What’s Next for the US Cannabis Market? Key Trends, Challenges, and Opportunities

What’s Next for the US Cannabis Market? Key Trends, Challenges, and Opportunities

The legal cannabis industry has emerged from its recent slump and appears ready for massive growth in the near future. It’s been a rough ride getting here, and companies who have weathered the storm now have the opportunity to turn things around.

But what do piecemeal legalization and broad investor pullback mean for businesses? And how should these trends impact the decisions being made right now?

In this article, we’re exploring the case for optimism, pointing out some of the pitfalls, and recommending the best way forward. 

The case for cautious optimism: signs of recovery and opportunities for the future

The US legal cannabis industry took a beating in 2022, with the largest publicly-traded companies reporting collective losses of $550 million. But analysts are now expecting a rebound, with sales projected to increase to $50.7 billion by 2028.

This growth is expected to come largely from the piecemeal, state-by-state legalization that is now taking hold. New states that are now beginning to allow sales: Connecticut and Missouri for adult-use, and Mississippi for medical use. It’s likely that as these regulatory changes open new markets, the industry will eventually right-size itself relative to the level of demand. That could allow cannabis-lifestyle and therapeutic businesses to expand their operations into newly legal markets.

Opportunities for biomedical industries

It’s not just recreational or lifestyle use that benefits from a more relaxed regulatory environment. It also creates more opportunity for biomedical and pharmaceutical companies to investigate cannabis for therapeutic applications. Pfizer’s acquisition of Arena Pharmaceuticals was just one major signal of this increasing interest in cannabinoids. 

Cannabinoids are already used in a wide variety of therapeutic applications spanning pain management, immune diseases and improving patient outcomes in chemo-therapy. Legalization is making it easier for researchers to access and work with cannabis, even though at the federal level, significant obstacles remain. 

But overall, the industry looks ripe for product innovation and accelerated growth. 

Why the cannabis market isn’t fully out of the woods just yet

The legal cannabis industry has to reckon with the same broad investor pullback affecting almost every other industry. Investors are – understandably – demanding more proof of future profitability, which may be especially difficult for operators in mature markets where prices have leveled out. In addition, inflation and rising costs will continue to impact the bottom line. 

With funding and M&A on a downward trajectory that shows no signs of reversing anytime soon, the industry’s best chance lies in strategic partnerships. 

Better together: why partnerships are so crucial for cannabis companies

Partnerships have the potential to act as a force multiplier to differentiate companies, expand their reach, and navigate complex regulatory challenges. 2023 has already been hailed the “Year of Partnerships” by industry leaders due to the recognition that the industry will need to pull together to overcome challenges and make the most of the potential the market is showing. 

Partnering for compliant distribution: MSOs and co-manufacturers 

As we mentioned earlier, legalization is rolling out state by state, but federal prohibitions still make interstate commerce illegal. This is where Multi-State Operators (MSOs) play a pivotal role, enabling companies to expand their presence to other states, without running afoul of federal rules. 

 Co-manufacturing partnerships offer another way for companies to expand without overextending budgets. These deals enable companies to pool resources to enter new territories or start new product lines. This can also help to avoid the costs of setting up new manufacturing operations, leveraging partners’ facilities instead.

Accelerating biotech research through partnerships with authorized manufacturers

Partnerships are also enabling progress in biotech research and the creation of cannabis-based medicines. The recent partnership between biotech company Bioharvest Sciences and Royal Emerald Pharmaceuticals is one example of this type of partnership. Through this alliance, Bioharvest Sciences can more easily sell to research institutions federally, leveraging Royal Emerald Pharmaceutical’s ability to legally produce marijuana in the United States.  

Cut through the noise with AI-enabled insights

To succeed in an increasingly saturated market, cannabis companies will need to take a hard look at operational efficiency, and cut costs aggressively. But even more importantly, they will need to find ways to know what is happening in the market, moment to moment, in order to move in on opportunities as they arise.

Similari empowers companies with the always-on market intelligence they’ll need to make agile decisions in a constantly evolving commercial landscape. Through its next-generation insights mechanism, Similari gives researchers and innovators real-time updates on competitors, technological advances and critical changes to the regulatory environment, adapting to users’ needs and preferences over time. 

Schedule your very own demo with our team to see how Similari brings order out of chaos, with timely, reliable insights. 

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