• Rachael Z. Ardanuy, Esq.

2018 Mid-Year Look at the U.S. Cannabis Industry


Cannabis Business Times creates an annual State of the Industry Report. I’ve put together a short guide, so you know what is impacting your cannabis company in 2018 and beyond. This report is a comprehensive look at the marijuana industry and does not look to the trends facing the hemp/CBD world, which is growing exponentially, The marijuana industry continues to evolve; to be a key player, you need to stay informed.


Legalizations


States continue legalizing for both recreational and medicinal use. Both California and Nevada introduced adult-use this year, while Massachusetts is expected to roll out recreational sales as early as this month.


Pennsylvania is poised to become a major stakeholder in the industry since it has one of the largest populations in the country, and their medical program is one of the most inclusive in the nation.


Ohio’s medical program is experiencing some growing pains, alongside Maine, but both are anticipated to streamline their processes by next year.


New Jersey, Michigan and Vermont continue to push forward on recreational legalization, and Oklahoma, Utah and Missouri are legislating for medicinal use.


Canada is legalizing usage nationwide this year, making marijuana a global game.


The Political Climate


Through U.S. Attorney General Jeff Sessions’s recent actions, the U.S. Attorneys are now in the position to decide whether or not to prosecute cannabis businesses for violating federal law. Luckily, the U.S Attorney for Colorado has indicated that their office will continue to focus on harmful actors and not marijuana businesses who are staying compliant and following Colorado's laws, rules and regulations governing their businesses.


Despite setbacks like this in the recent attempts to legalize federally, the political climate is overwhelmingly positive.


In fact, according to Readex Research, the number of cultivators who reported that they are concerned about the federal government’s potential policies regarding legalization dropped by 10% since last year.


The Financial Picture



While the ‘Green Rush’ continues, the increased competition is now affecting existing businesses’s revenue and profits.


Changes in Revenue


Compared with 2017, 32% businesses increased revenue, and only 8% saw a decrease in revenue. Of the businesses surveyed, 38% were in the first year of business indicating that the industry is still growing quickly. Although revenue is increasing, so are expenses.


Changes in Profits


When the same businesses were surveyed about their profits, only 25% said they saw an increase, whereas 10% saw a decrease in profits. At least 20% of the industry saw no significant change, which may be an indication that businesses are finding sustainability in their income.


Looking ahead, most businesses are still optimistic, with 66% expecting to see an increase in both revenue and profits in the coming years.


Business Challenges



The greatest concern amongst cannabis companies is the pressure of reduced pricing due to increased competition; with more states legalizing and more businesses entering the industry, marijuana is no longer the ‘cash cow’ it used to be.

This concern is followed closely by issues surrounding compliance management. With the constant changes in policies and procedures, keeping up with regulations is becoming ever more difficult. This is why I highly recommend that you consult with an attorneyspecializing in the cannabis industry, like myself, who knows the state and local laws inside and out. 


Future Outlook



Greenhouse production is on the rise and is expected to largely take over indoor warehouse production. Given that the costs of managing greenhouse production are lower per-square-footage due to automation-technology, and nearly 80% of companies are looking to expand their operation’s cannabis production, this transition is a no-brainer. Ideally, some localities that require indoor cultivation facilities will get on board sooner than later with the notion that this industry needs to stay current with environmentally-friendly trends.


While the federal government’s impact on the cannabis industry as whole remains in flux, fewer businesses are worried. Public support to legalize marijuana continues to grow, and is likely a contributing factor to the industry’s positive outlook. 


Like any new, fledgling industry, there are bound to be ups and downs. Planning ahead and working with a professional will help you avoid headaches and reduce costs. Laws and regulations change fast, but I can help you navigate the ever-changing landscape, so you can focus on growing your business. 


Schedule a mid-year consultation today.



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© 2017 by Rachael Z. Ardanuy, Attorney at Law, P.C.