SWOT Analysis: Potential Growth for the Cannabis Industry

SWOT stands for “strengths, weaknesses, opportunities, and threats.” Investopedia defines this acronym well: A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and weaknesses of an organization, initiatives, or within its industry.

The legal cannabis industry is large but fragmented in the US. Each state that has legalized recreational cannabis is a market unto itself, which makes the industry as a whole challenging to analyze. While dispensary owners and other cannabis companies need to be aware of state laws and consumer trends, it’s also important to keep your finger on the pulse of what’s happening nationally. While each market is self-contained, consumers are not and often travel to different states and markets.

The cannabis industry has been rapidly growing for years, and we don’t expect to see that slow down in 2024 or 2025. Cannabis is more widely accepted than perhaps ever before, and several new states have added potential cannabis legalization to their 2024 ballots – creating even more opportunity.

Strengths in the Cannabis Industry

What’s going well in the cannabis market? 

Growing Cannabis Market

Cannabis legalization is spreading across the US and the world as a whole. This means there is a rapidly expanding domestic and international market for legal cannabis products. Cannabis sales continue to grow year over year.

Public Acceptance

Public opinion on medical cannabis and recreational marijuana has changed dramatically in the last 10 years and is generally considered more positively now. There is more social acceptance, less stigma and penalties for being known as a cannabis consumer, and a wealth of cannabis-curious people to welcome into the world of plant medicine. All of this, plus growing international markets, leads to massive market potential. 

Medical Cannabis Benefits

Research on cannabis was stifled for decades, but today we have tens of thousands of studies proving various medical benefits of marijuana use for a range of conditions. Many states begin the process of legalization with a medical marijuana program, opening the door to new patients and driving up demand for medical products. The federal government has also sanctioned a few cannabis-based medicines, pushing product development forward with big pharmaceutical companies. 

Product Diversity

Grinding flower or dabbing concentrates are classic ways to consume cannabis, but today’s consumer demands more innovative options. Edibles have grown exponentially as a product category as have topicals, cosmetics, and skincare products giving today’s cannabis consumers more options to incorporate the cannabis plant into their lives than ever. 

Innovation Potential

The cannabis industry is just getting started, and it’s attracting people from the legacy market with decades of experience handling the plant, and people from other industries including agriculture and consumer packaged goods. The combination of knowledge coming into the industry means there is significant potential for innovation in product development, cultivation techniques, delivery methods, and onset time. 

Weaknesses in the Legal Cannabis Industry

It’s not all sunshine in this industry – as many entrepreneurs know all too well. 

Federal Prohibition

Despite many voter victories, cannabis remains illegal at the federal level, and the federal government has shown no rush to change that. Federal legalization has been teased to the public for years, but don’t expect to see the fed legalize recreational marijuana (or medical marijuana for that matter) any time soon. This ongoing prohibition of cannabis plants creates continued problems with regulatory hurdles and access to financial services. 

High Regulatory Burden

It’s not just the federal government making it hard to enter cannabis. Many states impose strict regulations that can limit business entry into markets, make it more expensive to operate a retail shop, restrict product innovation, and stifle marketing options throughout the cannabis industry.

Social Stigma

Cannabis isn’t accepted everywhere – yet. There is still a pervasive stigma surrounding cannabis use, particularly the myth of the “lazy stoner”. This impact on public perception can manifest in many ways that are problematic to cannabis businesses, like towns in legal states voting to disallow dispensaries. 

Competition

The most opportunity for cannabis companies is found in early entrants in new markets, as established markets quickly become competitive with brands vying for the same customers. 

Opportunities for Cannabis Companies

Growing Research

More research is needed to understand the long-term effects of cannabis, and every year new studies are started or published helping us deepen our understanding of this incredible plant. Our knowledge of the endocannabinoid system, one of the most important systems in the body, is on the precipice of massive breakthroughs.

International Expansion of Legalized Marijuana

Germany made headlines this year for becoming a major EU country to legalize cannabis (in some form) proving that the tide is turning. Legalization efforts around the world are gaining strength and present opportunities for international expansion and trade. 

Education

Most people fundamentally don’t understand how cannabis works, and education is a vital point of the industry. Educating consumers can help sway public opinion and lead to broader mainstream acceptance of the plant and cannabis products. 

Wellness Market

The wellness industry has latched onto the power of cannabis. This billion-dollar industry presents opportunities for cannabis companies to develop products marketed for well-being, sleep, stress relief, relaxation, joy, and self-care. 

Technology Integration in the Cannabis Industry

Integrating new-school technologies with old-school plant handling techniques can improve product quality and development. Using new technologies in the dispensary can improve efficiency and customer experience. 

Ancillary Cannabis Companies

As the cannabis industry grows, so does the supply chain needed to support it. There are many opportunities for ancillary businesses like packaging, cultivation equipment, technology, and testing labs that are necessary to keep cannabis products moving from seed to sale. 

Threats to the Cannabis Market

Shifting Regulations

We’ve said it before and we’ll say it again: the cannabis industry is a shifting sea of red tape that’s subject to change at any time. Regulatory changes or federal crackdowns can negatively impact the industry’s growth and you must stay atop of the changes.

Environmental Impact

For such an incredible, multi-use plant, indoor growing and child-resistant/single-use packaging create a lot of waste and a large carbon footprint. Valid concerns about the environmental impact of large-scale cannabis cultivation and packaging need to be addressed to keep this industry from turning the positive of legalization into a carbon-sucking industry of waste. 

Black Market Competition

High taxes in many legal states keep the Black Market thriving, which poses a threat to legal business owners and to consumer safety. 

Negative Publicity

Misleading headlines about cannabis use or safety are designed to create fear and confusion and to damage public perception of the plant. 

Product Liability Concerns

Product liability is a big risk in the cannabis space, especially because there’s no federal consensus for testing or safety, leaving businesses in the cannabis industry to assume the risk. Protecting your cannabis company and your bottom line is an important factor to set yourself up for long-term success. Insurance policies like product liability can help.

Important Note: This is a general SWOT analysis for the national cannabis industry, and the specific strengths, weaknesses, opportunities, and threats will vary depending on your specific company, which state(s) you operate in, your product types, and your target market.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by email [email protected] or calling 646-854-1093 for a customized letter or learning more about your cannabis insurance options.