2021 Looking Favorable for California Cannabis Industry

This has undoubtedly been a year of challenges for virtually all business sectors, but 2021 holds some promise for the continued growth of California’s burgeoning legal cannabis industry.

Some of the trends our Los Angeles marijuana business lawyers recognize as specific to our state include:

• More cannabis business license opportunities in Los Angeles and throughout the state.
• Ongoing evolution of consumer preferences as well as product maturation.
• Pressure from consumers and businesses on taxes and pricing.
• Newly available legal finance and banking services.

Although these are mainly positive developments on the horizon, some could lead to a degree of market volatility. Still, all indicators are that California’s legal cannabis market will continue to grow by leaps and bounds. Voters in various parts of the state passed dozens of local initiatives that establish a regulatory and tax framework for new marijuana businesses to become established. That means we’re going to see more marijuana businesses set up shop.

It’s true that the black market and cumbersome state and local taxation continues to weigh on existing businesses and hamper new opportunities, consumers are becoming more discerning between licensed and unlicensed operations. The value of licensing and regulation was especially poignant during the vape crisis, as well as the pandemic. We expect to see a heightened focus on health, safety, quality control, and legitimacy of products. Further, industry analysts expect licensed pot products will begin coming down in price, which would cut directly into the demand of unlicensed operators.

Demand is likely to remain high as well. Cannabis consumption has surged in the months following the COVID-19 pandemic, as people’s anxieties have mounted. While we do hope 2021 is far less stressful for everyone than 2020, it’s unlikely we’ll see a precipitous drop in the number of consumers, particularly with more product options available – some specifically designed to help with anxiety and insomnia.

There may also be increased demand among cannabis connoisseurs, who are anticipated to pay a premium for products designated by the new state appellations program, which launches next month. This is the program that works similar to the wine industry and allows for unique marketing opportunities based on cultivation methods and region.

Smaller Shops Feel the Squeeze

Although the niche market for marijuana continues to thrive, smaller retail shops have been feeling squeezed. Cannabis operations were deemed “essential” in the midst of the pandemic, but those with more capital to start have fared better. Supply chains are becoming increasingly sophisticated, and larger operators are increasingly dominating the market.

Competition appears to be especially fierce among manufacturers, though many cultivators too have expressed difficulty keeping pace with the meandering network of local and state regulations – particularly track-and-trace requirements.

All this may mean that some operations may be edged out of the market, though we may well see some operations shift to jurisdictions that have more favorable regulatory and tax rules.

Local delivery services continue to do well, particularly as concerns about the pandemic have changed the way people shop for marijuana. In one survey, nearly 4 in 10 consumers stated they were at least moderately concerned about going in-person to a marijuana shop.

Economic Reforms

Although it’s unlikely federal legalization will happen in 2021 (despite the recent passage of reform in the House, which probably won’t clear the Senate), we may see some easing of restrictions for financial services to cannabis companies.

This may allow many struggling operations to stay afloat, as they’d have debt financing options, credit and the ability not only to survive to but to innovate and possibly expand.

If you are a cannabis company in need of legal services to help you navigate these challenges, our experienced team can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

World $350+ Billion Cannabis Cultivation (Hemp, Marijuana) Market Size, Share & Trends Analysis to 2027, Dec. 3, 2020, Yahoo! Finance