After the passage of the 2018 Farm Bill, CBD has increased in popularity (and profitability), making 2019 another strong year for cannabis.
Investors remain plentiful and optimistic about the industry, continuing to infuse a new sector with cash. Investment totals for 2019 hit 2018 levels by the third quarter, and as legalization swept across the nation, unique recreational and medical marketplaces came online.
As we look ahead to 2020, here are the top three financial trends to expect in the cannabis industry.
Trend One: Payment options and new market regulations
While standard banking options remain elusive for canna-businesses, one thing has changed for the better, and that is credit card processing. Although the feds continue to limit banking, payment processors will be introducing new methods to help by opening up new payment methods and offering other creative (and less costly) ways to receive payment from customers. A side benefit? Transactions and record-keeping will be much easier for everyone and helps customers that don’t usually carry cash to purchase products.
Besides banking, new markets are continuing to open up. The new year will usher in both new and expanded recreational, adult-use and medical marijuana businesses across the country. For those just entering the legal market, their ability to operate and function depends on regulations, and those vary from state to state, county to county, and even city to city. How strict or lax the rules also depend on where the business is located. Some areas limit licensing to a limited quantity, and others are more likely to issue licenses to anyone who applies (and pays the necessary fees) for one. Whether that benefits the smaller companies or obliterates them to make way for the big players remains to be seen.
Another regulatory trend guaranteed to be a hot topic in 2020 is cannabis taxes and the issues that will stem from that. For example, California has increased its tax on weed by 20 percent starting January 1, which critics say will increase costs for consumers and businesses and make the legal industry even less competitive with the black market.
Trend Two: Investor Fatigue
Vast amounts of investor money were spent in the years, months and weeks leading up to legalization in various states. Because banks were leery of the federal stance on marijuana, those that wanted to enter the industry had to find other sources of cash, since conventional bank loans were off the table. Enter the investor.
After a few years of optimism, investors in the cannabis industry are now facing the fact that marijuana isn’t necessarily an instant-return windfall on a tree. Publicly traded cannabis companies aren’t performing as well as analysts anticipated, and regulatory restrictions that limit the freedom to do business as one might like means that those investors are fighting a case of fatigue — and being more cautious when considering investments. So cash will be harder to pin down in 2020.
Trend Three: Big Fish
So, combine trends one and two, and you have the result: trend three. With the “green rush” of the past few years behind us, the truth is in front of us, and that means we need to do a reality check. For those businesses unable to navigate the regulatory hurdles, banking issues, and secure funding, that means they’ll most likely face one of two choices: close up shop or sell out to one of the bigger fish.
As a result, the final trend for 2020 will be the consolidation of smaller retail shops and dispensaries into larger companies. While these will challenge the industry, the positive side is that these struggles point to a sector that is changing, growing, and adapting as it matures — and there’s no doubt that the cannabis industry will continue to grow in 2020 and in the years after that.