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It’s no secret that the cannabis industry has faced some challenges since legalization. Though regulations are changing in favour of the industry’s growth, residue from past taboos and fumbled launches continue to wreak havoc on potential profits. Add to this the complications of some challenging times for markets in the wake of COVID-19 and it’s no wonder that the industry had found itself in the weeds.
That being said, hope is building for a positive outlook on 2021. Let’s take a closer look at 3 reasons why the coming year may see new growth for cannabis companies:
1) Extinctions and Acquisitions
Back in the early glory days of the legalized cannabis industry, players were rushing in with great fervour. In the rush to set up facilities, acquire licenses, expand operations, and get growing, spending surged. New companies were popping up left and right, and shortly thereafter they began to face their own set-up of economic, regulation and supply challenges.
Once it became clear that most provinces in Canada fumbled the ball on the retail aspect and that there was excess supply, the resulting financial hemorrhaging of many of the players became untenable[1]. For several cannabis companies, it’s likely that being acquired will become the most feasible option moving forward.
2) Further legalizations
New York state has been planning on legalizing cannabis[2], and in fact was expected to do so in 2020. As the pandemic ravaged the state, the issue was delayed. But many believe that in as early as January 2021, legalization will be back on the table. With nearly 2 million people in New York City alone, having applied for unemployment benefits since last March, the state will be eager to recoup the potential $300 million in revenue that could be expected from cannabis legalization.
New York would join the other states that recently voted in favour of legalization[3]: Montana, New Jersey, Arizona, South Dakota, and Mississippi (where only medical cannabis will become legal).
3) Cannabis beverage changes
This year saw a significant increase in M&A activity[4] within the cannabis beverage market segment, with several large alcohol companies having partnered with or acquired cannabis beverage businesses. HEXO Corp. and Molson Coors have continued to progress by forming Truss Beverages earlier this year, selling THC infused beverages in Canada and CBD infusions in the US. In addition, BevCanna Enterprises Inc. announced its acquisition of Naturo Group Investments, with plans to create a “fully integrated health and wellness company”.
Further, Health Canada announced[5] this month their intention to launch new consultations that may relax the purchasing limits of infused beverages, and mandate more extensive labelling information for consumers. Current limits encourage consumers to purchase high THC, low-volume products, representing a discrepancy between what is allowed for beverages and what is allowed for powdered drink mixes, however,regulations may change to allow greater choice for consumers.
Setbacks and comebacks
With the COVID-19 vaccine delivering some hope for normalcy in the coming year, investors will undoubtedly be eagerly awaiting positive news for the cannabis industry in 2021. To learn more about how we can help your cannabis business position itself to benefit from the promising opportunities available, reach out to the Zeifmans cannabis team today.
[1] FinFeed, “Will 2021 be the year the cannabis industry makes a comeback?”, https://finfeed.com/opinion/the-420-report/will-2021-be-year-cannabis-industry-makes-comeback/
[2] Nasdaq, “Why 2021 could be a big year for the cannabis industry”, https://www.nasdaq.com/articles/why-2021-could-be-a-big-year-for-the-cannabis-industry-2020-10-31
[3] CNN, “Montana, Arizona, New Jersey, South Dakota, and Mississippi approve marijuana ballot measures, CNN projects”, https://www.cnn.com/2020/11/04/politics/marijuana-legalization-2020-states/index.html
[4] Technical 420, “The race to build a global cannabis beverage leader is heating up”, https://technical420.com/cannabis-article/the-race-to-build-a-global-cannabis-beverage-leader-is-heating-up/
[5] Marijuana Business Daily, “Canada launches new cannabis consultations on beverages, labelling, and research”, https://mjbizdaily.com/canada-launches-new-cannabis-consultations-on-beverages-labelling-and-research/
