In the past few years, cannabis laws worldwide have been evolving. Several countries, such as Uruguay, Canada, and 23 states in the US, have legalized cannabis and its derivatives for recreational use. That has also changed the landscape for medical marijuana and the hemp industry. In this article, we will look into the impact of cannabis legalization on the non-recreational cannabis industry and how hemp businesses can navigate through these changes.
Non-Recreational Cannabis and the Cannabis Market
Non-recreational cannabis encompasses hemp and high-THC products used for medical or therapeutic purposes, such as THCa flower or CBD. Hemp refers to a variety of the Cannabis sativa plant, which has a low concentration of THC, the psychoactive agent in cannabis. THCa is a cannabinoid bred to have higher THCA content than hemp.
Since the legalization of cannabis, the definition of the cannabis market has broadened to include therapeutic, medical, and recreational cannabis. Therapeutic cannabis encompasses low THC levels, such as hemp, and is meant to improve quality of life by reducing stress or anxiety. The medical cannabis market includes prescribed cannabis products supplied through the healthcare system, primarily to mitigate chronic or severe conditions such as cancer. That contains CBD, THCa, and higher THC content cannabis products.
The cannabis industry has an overall value of $52.27 billion in 2023 and a CAGR of 14.95%. The industry is still evolving, considering cannabis is only legal in some parts of the world. Germany, for example, has legalized the use of cannabis for medical purposes but not for recreation.
The Challenges Faced by the Cannabis Industry Post-Legalization
With this transition in the cannabis industry come its challenges for non-recreational cannabis businesses. Now that recreational marijuana is becoming legal, the cannabis industry is likely to face regulatory complexity and maintenance costs.
With the legalization of cannabis in some countries, taxes on cannabis production, distribution, and supply have increased, resulting in small suppliers closing down businesses. For example, California had a robust cannabis community with 1,500 brands in 2021. As of May 2022, 500 have closed down due to high running costs. While the government considers these taxes a way of driving out illicit businesses, it makes the illegal cannabis market more attractive than the legal one.
Taxes aside, there are research, development, and quality control costs that may arise as legalization becomes more global. Cannabis suppliers will have to invest in rigorous quality testing equipment and procedures. They will also have to allocate funds to research to stay at the forefront of product innovation to stay competitive in the cannabis industry.
Regulations and Compliance
With laws to legalize cannabis up in the air, governments are also looking to regulate the sale and purchase of cannabis products, especially hemp. Minnesota, for instance, legalized hemp-derived products in 2022. It further decided to have a tier licensing system for cannabis business owners, proving problematic since the law restricted cannabis production outside of hemp.
There are also packaging, labeling, and marketing rules that cannabis dealers need to comply with. Overall, the regulatory landscape post-legalization has been complex and costly due to the varying local, state, and national laws, which are still evolving. Other challenges can be expected, too, such as intense competition once this market becomes more legalized, safety and security concerns, educating consumers, sustainable business practices, etc.
The cannabis industry, especially the medical and therapeutic ones, faces many complex problems in post-legalization. In trying to cater to the legalization of recreational marijuana, there are high taxes to drive out the illegal market, regulatory compliance necessities, and incoming competition with the globalization of the industry.