The cannabis industry is booming, with stocks rising 380% in the past 12 months. With the launch of new and large recreational marijuana markets in New York, New Jersey and Virginia, the industry is expected to double again in the next six years. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions achieve financial freedom through our website, podcasts, books, newspaper columns, radio programs and premium investment services. With such strong cash flow, Green Thumb Industries is in a strong position to undertake acquisitions and further expansion next year without diluting its shareholders.
It has been expanding to several states, including New Jersey, which recently legalized recreational marijuana. A new study belies any assumption that the U. S. cannabis industry is an easy business to make a profit from, with 37% of National Cannabis Industry Association Cannabis Operators reporting that they operate without one.
The survey was of 396 Americans, and only 26% of those surveyed said their businesses are profitable. More than half said no, while 17%, like Mike Benziger from GlKentucky Farms in Glen Ellen, Sonoma County, feel their businesses are breaking even. Competition with illicit producers represents 1 in 4 challenges cited in the survey. Other obstacles include excessive taxes, price volatility, and lack of ability to open bank accounts.
Legal cannabis commercial operators have coined a new term “prohibition through legalization” due to what they consider to be overly strict compliance regulations imposed by local governments. California companies can operate with local government approval, but when less than half of jurisdictions across the state pull the welcome rug, the lack of access to sell plants and products is a sticking point.The lack of commercial space to sell the plant is having a negative impact on the sales of legal operators. However, when companies leave, local economies suffer. Diversifying the plants you grow represents one saving grace for legal companies; Mike Benziger also grows savory and dandelions for wellness products.Technologists believe that legislation must change to make things more profitable for cannabis companies.
For example, reducing taxes and reducing regulations would be a start. Beyond growers, other legal cannabis companies in the supply chain are struggling; test laboratories are vulnerable in a competitive market because customers will change companies when they don't get the results they want.CannaCraft's Director of Government Affairs Tiffany Devitt said that many are turning to “laboratory purchases” to achieve the highest level of potency needed to comply with state regulations. CannaCraft also estimated that it consumes up to 4 million pages a year printing documents to comply with California government regulations.Even so, there is resilience and optimism behind the industry; Devitt believes that things will improve as authorities and government officials realize their difficulties. For example, the state's Department of Cannabis Control has just amended some guidelines, including a section that now eliminates the need for producers to weigh each individual plant.This projection comes at a time when cannabis remains illegal at the federal level, despite the legalization of medical marijuana in 39 states and Washington D.
C., and many ancillary businesses can be started by focusing their existing business on the cannabis sector or by developing a new brand specifically associated with cannabis.Not only is cannabis advertising usually banned on radio, television or billboards, but many local marketing channels make it difficult to do so by prohibiting the purchase of sponsored content for cannabis companies. Cannabis still faces the stigma that it is only a “culture of stoner smokers” when in reality patients and users are increasingly turning to it for medical purposes.
