It’s no secret. In the cannabis industry, businesses have a lot of hurdles to overcome. From banking restrictions to navigating frequent changes in state and federal laws, cannabis companies face challenges unlike any other businesses in the nation. However, despite these significant struggles, America’s cannabis companies are among the fastest-growing businesses in the U.S.
If recent statistics are any indication, the hot cannabis market shows no signs of slowing down anytime soon. But what makes the cannabis industry one of the most prolific business sectors in the United States?
What the Statistics Say About the Cannabis Industry
In 1996, California became the first state in the U.S. to legalize cannabis for medicinal use. Almost two decades later, in 2012, Colorado and Washington became the first two states to legalize recreational cannabis use for adults 21 and older. Although recreational sales got off to a somewhat rocky start as states tried to navigate confusing state and federal laws, the cannabis industry saw tremendous growth between 2017 and 2021, with an astounding 161 percent industry-wide job growth during that span. Some job reports indicate the cannabis industry employs close to 428,059 full-time workers, and job growth recently surged by another 33 percent in one recent year.
For context, consider recent statistics from the U.S. Bureau of Labor Statistics. The bureau expects the personal services industry to grow by 17 percent over the next decade, followed by the travel industry at 13 percent. Compare those numbers to the numbers in the cannabis industry. Cannabis businesses have seen significantly more growth in their first years of inception and are expected to continue growing with no signs of slowing.
Cracking the Financial Times’s 500 Fastest Growing List
Another indicator of the strength of the cannabis market is the recent release of the Financial Times’ 500 Fastest-Growing Companies in America list. In 2021, only one cannabis company made it onto this list. More recently, a whopping 11 cannabis companies cracked the top 500 for the year. Between 2018 and 2021, these companies had compound annual growth rates between 21 percent and 175 percent. The top two cannabis companies reported $1 billion in sales. Some cannabis businesses even ranked better than powerhouse names like Tesla and Amazon.
As more states look to green-light recreational cannabis use, the market is poised for even more growth, which should create additional jobs and opportunities. Analytics company New Frontier Data projects that the cannabis industry has the potential to grow into a $71 billion industry by the end of the decade. That’s more than double the $30 billion in total cannabis sales last year.
Barriers to Continued Growth in the Cannabis Industry
It is astounding to consider the massive growth and success of the legal cannabis industry in the United States, especially given the considerable barriers many cannabis businesses face that most other companies do not. Technically, cannabis remains a Schedule I controlled substance under U.S. law, making it federally illegal nationwide. Although many states have legalized medicinal and recreational cannabis sales, the fact that cannabis is still illegal at the federal level creates significant challenges. One of the most profound problems cannabis businesses must endure is the lack of access to capital and the services of financial institutions.
As purveyors of a federally illegal substance, cannabis businesses cannot access many federally-regulated financial benefits. Many businesses in the industry started and still rely on all-cash business models for payroll, company transactions, and customer payments. Some lawmakers have pushed for relief in the form of the SAFE Banking Act, a measure to give cannabis businesses access to banks and credit cards. However, all efforts to pass this Act have failed thus far.
The continued categorization of cannabis as an illegal substance by the federal government also hamstrings businesses looking to trade across state lines. In some areas like California, Washington, and Michigan, for instance, there is a glut of cannabis on the market, which has been driving down prices and creating problems for suppliers and cultivators. Interstate trade could open up business growth and opportunities by allowing companies with surpluses of cannabis to sell to companies in other states with limited stocks.
Will Cannabis Hype Keep the Industry Afloat?
Although the cannabis sector currently faces unique challenges that are stifling growth and limiting the industry’s potential, the cannabis industry somehow remains one of the nation’s fastest-growing. This is an amazing accomplishment in and of itself. New customers are discovering cannabis every day, including Gen Z-ers and middle-aged women.
Gen Z-ers could profoundly reshape the cannabis industry as the first generation of consumers to come of legal age during a time when there is finally widespread, legal access to marijuana. Some studies suggest that 69 percent of individuals aged 18 to 24 prefer cannabis to alcohol. These numbers suggest that cannabis growth can continue going strong, keeping the industry afloat and continuing the economic cannabis boom in the United States while laws lag behind.
There is also the potential for continued growth if more states consider legalizing cannabis for medicinal and recreational use among adults. Delaware recently passed laws that legalize recreational marijuana while Minnesota creeps closer to passing legalization measures of its own. As more states look to expand these legalization measures, the industry is poised to expand into new marketplaces and increase job growth and sales figures even further.
Against all odds, the cannabis industry continues to flourish. Economic forecasts predict continued annual growth. If the winds of change continue to blow, and significant changes are made at the state and federal levels, there is no telling how big the cannabis industry could grow, increasing job opportunities and economic development along with it.
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