The cannabis industry has grown dramatically in recent years in response to expanded legalization and an influx of capital from venture capital and other investors. Voters in Maryland and Missouri approved legalizing recreational marijuana in 2023, bringing the total to 24 states and the District of Columbia. An additional 14 states and three territories have legalized or decriminalized the medical use of cannabis products.
Marijuana legalization and sales are progressing rapidly not only in the United States but worldwide. Global cannabis sales are expected to increase from $13.4 billion in 2020 to $148.9 billion by 2031. That growth opportunity has spawned numerous startups and IPOs, as well as a wave of cannabis-related mergers and acquisitions (M&A) involving production companies. Distribution, real estate, retail, etc.
Despite its growth, the global coronavirus pandemic has caused significant disruption to the cannabis industry, and the industry continues to face major challenges in 2024.
Let's take a look at next year's outlook.
Important points
The cannabis industry is growing rapidly, with global sales expected to reach nearly $149 billion by 2031. Although the industry has seen significant improvements, particularly in terms of legality, it will continue to face many challenges. Legality and regulation will continue to be the key drivers driving the cannabis industry. The cannabis industry will continue to be challenged because different countries and states within the United States have different approaches to cannabis use and sales. Banking will continue to be a challenge as cannabis businesses in the United States do not have legal access to traditional banking services. Through partnerships and acquisitions, established “addiction” industry companies will become even stronger in the cannabis market, like alcohol and tobacco. Recent interest rate hikes by the Federal Reserve could make it more difficult for cannabis companies to finance future growth.
ever-changing landscape
As the industry grows, it must adapt to a rapidly changing and complex legal landscape. The challenge for cannabis companies is that different states within the United States and different countries have different laws governing the legality, use, distribution, and growth of cannabis.
As the legal cannabis industry continues to mature, more established companies outside the industry are expanding their footprint. So-called “addiction” industries such as alcohol, tobacco, and pharmaceuticals are investing heavily in the cannabis market. They have acquired many companies to sell cannabis in bulk as well as their own products. Along the way, entirely new cannabis-infused products have been launched, including cannabis drinks sold as alcohol replacements. These trends could dramatically change the cannabis industry.
Impact of the COVID-19 pandemic on marijuana use
The COVID-19 pandemic is impacting the number and amount of people using cannabis for medical purposes. The pandemic has taken a toll on people's mental health around the world. According to an October 2021 Lancet study, the 2020 pandemic led to an additional 53.2 million additional severe cases of depressive disorders and 76.2 million additional cases of anxiety disorders worldwide. It's no wonder, then, that the global medical cannabis market is booming. It is projected to grow at an impressive compound annual growth rate (CAGR) of 26.6% from 2019 to 2027.
To be sure, the pandemic hasn't boosted usage in every way. The study, led by researchers at the University of Michigan, focused on drug and alcohol use among adolescents. The study also notes that while cannabis use among adolescents has not changed significantly during the pandemic, there has been a record decline in cannabis availability.
us market
The US market remains very complex for cannabis companies and investors. As mentioned above, as of March 2024, just under half of U.S. states and territories have legalized recreational use of cannabis. This limited legality exists despite the fact that most Americans think marijuana should be legal for recreational or medical purposes, according to a Gallup poll conducted in October. 2023. As many as 70% of people think recreational use should be legal, while 29% think it shouldn't be.
As the marijuana industry expands, lobbying efforts to legalize marijuana by the federal government have become more active. Banks, tobacco and alcohol companies and other businesses have joined union advocates, personal use advocates and social justice activists in pushing for federal legalization.
In July 2021, three U.S. Democratic senators, Senate Minority Leader Chuck Schumer, Finance Committee Chairman Ron Wyden, and New Jersey Senator Cory Booker, released a discussion draft of a bill that would legalize cannabis at the federal level. Announced. The bill, known as the Cannabis Control and Opportunity Act, would allow adults to purchase and possess up to 10 ounces of marijuana without facing criminal penalties. The bill would also eliminate non-violent cannabis crimes, promote medical research and allow cannabis companies access to basic financial services such as bank accounts and loans. The bill was introduced in the Senate in July 2022, and as of November 2022, there has been no further progress.
In November 2021, Republicans in the U.S. House of Representatives, led by Nancy Mace of South Carolina, introduced another bill aimed at decriminalizing marijuana at the federal level. The bill, known as the State Reform Act, would remove legal risks faced by cannabis businesses and regulate cannabis use in the same way as alcohol use. The bill differs from the Democratic bill proposed in July in a number of important ways.
In November 2022, voters in Arkansas, North Dakota, and South Dakota voted against proposals to legalize recreational marijuana. This suggests that public opinion across the country is diverse and that it may be difficult to pass a broad federal legalization bill for some time.
Another issue is banking. Congress has not yet lifted banking restrictions on cannabis companies, limiting their access to capital. The Secure and Fair Enforcement (SAFE) Banking Act would prohibit federal regulators from penalizing financial institutions that service state-legal cannabis businesses. It has passed the House seven times, most recently in June 2022, but never passed the Senate.
increase in interest rates
Like any young industry, cannabis companies need to raise capital to fund future growth. Due to their precarious legal status, cannabis companies do not enjoy access to banking services that many other companies enjoy. This makes raising capital difficult and increases costs. However, in recent years, these costs have become relatively cheap due to low interest rates. The industry could face further challenges in 2023 following a series of rate hikes from the US Federal Reserve.
What is the legality of cannabis in the US?
Although cannabis remains illegal at the federal level, a growing number of individual states and territories in the United States have legalized cannabis for recreational and/or medical purposes. As of March. In 2024, 24 states and Washington, D.C., have legalized recreational marijuana. Numerous bills have been introduced to legalize cannabis at the federal level, but no such bill has yet been passed.
What are the main challenges facing the cannabis industry in 2024?
The cannabis sector faces both industry-specific and broader economic challenges. Looking specifically at the industry, increasing competition from non-cannabis companies entering the space is a major concern, as is the changing landscape among emerging cannabis companies competing for market share. A complex legal landscape also makes it difficult for cannabis companies to do business.
More broadly, rampant inflation in recent months has increased costs for many cannabis companies, and rising interest rates may have made it more difficult for these companies to secure capital. Concerns about an economic recession may reduce consumer spending on non-essential goods, which may include cannabis products.
What benefits will the cannabis industry have in 2024?
The global cannabis market is expected to grow at an incredible pace over the next few years, and well-positioned companies in the U.S. could take advantage of these gains. Marijuana use is becoming increasingly accepted in the United States for both medical and recreational reasons. Finally, there is a growing demand for cannabis products around the world.
conclusion
Although the cannabis industry is growing and society is gaining acceptance of its use, it faces significant challenges. These trends will also create a volatile and rapidly changing environment for both investors and cannabis companies in 2024. The big challenge for investors will be determining which of the many startups, IPOs, and established cannabis companies can weather the upheaval and find long-term success. semester.
