Arcview Group and BDS Analysis have released a report on the expected growth of the cannabis industry in California – and it’s a mixed bag, to say the least.
While the cannabis market is expected to grow 23% over the course of 2019 to $3.1 billion, and nearly double that by 2024 to reach $7.2 billion, it’s not all good news for cannabis suppliers. No matter how great that industry growth may be, it still represents a lower than expected rate of consumer spending.
The growth can be attributed both to an influx of customers that are shifting from illegal sources of cannabis, and the newer market of adult-use sales by tourists in the state. That’s not to mention the generally higher standard of quality and wider array of choices that the legal cannabis market offers to consumers as well.
The lack of expected growth in consumer spending comes down to regulations and taxes that affect the cannabis industry in California. No matter what other benefits the legal market offers to consumers, the fact is that the illegal market can be up to 77% cheaper for the consumer.
Add to that the difficulty that businesses entering the industry face in obtaining licenses and managing the taxes, and the industry becomes an even less attractive area of business. Don’t forget – California was the first state with legal cannabis to see year-over-year sales fall, back in 2018.
“States making the move before–including Colorado, Washington, and Oregon–have typically seen consumer spending double over 12 months,” said Arcview in a press release. “But in California, local bans on commercial cannabis activity caused the number of retailers to shrink sharply during the launch of the state’s adult-use program in January 2018. Stringent testing regulations that took effect in July 2018 prompted many suppliers to fold as product shortages cut consumer spending dramatically.”
As you can see, California has its own share of specific challenges in making sure the cannabis market remains competitive. There is great potential for a much more profitable market under a more inviting tax system, but until then, businesses in the cannabis industry will have to cut costs where possible.
One way to do so is by outsourcing your IT needs to a single provider, like Veo Verde. Reducing IT costs is one of the most appealing reasons businesses work with an IT company. Businesses that choose to outsource can convert unplanned IT expenses to fixed, predictable ones. This frees up capital for other aspects of their business.
Plus, it saves on hiring (and firing) in-house staff, paying benefits such as sick leave, health insurance, and social security. In addition, your IT company will be available 24/7, where in-house staff may take off due to personal issues or illness.
Furthermore, as the cannabis industry in California grows, your business will as well, right? And as your business grows, your IT needs grow as well. Keep in mind that new service offerings often come with significant upgrades or new software. Your IT company should provide the flexibility you need to change your products/services or add new ones when required.
Like this article? Check out the following blogs to learn more:
Fill in your information below: