It’s not too long ago that people would never have dreamed about investing in cannabis the same way they might any other product or service. For decades the plant was heavily demonized and sidelined – today, while stigma remains, the legitimacy of cannabis as a product has reached unprecedented levels. The legal cannabis market has exploded in the US alone, reaching over $31B in sales in 2021. This represented a 41% increase from the year prior – in the middle of a global pandemic. From growers to suppliers to dispensaries, investment opportunities abound for those looking to get in on this growing market. Like any investment, there are risks. And given the nascency of the cannabis market, those risks can be quite pronounced – especially considering the lack of federal regulation in territories like the US. But for those who understand those risks and can afford to take a chance, however, there are great reasons to invest in cannabis and cannabis assets like dispensaries.
Federal regulation is coming
One of the biggest insecurities of the cannabis industry is the lack of consistent federal regulation. States are able to set their own regulations, but until the federal government gets involved there is no consistent standard across the country. This increases volatility – how do you know that tomorrow the entire industry might not disappear? Yet this doesn’t seem to be the likely outcome. Cannabis legalization is spreading across the globe. More and more countries are dipping their toes in the waters, first for medicinal uses such as CBD oil, and then legal recreational use. As global acceptance increases, the chances of federal regulation finally coming into play in a positive way increase, turning a volatile stock into a more stable one. There is a risk this could undermine some investment opportunities – but will also provide a profound boost to others.
The Industry is Rebounding
COVID-19 hit every industry. While cannabis manufacture and distribution was able to ride out the storm relatively safely, many dispensaries were hard hit – particularly those that relied on foot traffic. Dispensaries in touristy locations such as LA were sometimes destroyed by the lack of business brought about by COVID restrictions. But dispensaries that successfully pivoted to a delivery model were able to weather the storm better. And now that those movement restrictions are easing, even dispensaries that relied on foot traffic are experiencing a renaissance. This demonstrates a resilience to major upsets that many industries have struggled to enjoy. If anything, the COVID-19 pandemic has illustrated that cannabis is a market that people will prioritise even when their worlds are falling down around them. This provides an element of security as an investment, knowing that one can ride out any major dips
The global market is expanding
Cannabis has historically been the victim of bad press for many decades. Today, the global conception of cannabis is shifting from an evil “gateway drug” to a relatively harmless drug with recreational and medicinal use. Education campaigns across the globe have sought to highlight the relative safety of cannabis when compared to other legal drugs – particularly alcohol. And they’re working. What this means for investors is the possibility for even a local business to expand exponentially in the long term. A dispensary operating on the corner of an LA street could become a recognized brand across the world in 10-20 years – certainly unappealing for the day traders out there, but a legitimate consideration for the serious investor. Though young, the cannabis industry shows immense promise and potential for growth. While it is always crucial to weigh the risks of investing in anything, there are certainly strong reasons to seriously consider investment in the cannabis space.
