There is no doubt that we are watching the cannabis industry start to come into its own. Like with any emerging market, the cannabis industry is going to have its ups and downs. This list is by no means a comprehensive list of the challenges businesses in this space will be facing over the coming years, but it is the three I believe will be the toughest for them to face.
Big Names Entering the Space
If there is anything that can scare fearless cannabis entrepreneurs, it’s the day companies like Monsanto, and Philip Morris enter the cannabis space. These big names will come with big money and a drive to monopolize the industry. Organizations like the Open Cannabis Project see this coming and have taken measure to keep cannabis genetics from being patented by these major corporations.
Because cannabis has grown up in isolated markets, we have grown used to the wild variety we experience at any dispensary. Utility patents by companies like BioTech Institute threaten to destroy this culture. We have only just begun to learn the different ways cannabis can affect you, patents like these from huge corporations threaten innovation in not only cannabis strains, but also the potentially limitless medical applications cannabis can provide.
Marketing Their Brands
Even once cannabis eventually becomes federally legalized, I believe that the industry will be hardpressed to get advertising slots for a national audience. There have been televised commercials for cannabis lawyers, and then there was one commercial by Scotts Miracle-Gro that wasn’t very subtle in its attempt to cater to cannabis growers. These were not explicitly commercials for cannabis, though.
While legalization might allow social media platforms to start to turn a blind eye to cannabis advertising, it’s not certain that will be the case. Even though tobacco, bongs, and CBD are all legal, they still find themselves on all prohibited to advertise lists.
The brands that break free from the confines of their state will have to become extremely creative to reach a wider audience. Without money and various operations across the United States, businesses will have a hard time building their customer base and recruiting top talent to come work for them.
This may seem counterintuitive, but opening the floodgates of legalization is going to bring a litany of problems for small businesses. First, small businesses will now feel the pressure of national competition. Currently, cannabis markets are almost all on a city level. Since there is no shipping, you are forced to do business where your shop is located.
Secondly, there going to be a new standard in both quality and safety. While this may be difficult for business owners to adjust too, this is hugely advantageous for consumers. Once the FDA and the National Organic Program gets their hands on the regulation of cannabis, you will no longer have to hope that your cannabis wasn’t doused an undisclosed amount of pesticides.
Finally, once federal legalization occurs, there will be a huge supply issue for at least a little while. If a brand can’t keep up with the demand, consumers will move on to a brand that can meet their needs and might never give the smaller guys another chance. If you don’t have your operation to a level that can meet national demand by the time federal legalization rolls around, you’ll watch your market share shrivel up right in from of your eyes.
The companies that can grow big enough to compete with the big players in adjacent put in place a plan for national distribution, and build brand loyalty are going to come out on top. Those that can’t are going to struggle to keep their doors open.