Legal cannabis has been a boon in tax funds for states that have legalized. Colorado set the trend in 2012, and since then, more than ten states have legalized recreational consumption of cannabis. While states are reaping more than $132 billion in tax revenue from the cannabis industry, you should be cautious about this fast-growing industry. Plenty of competition, regulations, and decreased profitability should give any business owner pause. Take a look at these cautionary tales before deciding whether you should invest in the legal cannabis industry.
Too Much Weed
Cannabis start-ups in Oregon are learning a painful lesson in supply and demand. Since federal regulations prohibit cannabis from being sold outside the state, Oregon is drowning in weed. The glut of extra cannabis has driven prices as low as $24 an ounce for recreational customers, which is bottom of the barrel in terms of price. In fact, it’s estimated the state is sitting on enough for each resident to have four ounces. State regulators ended applications for new cannabis licenses until the backlog of existing applications have been processed. With applications no longer being processed in Oregon, any cannabis entrepreneur in the state not in the system is effectively out of luck. Even California has limited their application process because of the high number submitted after legalization passed.
Successful Companies
The highly anticipated entrance of GGB happened earlier this month, trading on the OTCQB Venture Market. The company continues to trade on the Canadian Securities Exchange under their GGB tag, but the U.S. expansion will help reach new investors and expand the business in an increasingly legal market. Green Growth Brands is focused on leading the retail and consumer packaged goods sector of the cannabis industry. New entrepreneurs and investors looking to break into the industry should check out this company as a leading cannabis brand in a saturated market. Most cannabis start-ups are expected to fail as the market reaches saturation over the next two years. With 400% growth and a market worth $40 billion by 2021, only companies with astounding leadership and market share will succeed. You should keep this in mind if you’re considering investing in the cannabis industry and let GGB serve as a stellar example of a company that has acquired leadership talent to lead the company through its early growth phases.
Room for Solid Ideas
While Oregon’s glut of cannabis business applications is a cautionary tale to anyone looking to enter the industry, you shouldn’t let that stop you. Since the cannabis industry is so young, these early days are like the Wild West days of the industry. There is plenty of room for growth for companies that have a solid business idea to bring to market. The cannabis industry at large encompasses so many different sectors that it will be a juggernaut in job growth and profits over the next two years. Cannabis retailers, growers, producers, and manufacturers all have room to claim market share as the United States government becomes more open to federally legalizing weed.
No Comments yet!