People in the United States are interested in the cannabis space. It’s a new topic, even though the plant has been around for generations, give or take 12,000 years ago. Yeah, you read that right; cannabis was discovered 12,000 years ago, but recently people have been able to start, invest, and legally profit from marijuana. Let’s take a look at the industry.
The total cannabis market cap was USD 20.47 billion in 2020. This market is expected to surpass USD 100 billion in the next five years. People may ask why is the cannabis industry so lucrative. The product is expensive, has a limited amount of stores, and demand is high. This can get confusing thought. To understand the market, we must break them down into states. Let me clarify, our government has legalized marijuana on a federal level, but we have on the state level.
Every state either voted for or against recreational cannabis. The known states that legalized marijuana are California, Colorado, and Oregon, but other states such as Nevada, Montana, Vermont, Rhode Island, Michigan, Massachusetts, and many more. Well, exactly 21 states legalized recreational cannabis. A total of 39 states legalized medical marijuana.
Now you understand some states have legalized medical, recreational, or both cannabis use. The second thing to understand is that not all states are equal. So, cannabis differs from state to state in quality, quantity, services, and product.
Every state has a different quality. This is simply a personal opinion, so take it with a grain of salt. The best location for cannabis flower is California. The best cannabis concentrates are in Colorado, which consists of wax, shatter, and other oils in the market.
Some states are more over-saturated than others. States like California, Oregon, Colorado, and Oklahoma have issued too many licenses for their state market. This will affect pricing in these markets. So the price per pound of cannabis will drop due to market competition.
The only difference in services is the number of locations. The newer licensed states that allow adult-use cannabis will only issue a certain amount of licenses for retail, cultivation, manufacturing, and delivery. While older and more mature states have allowed the masses to apply for and acquire a license. So, these states have established more infrastructure vs. newer states like Massachusetts. For example, Massachusetts, like other new states, is lacking in certain services, such as delivery and operating management.
You might be thinking, why and how are products different? Well, some states differ in their edibles. For example, Massachusetts cannabis-infused edibles do not typically surpass 100 mg. While cannabis-infused edibles in other states, such as California and Colorado, have cannabis-infused edibles greater than 200 mg. You might find even stronger ones at some retail stores.
What to look for while investing in cannabis?
The first thing any investor should do is research the company. Of course, this is standard for any investment, but it is even more important in the cannabis industry.
Why, you ask?
The cannabis market is a high-risk investment because of legalization, constant law change, and accounting restrictions. Cannabis investors should understand the operators who are putting their money to work. Look at a few things.
1. Financial Pro-forma or Statements
2. Business Operations