Inflation is tough on both new and old cannabis businesses
As we head into 2023, everyone is feeling the pinch financially. Households are spending upwards of 20% more for many necessities such as groceries, rent, and utilities, and homeowners are crumbling under the pressure of skyrocketing interest rates, imposed by big banks in hopes of correcting the path of inflation. Everything is getting more expensive, and average incomes are not rising to match. This is the side of inflation most regular everyday people are openly acknowledging, but what about businesses?
All business owners are experiencing loss due to inflation, and in some cases, it’s to the tune of thousands or even millions of dollars – enough to make or break the majority with little to no notice. Though we all saw the predictions leading up to this recession, those sorts of doom and gloom guesses have been circulating forever, and it was impossible to know that this time things would turn out differently. Cannabis businesses however face extra challenges due to the market.
Established cannabis businesses
When customers are spending more than 50% of their income on housing, there’s very little left for luxuries such as alcohol or cannabis. The booze industry is highly subsidized and controlled by the government, so those retailers have minimal fear in terms of what the future may hold. Those jobs, those businesses, and that industry are cushioned so well, they could never break, while cannabis-related businesses are floundering. Producers, retailers, advertisers, and pretty much everyone in between are starving as the average price of cannabis products drops to entice consumers and compete with the black market.
Big cannabis is not subsidized by the government, nor are there any tax breaks for these businesses that pay substantially higher rates for everything from licensing to taxes and even rent. They must also invest a significant amount of money into security measures, to do things like keeping products from being viewed by minors and diligently checking the ID of every single individual that enters. It’s a massive amount of manpower, money, and effort that is not required of most similar businesses in other industries, and it’s not about to get any easier.
Some regions are looking at raising taxes even further, as utilities, rent, and other overhead expenses continue to rise, starving many out of the competition. Cannabis businesses are doing everything they can to stay afloat from mergers to restructuring and mass layoffs, but they’ve still got a little bit more security than those who are hoping to cash in on this new industry right now.
With spiralling inflation, banks are increasing interest rates, making it more difficult than ever before to borrow enough money to start a cannabis business. There’s no money for licensing unless you’ve got personal savings or an angel investor, which makes it impossible for the average person to break into the industry. Even with the best business plan and innovative ideas, without the funding, just getting started is difficult, and from there, those who succeed must deal with all of the same problems plaguing the most established cannabis companies.
Cannabis is not an easy place to be or exist within for anyone right now.