Toward the end of 2019, market experts and economists predicted an extinction wave of sorts headed for California’s cannabis industry. Fighting against exorbitant taxes, a thriving underground market, and a severe lack of banking options, many cannabis businesses were doomed to fail in 2020, according to leading figures in the industry.
So far, however, this prediction has yet to become a reality. In fact, California’s cannabis industry hit record sales in July at $348 million. There may be several reasons for this unexpected success.
While the COVID-19 pandemic threw a wrench into the financial plans of consumers and businesses alike, cannabis companies in California were given a lifeline almost immediately. Governor Newsom, along with many other governors across the nation, designated the legal cannabis industry as essential. According to Pamela Epstein, a board member of the California Cannabis Industry Association, this designation prevented the predicted “extinction wave” from coming true overnight.
Another factor that may have—at least for now—saved California’s cannabis industry is the enhanced unemployment implemented by the CARES Act. Until the end of July, unemployed individuals received an extra $600 per week from the federal government. Combined with staggering rates of unemployment, this secure form of income has given people the free time and money needed to support local cannabis businesses.
The predictions themselves may have bolstered the industry, as businesses responded by strengthening their plans and taking greater precautions to weather potential hardship.
Finally, some industry experts have suggested that licensed businesses are in survival mode, potentially conducting some level of business “out the backdoor.” Many dispensaries lost substantial amounts of product from looting and riots that took place amidst recent political unrest, and those businesses might be choosing to break certain regulations simply to stay afloat.
While California’s cannabis industry has managed well so far, businesses should still prepare for future hardship. The biggest issues facing the industry (i.e. high taxes, competition from the unlicensed vendors, etc.) have yet to be solved. Nevertheless, the immediate designation of cannabis as an essential industry suggests that the national attitude toward the business may be changing for the better.
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The cannabis industry has enormous potential, but you’ll need skilled support if you want to navigate the business’s unique challenges and maximize your profits. At Purdy & Bailey, LLP, we can help you strengthen your business with the knowledge, resources, and strategies needed to survive current and future challenges. With more than half a century of experience, our attorneys are fully prepared to provide exemplary legal counsel and representation.