. Total sales in retail stores across the country are rising and are projected to continue doing so as new bigger markets emerge online in New York, Maryland and Missouri.
According to Viridian Capital Advisors, a New York-based cannabis advisory entity, the total marijuana capital raised in the country dropped to 62.6% since 2021 while equity financing dipped 96.3%, translating from $2.1 billion last year to $78 million presently.
The problem in part is that investors are worn out waiting for federal regulations to change. This slack by the federal government dictates that the states where cannabis business sales are legal still cannot access traditional banking services or institutional capital. A congressional bill, the Secure and Fair Enforcement Banking act (SAFE), would be instrumental in lifting such restrictions. However, the bill did not make it to the Senate despite being passed in the house several times.
Many investors dove into the industry hoping a shift would be in the offing at the federal level to reschedule cannabis or pass a banking legislation, said Entourage Effect Capital founder, Matt Hawkins. Hawkins and other investors are now quite selective in business entities they fund, prioritizing those that already have a worthy market share. This move gives little hope to SMEs looking to get their feet in the door.
The cannabis industry is in internal consolidation, with new licensed business entities finding it rough gaining capital and efficiently expanding, noted Robert Beasley, the CEO of Fluent, a business operating medical marijuana dispensaries in Texas, Florida and Pennsylvania.
In spite of the economic hardships, Beasley believes that several regulatory relief measures could spur the industry back on course. This could give players such as Flora Growth Corp. (NASDAQ: FLGC) a bigger market base to serve.
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