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HomeTips6 Business Challenges the Cannabis Industry Faces Today

6 Business Challenges the Cannabis Industry Faces Today

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Since the deregulation and legalization of cannabis products in North America, new cannabis businesses and enterprises have created a shift in the world of business. This transitional period has created an opportunity for many aspiring entrepreneurs to start a profitable business.

However, there are still several factors— both new and existing— creating challenges for people in the cannabis business. Here are six business challenges the cannabis industry faces today.

Rising shipping costs

In recent months, gas prices have skyrocketed around the world. There are many factors impacting the rising gas prices, including political unrest and the turning tides of the pandemic. For cannabis businesses that provide free shipping (check out here for details), these rising costs impact margins.

Shipping costs cannabis industry

As the rising gas prices are expected to continue for months, it’s only a matter of time before shipping companies raise their prices. This can create undue challenges for small businesses that rely on low shipping costs to sell their products. 

Legalization disparity

As of the end of 2021, less than half of the United States has legalized cannabis. Furthermore, the specifics of which products are decriminalized or legalized vary from state to state. These regulations also differ from federal regulations.

This disparity can create significant challenges for cannabis companies trying to grow and scale up. In October 2021, USPS also announced the final ruling, banning the shipping of CBD, hemp, and marijuana vapes through the mail.

The differences in legalization aren’t expected to change much in the coming year, continuing the growth limitations for these companies.

Post-pandemic return to work plans

Cannabis use dramatically increased during the pandemic. As cannabis has proven applications in reducing stress and anxiety, this surge in usage should come as no surprise. For cannabis-based businesses, this increase in use was a positive outcome of a negative situation.

However, the world is getting back on its feet and pushing to return to a sense of normalcy. One aspect of this plan is the push to return to work. Many of those working from home could find their balance with using cannabis to combat anxiety and stress while completing tasks and earning an income. Returning to an in-person work environment creates limitations around substance use during working hours, hurting the cannabis industry. 

While cannabis sales are still expected to trend upward, the so-called “Covid bump” could come to an end, leveling out the exponential growth of the past two years. 

Increasing competition

As this industry has great potential, many entrepreneurs are diving in and starting cannabis-based businesses, creating a highly competitive market. Additionally, as more states embrace legalization, larger corporations, tobacco brands, and alcohol brands will start to vie for a piece of the profit pie. 

Competition is an important part of a healthy marketplace, but small business owners will face challenges as a result.

Changes to regulatory

Decriminalization and legalization outpaced regulatory development during the early days. Now, regulatory bodies are starting to catch up and put more limitations and enforcement measures in place. While it seems contradictory, more freedom surrounding cannabis use will create more restrictions, with businesses facing hefty fines for non-compliance.

Financing difficulties

One regulatory issue that hasn’t changed is the restrictions surrounding banking for cannabis companies. This creates limitations for seeking financing and accessing capital. This issue has been brought to congress multiple times, passing the House but getting blocked at the Senate. 

These financial restrictions limit the growth potential of cannabis businesses. Unfortunately, they’re also keeping some larger pharmaceutical giants at bay. Once those restrictions are removed, the larger companies will have even more resources to acquire or beat out small cannabis companies. 

The stigma around cannabis use is starting to dissipate. For entrepreneurs, there’s great potential for success in this burgeoning industry. Take some time to research the challenges and understand the road ahead. 

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