Only 24.4% of Cannabis Operators Profitable Due to 280E, Other Challenges

Only 24.4% of Cannabis Operators Profitable Due to 280E, Other Challenges

new report The U.S. cannabis market paints a pretty dire picture of how the cannabis industry is doing financially, with just 24.4% of survey respondents saying their business is profitable. . To get a more complete picture, High Times recently sat down with Bo Whitney, CEO of Whitney Economics, who led the economic analysis of the data uncovered in the survey.

Cannabis economy hurts as it becomes impossible to ‘work with stones’

Remember when the COVID-19 pandemic began in the spring of 2020, many states said cannabis was a vital industry they couldn’t shut down, and cannabis sales were “booming.” may be Unfortunately, post-pandemic behavioral changes are taking a toll. “People can no longer carry stones to work,” Bo said. “The industry has taken a hit at a time when more revenue is needed, [received] the following. Whitney’s data found that only 10 of the 36 state markets were not growing, but “it’s the start-up states that are growing, and the ones that are growing.” But it’s a much smaller share of the overall cannabis market.” The 10 states not growing included large, mature markets such as Colorado, California, Oregon and Washington.

Oregon: Regional Prejudice or Precursor to What’s to Come?

The report acknowledged that there was “a strong regional bias, with nearly 90% of respondents based in Oregon.” So, of the 224 responses she received, only 24 were from carriers outside Oregon. As anyone long-time observer of the cannabis market will point out, Oregon’s cannabis economy has been struggling for more than five years, leaving many growers in financial trouble. entered the hemp market. Bo, who lives in Oregon and is no stranger to the struggles of the local cannabis industry, tries to control for any regional bias in the responses he receives by triangulating the data using multiple data points. I tried many times.

“I have a number of expert witness testimonies, and I have also conducted individual state-level investigations,” Bowe said, which is why “Michigan has overcapacity, oversupply, and a strong illegal market. It reflects Oregon with its Beyond the survey, Bo followed up on the survey by “calling business leaders.” All of the data from the less-represented states in the survey “showed Oregon as a harbinger of what was to come.”

next year’s survey plan

For the first two years, Whitney produced an annual report, but is now “moving from an annual survey to a quarterly survey,” he said. As a result, Bo said, “the number of questions will probably be reduced.”

The reason there were so many representatives of Oregon-based businesses was because Oregon cannabis regulators sent their surveys directly to licensees. Aside from Oregon, only two states—Washington and, surprisingly, South Dakota—had such strong regulatory involvement. Next year will be another story. Bo now has stronger relationships with regulators in Michigan, expects more support from regulators in Colorado, and has good relationships with business leaders in Florida. All states with significant gaps in this year’s data. “The Cannabis Regulators Association (CANNRA) sees a lot of value in this data and has been supporting me more than ever before,” Bo said, adding that their support has expanded the available data pool. He said it could help them scale up significantly.

Reform needed to save the industry

The main factors limiting growth are IRS Tax Code 280E, “Lack of access to banks, limited demand markets as supply and demand are all in one state, and the impact of illicit markets.” Whitney’s survey data and Bo’s personal research reveal some policy reforms that could help the cannabis industry. Bo’s main policy solutions are a safe banking system that “lowers the cost of capital”, 280E reforms that will reduce “taxes of up to 70% in some cases”, and interstate reforms to address supply and demand imbalances. It’s open to commerce. Boe analyzed the 280E tax earlier this year and found that “the cannabis industry pays $1.8 billion more in taxes than if it had been treated like other companies.”

In practical terms, Mr. Bo said, “When you consider product acquisition, labor, and federal taxes, you have to meet the criteria for economic viability.” He currently sets that threshold at about $2.5 million a year, but the 280E reform will lower that threshold to $1.5 million, which he says will greatly increase the chances of success. “The 280E does exactly what was expected when it was designed 40 years ago,” Bo said, making it impossible to operate a business profiting from the sale of federally illegal drugs. It is said that “It sounds doomed and bleak,” Mr. Bo said, not expecting growth until the Fed cuts rates, but that the surviving companies “should thrive in 2025 when growth gets back on track.” Warning.

Alexandra Solorio
Introducing Alexandra, an accomplished cannabis writer who has passionately pursued her craft for a decade. Through a decade-long journey, Alexandra has cultivated a profound connection with the cannabis world, translating her expertise into captivating prose. From unraveling the plant's rich history to exploring its therapeutic marvels and legal evolution, she has adeptly catered to both connoisseurs and newcomers. An unwavering advocate, Alexandra's words not only enlighten but also advocate responsible cannabis use, establishing her as an indispensable industry voice over the past ten years.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *