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The Cannabis Industry Needs To Address These Major Problems In 2023

The Cannabis Industry Needs To Address These Major Problems In 2023

The cannabis industry is still young, but the relatively rapid unveiling of legal markets across the country has proven fruitful. Per Investopedia, the cannabis industry could add another $149B to the American economy by 2031, all while creating new jobs. However, Politico reports that the biggest publicly traded cannabis businesses were hit with huge losses in the first half of 2022, amounting to $550M.

Unfortunately, there are numerous issues the cannabis industry faces that extend across the food chain, from CEOs profiting off of marijuana to budtenders who have no clue what they’re talking about.

Ultimately, a change needs to happen in the cannabis industry. Though it’s taken a long time to open the gates for a legal market, the weak points that drag down the industry will ultimately affect its longevity and profitability. Some problems are far from new, but there’s a dire need to address these issues immediately. Several points about lawmakers and politicians who’ve dictated how to run the industry with little understanding of the nuances involved. Others surround ownership of these companies, the management that handles day-to-day functions, and employees that lack a comprehensive experience of the brand or products.

Customer Concerns 

A survey conducted by Marijuana Packaging identified a few issues concerning customers within the cannabis industry. Some of these include the legality of the products, the education surrounding them, and financial matters. Of course, many of these problems overlap with one another. Banking, for instance, remains a massive hurdle due to federal laws surrounding cannabis. Financial institutions turn down cannabis businesses because it’s illegal, leading many companies to resort to cash transactions exclusively. At the same time, relying solely on cash creates more significant security concerns and leaves businesses vulnerable to theft.

Beyond that, the corporate takeover of companies (including other “addiction industries — alcohol, tobacco — acquiring smaller businesses) continues to create issues that ultimately impact mom-and-pop stores and small farmers. However, due to the rising financial issues the cannabis industry faces, there’s a good chance this trend will slow down this year. 

Underscoring all of the problems mentioned above is the price of cannabis. Between inflation and supply chain issues, the cost of marijuana has increased, yet many businesses continue to face the problems regarding profits. While the black market thrives on undercutting retail prices, taxes are still high in certain states.

What To Keep An Eye Out For This Year

The cannabis industry is in a fragile place right now. With the many unforeseen circumstances to impact everything from farming to packaging, it’s imperative to try and take as many preventative measures as possible. Anticipating potential setbacks is just as important as the growing cannabis market trends that are coming in the future.

Falling Prices & Companies

Cannabis companies witnessed a drastic drop in prices at a time when an influx of businesses began to emerge. States that recently legalized cannabis have experienced saturation in the market, while more mature states have seen prices drop significantly. Ultimately, there’ll be more cost-cutting and more giant corporations that will withstand the storm.

New Products

New products mean more competition, but it’s also a costly battle. Edibles and infused spurred more interest than ever, but businesses should also be aware that hopping on these trends with increase expenses. More financial resources must go into research into adequate extraction processes, as well as packaging and storage (I.e., refrigeration). Unfortunately, these products are also susceptible to mold and product recalls, which could lead to a loss in revenue.

Turnover Rates

Though the cannabis industry has created many jobs, the turnover rates are unimaginably high. Employees are entering and leaving the workforce rapidly, with many having surface-level knowledge of the products they’re selling. The solution? Better employee benefits. A solid team requires incentives, such as health benefits and higher wages. Ultimately, this could help elevate your company towards longevity in this business.

Customer Sophistication 

Many customers solely rely on potency, but there’s so much more to cannabis than solely the THC levels. The demands for highly potent products led to labs facing lawsuits for misrepresenting THC levels on their products. In places like Florida, for example, the issue began fining and suspending labs. 

More customers are becoming aware of these issues, hopefully increasing their education surrounding marijuana. At the same time, users are becoming more privy than ever to products outside of flower, such as edibles, vapes, tinctures, and infused drinks. 

Bottom Line

2023 will undoubtedly be another big year for cannabis, but it’s also a moment for many businesses to learn from the past few years. Though it remains unclear if and when the government will legalize cannabis on a federal level, Americans are more interested than ever to end prohibition. These will hopefully open the doors for bills like the SAFE Act to move forward to ensure safe financial practices for cannabis businesses. At the same time, companies must remain focused on how things might shift in the next few months.

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