6 Cannabis Industry Predictions for 2023
While 2022 was not a great year for the cannabis industry, the years ahead, including 2023, look more promising. Here are our predictions for 2023:
1. Federal legalization won’t happen in 2023, but more states will legalize
With the SAFE Banking Act failing late last year, most aren’t hopeful for federal legalization this year. Although President Biden has announced that his administration would review whether cannabis should remain a Schedule 1 drug, experts are skeptical whether they will follow through in 2023.
However, adult-use cannabis was legalized in three more states in 2022 (Maryland, Missouri, and Rhode Island), bringing the total number of states that have legalized both recreational and medical marijuana use up to 21 states (plus Washington D.C. and Guam).
In 2023, four more states will be voting on adult-use legalization of cannabis: Minnesota, Ohio, Oklahoma, and Pennsylvania. Legalization will likely be successful in Minnesota, Oklahoma, and Pennsylvania, but Ohio will likely fail.
Two states, Hawaii and New Hampshire are expected to make progress toward adult-use legalization. Three states, Kansas, Kentucky, and North Carolina, are expected to make progress this year on medical legalization.
In many of the remaining non-recreational or non-medical cannabis states, the question is no longer if cannabis will be legalized but how and when.
2. Cannabis consumption will continue to adapt to inflation
Despite rising inflation and cost-saving behaviors, demand for cannabis is resilient. In a poll by Jushi, 39% of participants said they purchased less expensive cannabis in 2022 compared to 2021, but 73% actually spent more money per transaction this year.
THC concentration (60%) and price (58%) are now the leading factors in cannabis purchases. Last year, branding and strain type were surveyed as the most important.
3. Cannabis mergers and acquisitions will make a comeback in 2023
After a big year in 2021, investments in cannabis brands and capital raises slowed dramatically in 2022. The total M&A volume in the US decreased by 62% compared to 2021. And according to Viridian, there were 39% fewer transactions. This is primarily due to rising interest rates and low cannabis stock prices, which makes stock-based M&A deals more expensive.
But the good news is that it looks like 2023 is bringing the “perfect storm” for M&As.
4. Brand differentiation will become essential
As market saturation continues to grow and cannabis operators in multiple states struggle with mounting oversupply issues, the pressure is on to compete. Differentiation will be crucial for brands to survive the stiff competition. There is an urgency to differentiate due to the impending recession, which will also be essential for long-term success.
While there are still few national brands, the most successful brands in individual states dominate competitors by a factor of 9 to 1. These companies are leading the pack effectively using consumer data to guide marketing strategy.
5. Risk assessment and long-term thinking will be crucial to cannabis business success
To make it through a recession, cannabis business owners must operate smartly with practices like risk assessment and strategizing with the bigger picture in mind.
“As exciting as the cannabis industry has become, given the major strides made in recent years with legalization and greater access, the hardships and challenges are still fundamental factors to consider within the business environment. In 2023, it remains paramount for businesses to prioritize and constantly assess their risk strategies while being mindful that cannabis remains a long-term investment.” –JM Balbuena, author of The Successful Cann-preneur.
6. The US cannabis industry could reach $100 billion in annual sales by 2030
Each year, analysts predict what the cannabis industry is worth. And each year, they are wrong because the numbers exceed expectations.
New Frontier Data crunched the numbers, and the compound annual growth rate (CAGR) of the legal cannabis industry is 11% between 2020 and 2030. But Wall Street predicts the industry will be far more by 2030, projecting a value of $100 billion. As demand grows and new legal state markets open up yearly, the outlook is good indeed.
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