5 pandemic-driven trends in the cannabis market

Published on Apr 19, 2022

5 pandemic-driven trends in the cannabis market

Like many industries, cannabis was forced to turn over new leaves during the COVID-19 pandemic to survive. After two years of adapting—and thriving—the cannabis industry will be faced with some lingering questions about which trends will last and which ones will go up in smoke.

Here are 5 trends to watch in the cannabis market

1. The emergence of e-commerce

Federal laws prohibiting cannabis use and sales have slowed down the emergence of e-commerce in the industry. Without reliable access to many popular websites, banking platforms and search engines, cannabis-related businesses have been relegated to more analog ways of selling.

But as in other retail sectors, cannabis companies were forced to rethink their sales strategy thanks to COVID-19. As mandated closures kept stores empty and customers at home, the industry was forced to rapidly adopt the e-commerce tools available to them.

Despite the added limitations and regulations of cannabis-related e-commerce sales, dispensaries have been able to meet the shifting demands of consumers during the pandemic and establish a strong foundation for the post-COVID retail environment. When the lockdowns hit California-based dispensary chain Harborside, their days-old e-commerce capabilities and curbside pickup quickly outpaced in-store shopping by 30-40%. When paired with home delivery, companies have found a recipe for long-term success.

2. M&As gain steam and reshape the landscape

There have been some big, splashy IPOs in the cannabis industry, but the days of wild valuations are in the past as investors get a more realistic view of cannabis’ performance. Early in the pandemic, the cannabis industry faced a funding crunch as investors pulled back. Despite some notably poor-performing stocks recently, growth and innovation in the industry continues apace.

These market conditions have pushed companies to merge and acquire others to shore up profits. In 2021, there were almost 3.5x as many M&As as the same period in 2020, and experts say 2022 will be feature even more. Despite large cannabis companies having less cash due to deflated stocks, they’re still taking the opportunity to leverage that capital to buy up related companies, like the software startups that are supporting the industry.

While this may not be the longest-lasting trend, the unique landscape presented by the pandemic set in motion market moves that will resonate for years to come in the industry.

3. Continued state and local legalization

Legalization and decriminalization have been trickling across the U.S. for decades, but the last few years have been more of a flood. While marijuana remains a Schedule I substance at the Federal level, there’s growing pressure on Capitol Hill to de-schedule it.

It’s not only a winning political issue—9 in 10 Americans support some form of legalization as of last year—but it was a needed source of revenue for cash-strapped governments when COVID-19 reduced many revenue streams. Cities like Vista, CA were surprised by boosts to their coffers from cannabis revenue, with the 2021-2022 fiscal year projected to now bring in $4 million for the city instead of the initially projected $1.3 million.

In 2022, there’s a raft of legislation being considered by votes and politicians to legalize recreational or medical marijuana. These states include Arkansas, Delaware, Idaho, Hawaii, Kansas, Kentucky, Maryland, Minnesota, Mississippi, Missouri, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Washington DC and Wyoming.

4. Cannabis proves itself essential

During the pandemic, most cannabis-related companies were declared ineligible for pandemic relief funds like the Paycheck Protection Program. Facing little assistance, cannabis companies were forced to pivot and find ways to increase sales. The result was a leap in the industry’s level of maturity as they stayed lean and found new ways to connect with consumers.

It also proved the staying power of cannabis, which has become a recession-proof staple for many consumers. Current projections put the cannabis industry growing from $20 billion in 2020 to generating nearly $46 billion dollars in 2025, which would make it larger than the U.S. craft beer industry.

5. Cannabis banking reform gains steam

One of the biggest ramifications of cannabis remaining a Schedule I substance according to the US Government is the challenge the industry has finding reliable banking. Without access to the business loans and support of other retail industries, it’s harder for the communities most affected by the enforcement of cannabis laws to now join the multi-billion dollar industry.

COVID-19 revealed the importance of having strong local communities to rely on. With fair banking practices to help make the cannabis industry align with standards of other industries, it will be easier for cannabis companies to move away from a cash-based commerce and participate in the digital economy. While banks like Valley are helping this industry grow with innovative solutions like Valley Pay, which will allow cannabis-related businesses to provide their customers access to a compliant, secure and streamlined mobile wallet payment system, the need for further reforms remain.

In lieu of federal legalization, congressional lawmakers are working to make cannabis-related banking easier for companies in the industry. The Secure and Fair Enforcement (SAFE) Banking Act introduced as an amendment is working its way through Congress, and according to its main sponsor will enable businesses to “access capital in order to operate in a safe, efficient manner”.

Cannabis & Marijuana Banking

Cannabis & Marijuana Banking

We take a different approach to cannabis banking - one that puts the unique needs of the business first. As one of the leading cannabis banking institutions in the country, we offer innovative solutions designed specifically for dispensaries, cultivators, wholesalers and more.

Learn More