Cannabis Industry – A Brief Snapshot

Cannabis Industry – A Brief Snapshot

Cannabis Plant

Cannabis, which was once considered a “drug of the bad”, is gradually gaining full-scale industry status, akin to other industries like pharmaceuticals, agriculture, or healthcare. The governments of several countries have given legal status to the Cannabis business by spelling out rules and regulations. It took little time for the Cannabis business to grow exponentially in those countries. Given the recreational and medicinal advantages of Cannabis, this industry is witnessing focused investments – both by new players and established liquor or tobacco brands. Given that this industry is at its nascent stage, it is expected to see tremendous growth.

The Base Of The Cannabis Industry

As cannabis is a plant, the agricultural sector has been quick to venture into cannabis farming to provide the basic raw material to the Cannabis industry. The cannabis leaves are harvested and processed to manufacture an array of recreational and medicinal cannabis products. Cannabis actually is a derivative of the hemp plant that has psychoactive properties. The Cannabis leaf has as many as 120 compounds collectively called cannabinoids, but just two of those compounds are useful to be converted products for human consumption – that is cannabidiol or CBD and tetrahydrocannabinol or THC. CBD has medicinal values – eases inflammations while also reducing the symptoms of nausea, migraine and anxiety. THC is a psychoactive compound that is used for its addictive properties.

Health Advantages Of Cannabis

Cannabis has been recognized as a natural drug having special medicinal and healing properties. And this was one of the primary reasons why it was legalized. To allow patients to take advantage of its cathartic benefits. 

Cannabis in healthcare industry
  • The first drug approved by the food and drug administration was Epidiolex, which had higher amounts of cannabinoids to ease inflammation, pain, nausea, and anxiety. It also helps in treating epilepsy in young children.
  • Sativex is widely being used for pain management in cancer patients.
  • Medical Cannabis is also a mood elevator that acts by increasing the secretion of endocannabinoids, the lack of which can cause depression.
  • Cannabis-based drugs can revive appetite in AIDS patients.

Cannabis Legalization – It’s Impact On The Economy

The emergence of the legalized Cannabis industry is invigorating the economies of nations in several different ways. It is opening up newer job opportunities in agriculture, manufacturing, lab testing and retail. Many allied industries that feed this sector are also growing to provide more jobs. This in turn translates into more tax revenues for the governments and enhanced economic investment environment. 

Tax Revenue

Since Cannabis has been legalized, there has been a significant uptick in the legal consumption of the product – both medicinal and recreational. The combined tax revenue collection related to the sale of cannabis products totaled well over $12.2 billion in 2019, in parts of the developed countries where it was legalized. It contributed indirectly to the local economy by providing more jobs and therefore taxes – in terms of more activity towards logistics, storage, construction etc. Analysts suggest that if the drug is federally legalized across the USA, this industry can generate tax revenues of almost $105.6 billion by the year 2025 in the USA alone.

Growth in Job Opportunities

Like in any industry cannabis too provides direct jobs as well as in direct jobs in the affiliated industries. The most visible, of course, are the employees in the cannabis outlets and dispensaries. Similarly, there are jobs created in the production and manufacturing units.  Many indirect jobs are created in the setting of the shops and manufacturing units, logistics, administration, marketing et al. The economic activity has also increased as a result. Analysts suggest that it can lead to a growth in job opportunities for over 41,000 people by 2024, with a labor income of over $1.7 billion in the state of Nevada alone.

Growth In The Agricultural Sector

Cannabis Cultivation

Many established farmers have taken the opportunity to venture into Cannabis farming once it was legalized. As growing legal cannabis is regulated, interested farmers have taken license to farm Cannabis either in their fields or in greenhouses. These farmers have opened up new earning avenues for themselves – an additional crop income source. As the cannabis industry grows the demand for cannabis plants is increasing – motivating the farmers to upgrade their agricultural technologies to maximize their yield and profits. Most of these Cannabis farmers are now gradually equipping themselves with modern tools and systems to produce more crops in less time, and to improve quality and yield. Many farmers are also collaborating with cannabis manufacturing companies to be their exclusive growers. These companies in turn impart training to the farmers as it benefits them mutually.

Several cannabis companies are listed on major stock exchanges and millions of dollars are invested in these company stocks. Stock market traders and investment houses are investing in the stocks of cannabis companies as they see huge growth potential.

Cannabis Industry – Faces Unique Challenges

Every industry has its own set of challenges. And each industry finds its own unique way of overcoming them. Here are some of the significant challenges faced by the Cannabis industry and possible solutions:

Limited means of advertisement and marketing

Though Cannabis has been legalized for recreational and medicinal purposes most countries do not allow free advertising and marketing. Companies have to explore innovative ways to reach out to their end users. 

Limited Options of Finance

Banking and finance for Cannabis

Banks are reluctant to provide financial assistance to Cannabis companies as they still consider this industry as ‘unsafe’. Even if they do extend finance, they charge a higher interest rate. Private financiers and investors do extend finance but obviously at a higher interest rate. Companies in the cannabis sector need to go through a longer list of documentation and paperwork vis-a-vis other industries to prove the business’s legality and safety.

Rapidly Changing Rules And Legislations.

Being a new industry that has recently been legalized, the legislation is undergoing modifications – of which the cannabis companies have to be constantly keep abreast of. These modifications may be related to manufacturing specifications or distribution laws. Therefore, if there is a lapse in adhering to a modified legislation the company may be liable to be legally prosecuted.   Professional lawyers, who are specialized in the laws related to the legalization of drugs can be hired to provide regular updates and advice to minimize the chances of legal actions.

Development Of New Products

Cannabis products

Presently Cannabis industry focuses on developing products based on only two compounds – CBD and THC. Cannabis actually consists of over 120 other compounds and there may be some more compounds that become usable and marketable in the future. The present Cannabis companies may have to rapidly adapt to this scenario and might prove to be a challenge.

Wrapping It Up!

Undoubtedly the Cannabis industry has a bright future scope for growth, but at the same time the industry needs to take cognizance of the present and future challenges.

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