The cannabis industry is growing rapidly, and shows no signs of slowing down. According to a report by Fortune Business Insight, the global cannabis market is projected to grow from $28.266 billion in 2021 to $197.74 billion in 2028. Namely, a CAGR of 32.04% from 2021 to 2028.
This explosive growth is due to a number of factors, including the legalization of cannabis for medical and recreational use and the unprecedented support of legalization by the public. From recreation to the medical market, there are many opportunities for growth. However, it is still a new industry, and there are risks associated with investing in it.
Thus before making any decisions, it is important to do your own due diligence and understand the risks and rewards of investing in cannabis. This post presents a SWOT analysis of the cannabis industry. Our goal is to give you a better understanding of the opportunities that exist in this market. We will also take a look at some of the challenges faced by cannabis businesses as they try to navigate this new landscape.
So, if you're thinking about getting into the cannabis business, or if you're just curious about what's going on in this industry, then keep reading!
Strengths:
New Industry
Cannabis legalization is on the rise worldwide, as more and more countries are realizing the medical benefits of cannabis.
In fact, the medical use of cannabis has played a major role in the decriminalization and legalization of the drug. Countries that have allowed for medical cannabis have eventually ended up legalizing the recreational use of it as well.
Across the globe, countries like Canada, Uruguay, South Africa, and the USA (varies from state to state) have fully legalized recreational cannabis. Conversely, around 30 countries have legalized the medical use of cannabis.
The USA, Canada, and Mexico are the world’s largest continental cannabis market, worth $18.1 billion in 2020. For the USA, the laws vary from state to state. Federally, cannabis is still illegal and listed as a Schedule I drug.
But individual states have their own laws, some states allow for both medical and recreational use, others allow for just the medical use and there are still many in which cannabis is still illegal.
Europe is the second largest market due to the growing medical use and progressive legalization. As of December 2021, Malta became the first European country to fully legalize recreational cannabis. What’s more, the European Cannabis market is expected to be worth $37 billion by 2027 with Germany, France and England leading the way.
Thus, it's evident that the world is now changing its view about cannabis and within the next decade, more and more countries would join the wave of legalization.
Medical Use
The dried leaves and flowers of marijuana are used for medical purposes. Although research on medical cannabis is still in its early stages, there are already a number of promising findings.
According to Mayo Clinic, cannabis can be used for the treatment of:
- Alzheimer's disease
- Amyotrophic lateral sclerosis (ALS)
- HIV/AIDS
- Crohn's disease
- Epilepsy and seizures
- Glaucoma
- Multiple sclerosis and muscle spasms
- Severe and chronic pain
- Severe nausea or vomiting caused by cancer treatment
The medical use of cannabis is a complete opportunity on its own for businesses to get involved in the marijuana industry.
Weakness:
Changing regulations
Within the rapidly growing industry, the laws and regulations are also changing constantly. Even within a specific state, the laws are different for the specific type of businesses being operated.
For example, in Colorado, a cannabis delivery license only allows you to deliver cannabis products like a 3rd party delivery service. You can't sell/deliver your own products, because for that you would need a retail or delivery license. Thus the technicalities and limitations of regulations are a major concern to existing business owners and you should address this aspect before jumping into the industry.
Banking and Insurance challenges
Limited banking options for cannabis businesses are nothing new. They continue to be a thorn in the side of an industry that is expected to reach $197.74 billion by 2028.
On one hand, cannabis is now legal in many states, and businesses that deal in cannabis products need to be able to bank their money just like any other business. On the other hand, cannabis is still federally illegal, thus most commercial banks are unwilling to do business with cannabis companies, citing concerns about violating federal laws.
Though some amendments in the banking laws are expected soon, the only options available is to go with local community banks, credit unions that have fewer federal regulations.
Funding issues
Just like banking opportunities, the funding options for cannabis businesses are also limited. Getting a loan for a cannabis business is next to impossible, therefore, in the U.S., venture capital, and crowdfunding are the most common fundraising options exercised by cannaprenuers.
If you are interested in crowdfunding then do check out our case study on how a cannabis business raised $140,200 from crowdfunding.
Opportunity:
Wide range of products
If you thought that cannabis can only be used for smoking. Then you are sadly mistaken. Right now there are hundreds if not thousands of cannabis products in the markets. From edibles to drinks and even skin care products, cannabis and its derivatives cover a wide range of products.
Some are made with THC, the psychoactive compound in marijuana that gets you high. This includes prefills, vaporizer, Spoon Pipe and much more.
Others are made with CBD, which does not have any psychoactive effects. CBD is thought to have many therapeutic benefits, such as reducing inflammation, relieving pain. These include CBD oils, edibles, gummies and creams.
As a matter of fact, if you are into food, then cannabis cookies and brownies are also popular among the community these days.
Cannabis Technology
The cannabis industry is growing at an alarming rate, and with it the need for technology to help manage and track plants, products, and sales.
The cannabis value chain runs around 5 key players:
- Cultivators
- Manufacturers
- Testing
- Wholesalers and distributors
- Retailer
And there is a lot of room for tech and automation at each and every stage.
Technology would help the cannabis industry in a variety of ways. For example, it could help to track the amount of cannabis being produced, as well as its potency and quality. This would enable businesses to ensure that they are producing a safe and consistent product.
Additionally, technology could be used to develop new products and delivery methods for cannabis, such as edibles or vape pens. This would allow consumers to enjoy the benefits of cannabis in a variety of formats.
Threats:
Big brands
As cannabis becomes legalized in more states, big brands are moving in to cash in on the market. Molson Coors, Moosehead, Carl’s Jr. are already offering CBD infused beverages.
This poses a threat to smaller businesses, who may not be able to compete with the resources of these larger companies. Although the regulations would impact both parties, a big marketing budget, huge resources and liaison really puts the brands in a formidable position.
However, there are ways small businesses can compete and even thrive in this environment. By focusing on quality, customer service, and innovation, small businesses can set themselves apart from the competition and build a successful business in the cannabis industry.
Marketing & HR
Cannabis businesses have a major problem when it comes to marketing. Because marijuana is still illegal at the federal level, most traditional advertising channels including Facebook, Instagram and PPC are unavailable. This makes it difficult to reach potential customers, and results in companies spending large sums of money on guerrilla marketing tactics instead.
Additionally, because cannabis is still seen as a taboo topic by many people, finding qualified employees with hands-on experience in the cannabis space is difficult. But as time progresses and the industry continues to grow, these problems will only become more acute.
The industry is growing rapidly, and with it come new opportunities for businesses of all sizes. In this article, we tried to cover various aspects of the industry and presented an unbiased SWOT analysis of it. By focusing on quality, customer service, and innovation, businesses can set themselves apart from the competition in the cannabis industry and build a successful business.
Ready to dive into the Cannabis Industry? Read our blog on Cannabis Business Plan.
