If you have been halfway paying attention to what’s been going on in the cannabis industry over the past year or so, you know that the industry is, shall we say, in a bit of a slump. From 48% growth in 2020 to 42% growth in 2021 to a comparatively sluggish 7% growth in 2022, it’s fair to say that things have slowed down. Granted, there still is growth, but it’s certainly a far cry from the robust numbers the industry has enjoyed in the past. Further, most of the growth is being driven by new markets, while several mature markets are reporting double-digit declines in sales.
Countless articles have already been written on the “whys” of the slowdown, so I’ll quickly summarize some of the key issues: sales coming back down to earth after a year or so of inflated growth during COVID, oversupply in a number of markets usually driven by the issuance of more licenses, taxation and other high costs of doing business in the legal market leading to a huge cost advantage for the illicit market (and let’s not forget lack of enforcement in a few key states), and the general economic malaise. These are some major headwinds to overcome.
And beyond these headwinds, with no strong prospects for federal legalization, capital has dried up, leaving companies that focused exclusively on top-line revenue with the assumption that they could eventually grow their way out of lack of profitability, in rough shape. Many are either shutting their doors, laying off employees, or looking for a quick exit through consolidation or acquisition. As equity has dried up, companies have …