An Extinguished High
The legal marijuana industry, which boomed during the pandemic, has seen its sales decline so far in 2022.
There was a massive spike in sales in 2020 thanks to stimulus money, not to mention plenty of time stuck at home with nothing to do. But things are different this year, with record inflation making it more difficult for families to pay their bills.
Colorado weed sales declined 11.4% year-over-year in June. As one of the first states to legalize recreational weed, Colorado remains one of the nation’s biggest marijuana markets, and indicative of the wider industry. Despite its growing popularity, marijuana evidently still falls into the “unnecessary expense” category for many consumers.
Weed’s Weakened State
Although consumer spending plays a role in the slowdown of marijuana sales, there are also other factors at play.
An ongoing illegal market and a lack of investment capital continue to make it difficult for new marijuana businesses to grow. According to Viridian Capital Advisors, the total capital raised for cannabis companies is down 62.6% from a year ago, with equity financing down a whopping 96.3%. This makes it much more difficult for new startups to become competitive in this already-saturated market.
The general sentiment is that investors are getting tired of waiting for federal regulation to pass — a process that could take years. So instead of waiting, they are opting to invest their capital elsewhere.
Last Dance With Mary Jane?
Despite these signs, insiders believe the industry will not go dry. Even at its relatively young age, the legal weed market is projected to reach $52.6 billion in sales by 2026. Meanwhile, downward cycles such as these are common for young industries, especially after the high experienced by the weed trade in 2020.
Investors and cannabis enthusiasts alike can rest assured that the legal weed industry isn’t going anywhere. But if you want to be sure – and you live in a state where the product is legalized, of course – your local dispensary could surely use another customer.
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