Cannabis Industry Outlook: What's Next After 2020?

It is difficult to overstate the profound impact of COVID-19 over the last year. The pandemic has fundamentally changed the way we engage with companies, with one another, and with our surroundings. Numerous business developments – ranging from online shopping to digital transaction methods – have been significantly expedited, advancing years’ worth of progress within just a few months.

The cannabis sector has experienced this shift as well. Already recognized as the nation’s quickest-expanding industry, cannabis saw substantial growth throughout 2020, reaching unprecedented levels. Currently, a historically high proportion of the U.S. population favors the legalization of cannabis.

The recent election results clearly demonstrate cannabis’s success, as legalization measures were approved in Arizona, Montana, Missouri, New Jersey, and South Dakota. Over 111 million residents – representing more than a third of the nation – now reside in states where recreational cannabis is legal. Projections indicate the legal cannabis market will achieve a value of $24.5 billion by 2021.

The evidence increasingly confirms that cannabis has become a firmly established element of American life. Looking ahead to 2021, this continuing growth trend will not only create additional possibilities for the industry itself, but also benefit the broader economy through increased innovation, investment, and job creation within the sector.

A green economy

Since March, over 57 million people in the United States have submitted claims for unemployment benefits. While opportunities within the cannabis sector aren't a complete solution to economic challenges, they represent a significant area for consideration.

The value of legal cannabis transactions approached $20 billion in the last year and projections indicate this figure will exceed $40 billion each year in the coming four years. To accommodate this expansion, businesses are actively increasing their workforce. Currently, the legal cannabis market provides the equivalent of 243,700 full-time positions for American workers, a number forecast to grow by 250% from 2018 to 2028. This positions the cannabis industry as the leading creator of new employment opportunities in the nation.

Furthermore, cannabis has the potential to bolster state economies and produce greater tax income, a particularly important benefit as state and municipal finances face constraints. As an illustration, Arizona’s recent legalization initiative includes a 16% tax on cannabis sales, with the resulting funds allocated to community colleges, law enforcement, fire services, and public health initiatives.

Accelerating cannabis e-commerce

This year has clearly demonstrated that cannabis is a product consumers highly desire and consider essential.

When widespread stay-at-home directives were implemented earlier this year, many states designated dispensaries as “essential” businesses, similar to grocery stores, gas stations, and pharmacies. Even with limitations on shopping at other retailers or enjoying entertainment options, consumers were still able to make purchases from their local dispensary. This official acknowledgement from governing bodies signaled a significant step towards mainstream acceptance for the cannabis industry.

Consumers responded emphatically, leading to record-breaking cannabis sales figures. This exceptional demand prompted cannabis retailers to fundamentally change their operational methods and the way customers acquire products. To reduce the possibility of virus transmission through close contact, dispensaries rapidly adopted e-commerce platforms and digital payment methods, prioritizing the safety of both staff and customers while simultaneously updating their business practices.

These industry-wide transformations have contributed to projections of $794.5 billion in online sales by year’s end, significantly exceeding initial forecasts. Industry analysts believe the pandemic has expedited the move towards e-commerce by a full five years. At Dutchie, we have observed this trend directly, with a 700% increase in online orders and a 32% rise in the average transaction value since March.

Looking ahead to 2021

The recent political and business shifts represent significant advancements that have occurred at an accelerated pace. What developments can we anticipate in the future?

I anticipate that advancements in technology will be central to the evolution of the legal cannabis sector. Technology will assist dispensaries in optimizing their processes within a heavily regulated environment where adherence to rules is critical. Consequently, data will grow in importance, as retailers will require a more thorough understanding of their information to make more strategic and well-informed choices. This will be a key area of focus for dispensaries regardless of size, though it will be particularly important for larger organizations seeking a greater degree of refinement for their digital platforms.

In response to this demand, we are now observing the emergence of new, comprehensive solutions designed to enable dispensaries to fully utilize their data in crafting a distinct online presence, allowing them to maintain a competitive edge as the market becomes more crowded.

With the continued expansion of legalization, broader acceptance will further validate the industry and reduce the negative perceptions surrounding cannabis sales and consumption. Cannabis companies are likely to attract highly skilled professionals from prominent organizations in various mainstream sectors, and more software companies, businesses, and investors who previously hesitated will start collaborating with and investing in cannabis-related ventures. Furthermore, the federal legalization of cannabis could improve financial flexibility and unlock substantial investment opportunities.

Moreover, as we have already started to observe, the trend toward consolidation within the industry will continue, with retailers pursuing significant acquisitions and mergers. Larger, multi-state operators will likely acquire smaller businesses, and smaller businesses will increasingly merge, resulting in a more unified and less fragmented market.

The future of cannabis

The cannabis sector is relatively new, yet its possibilities are readily apparent.

With increasing numbers of states approving legalization and the industry experiencing growth and development, progress will continue towards a desired outcome: Legal cannabis receiving comparable technological and financial support to established industries; increased collaboration among innovators to create advanced technological solutions for the field; and greater ease of access for both consumers and patients.