Emerging Trends in the Cannabis Industry in 2022

As 2022 gains traction, cannabis industry professionals are eager to find out if this will be a stellar year for the industry—or not. CannaBusiness ERP has compiled the top four cannabis trends, and the good news is that they appear to be pointing to further growth and maturation. The bad news is that hurdles for the industry still exist. 

Cannabis Trends for 2022

The cannabis industry is complex. Keeping on top of varying regulations while attempting to grow the business is challenging, but the following cannabis trends may offer insight into what direction owners, COOs, operation teams and consultants should consider taking.

  1. Increased legalization

A 2021 Gallup poll found that 68% of Americans support legalizing cannabis. This is an all-time high, with the first Gallup poll in 1969 that showed only 12% of Americans were in support of legalization.

The growing acceptance is reflected in the number of states introducing and passing bills legalizing cannabis. Because different states are passing legislation at different times, as well as passing differing regulatory requirements, it can be confusing to know state policies. A good place to start finding answers is with the National Cannabis Industry Association (NCIA). 

The trade association provides a map with state-by-state policies, making it easier to know which states offer opportunities for existing operators to become multistate operators (MSOs). CannaBusiness ERP’s guide, Cannabis: Guide to Expanding Into New Markets, also helps by supplying information on 10 states, including Nevada, New York and Pennsylvania, that MSOs may want to focus their attention on for expanding into new cannabis markets.

Though existing operators can expect expansion opportunities, opportunities also abound for new businesses to emerge as more and more states move towards legalizing cannabis.

  1. Sales will continue to increase in 2022

With strong support for legalizing cannabis, sales are expected to increase this year. Per a recent Adweek article, legal sales of cannabis reached $19.5 billion in 2020, and they’re projected to reach $30 billion in 2022. This is not surprising if the numbers posted by each state on NCIA’s map are anything to go by. For example, Washington State, which legalized cannabis ten years ago, is projected to produce $1.5 billion in sales for Adult Use alone (up from $1.2 billion sales in 2020). Washington’s projected sales pale in comparison to California’s projected Adult Use sales of $7.6 billion (up from $4.1 billion Adult Use sales in 2020). 

The growing number of states legalizing cannabis and the increased volume of sales in each state are not the only factors affecting success. Differing formats and uses of cannabis are also contributing factors. People’s reasons for using cannabis range from medicinal to recreational, as well as for health and wellness benefits, such as reduced stress, pain relief, and better sleep. Cannabis consumers can purchase edibles, pre-rolls, topical ointments and more. And they can purchase the cannabis from different locations, including their doctor, dispensaries, and online. 

In addition, consumption lounges, which are retail lounges that allow on-site cannabis consumption, are growing in popularity. The Cannabis Industry Journal says their popularity is growing because they provide a safe and legal physical space to consume cannabis. As with cannabis itself, the lounges are regulated by each state. 

Growing sales means cannabis businesses must scale operations to meet the growing demand. Cannabis production facilities have been expanding in size over the last five years. Cannabis businesses are also turning to cannabis business software to help them manage their cultivation, production, costing, compliance, recall management, inventory and traceability needs.

  1. Bills in U.S. congressional houses

State legalization has yet to be duplicated at the U.S. federal level. Cannabis is still considered a Schedule I substance under the Controlled Substances Act. However, there are a number of bills in the U.S. congressional houses that may help the cannabis industry overcome some of its challenges, including banking issues.

The National Law Review puts it this way, “Yet, in comparison to other industries, legitimate licensed cannabis-related businesses remain hobbled by the difficulties they face in accessing traditional banking and financial services – largely due to the fact that ‘marijuana’ is still considered illegal on the federal level under the Controlled Substances Act (“CSA”). Currently, financial institutions (including federally insured banks) are hesitant, and oftentimes unwilling, to work with cannabis-related businesses due to fear of reprisal from federal banking regulators.”

In response, a number of bills have been introduced to make some much-needed changes, such as the SAFE Banking Act of 2021. SAFE stands for Secure and Fair Enforcement. It passed the U.S. House of Representatives in April 2021 and is currently awaiting consideration within the Senate’s Committee on Banking, Housing and Urban Affairs. If it passes completely, the National Law Review says it will provide a “number of protective measures” and allow cannabis companies to have “ready access to crucial banking and financial services; thereby, reducing their need to be a cash-only business.”

Other bills, like U.S. Senate Majority Leader Chuck Schumer’s Cannabis Administration and Opportunity Act, are pushing for federal marijuana legalization with emphasis on ensuring smaller businesses and businesses of color have access to financial services.

Unfortunately, IRS Code Section 280E is another challenge. In a nutshell, it doesn’t allow the deduction of business expenses if the business is trafficking certain controlled substances. Though California has signed bills that will help overcome this code, it’s still a growth-limiting factor for cannabis companies across the U.S. 

Thankfully, cannabis companies that invest in a solid ERP solution, like CannaBusiness ERP, with an experienced partner are able to better manage these tax related hurdles.

  1. Continued Merger and Acquisition (M&A) activity

Finally, the last trend has to do with continued merger and acquisition (M&A) activity. In MJBizDaily’s article, “Marijuana M&A sizzled in 2021 and is poised for a hot 2022,” the author notes, “Marijuana merger and acquisition activity proceeded at a torrid pace in 2021 – and could accelerate in 2022 – thanks to lower interest costs and pressure on larger companies to expand their footprints and boost revenue.”

The article notes notable cannabis acquisitions in 2021, such as Jazz Pharmaceuticals acquiring GW Pharma for a deal value of $7.2 billion and Trulieve acquiring Harvest Health for a deal value of $2.1 billion. And a Business of Cannabis article looks at deals already taking place in 2022, such as Massachusetts-based Curaleaf’s acquisition of Arizona-based Bloom Dispensaries. The $211 million deal netted them a total of 13 dispensaries in Arizona and 121 nationwide.

For cannabis companies participating in M&As, it’s critical they have a comprehensive cannabis ERP in place to manage their M&A due diligence, including financial statements, compliance, inventory (cost of sales), business transactions and more.

It’s also critical that they choose the right cannabis ERP.

CannaBusiness ERP: The Right Cannabis Business Management Software

Cannabis companies can grow their business with an ERP solution designed for the cannabis industry. Learn how CannaBusiness ERP can set businesses on the right path. Manage financials, operations, quality, compliance, traceability, customers and more. 

CannaBusiness ERP is cannabis business management software that is built in Sage X3 and configured by NexTec industry experts to deliver a complete cannabis business solution. Our specialization in developing solutions for the cannabis cultivation and processing industry has resulted in some of the most respected companies around the world managing their day-to-day operation using CannaBusiness ERP. 

To learn more about our software and team of industry experts, reach out to us. We’d love to show you what CannaBusiness ERP can do for your business. 

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