Cannabis Industry Predictions for 2021 – and Beyond

By Rob Woodbyrne

With the US House of Representatives passing the MORE Act on Dec. 4 that would federally legalize cannabis, many industry watchers are asking about predictions for what trends to look for in 2021. As we continue to position ourselves as a strategic business partner on the frontlines with our clients, here are our insights on the direction the industry is heading in.

    Descheduling or Rescheduling of Cannabis in the US?  

    While we might not quite get the full descheduling or rescheduling of cannabis in 2021, with the House passing the MORE Act, this is very much on the radar.

    The descheduling or rescheduling of cannabis in the US would lift much of the stigma surrounding the plant, which was deemed an “essential business” during the COVID-19 pandemic, a major development for the industry that led to more of a “new normal” in terms of cannabis being seen as serious business. Cannabis is not just a joke anymore, and while 2020 was a bit of a growing up year for the industry, 2021 will be more of a “coming of age” year as serious federal reforms become a reality.

    This development would also allow for the draconian IRS 280 E taxation to be lifted, which makes a much greater profitability benefit for large Multi-State Operators (MSOs). As this greater legitimation and opportunity for profitability emerges for the cannabis industry, it’s more important now than ever that cannabis industry entrepreneurs leverage technology and carefully vet their decisions regarding business partners to help support their business.

    Cannabis Banking Reform

    With the US House passing the MORE Act, cannabis is becoming more of a mainstream issue and federal legalization is very much on the horizon.

    Conservative GOP Sen. Pat Toomey, (R-PA), who could chair the Senate Banking Committee, said that he would work with Democrats and potential ranking member Sen. Sherrod Brown, (D-OH), to see that the Secure and Fair Enforcement (SAFE) Banking Act gets heard and a fair vote on the Senate floor.

    The Republican would-be chairman told Politico in November that he’s “sympathetic to the idea that people who are involved in [the] cannabis industry — in an entirely legal fashion — ought to be able to have ordinary banking services.”

    Safe, legal access to banking services has always been the largest issue plaguing the cannabis industry. Many cannabis businesses are forced to operate as cash-only, making them a disproportionate target for criminals and unable to perform simple functions such as direct deposit for their employees or taking credit or debit card payments from customers.

    There are entire businesses set up to offer armored car deposits to banks, barbed wire, security cameras and armed guards for the cannabis industry. State governments make millions of dollars in tax revenue off of the industry, while users of the product that are very disproportionately of black and Latino descent are being put in prison.

    A federal vote and decision on safe banking access for these companies is a major, major development, really enough cannot be said about that. A move in this direction will make cannabis companies be able to equally compete with other businesses and will level the playing field for cannabis.

    Prepare For Rapid Growth and Potential Setbacks

    Along with the rapid growth the industry will see with greater mainstream acceptance, it’s also important for business owners to align with a strategic business partner to help them with compliance, transparency and carefully tracking buying trends, which are very important to be cognizant of.

    As an example, this year, Michigan traversed its first year in the recreational market. While sales were exploding and the industry was seeing great success, its early stages saw conflict in supply and demand and ran into cannabis flower shortages. As we prepare for rapid growth in other parts of the country in 2021, this could be a reality for many markets, but could effectively be avoided with the cultivation planning, predictive analytics and operation management a strategic business partner can provide.

    Other non-cannabis, established industries have been using similar software technology to monitor buying trends for literally decades. Cannabis industry operators have to take heart. Look at candy producers, for instance. If they produced the same amount and type of candy year round, they would surely run out around Halloween and incur losses due to unsold candy around the “get in shape” New Year season. They could have too many Peeps in August, but not enough around Easter.

    Increased Employment Within the Cannabis Industry

    Along with eventual safe access to banking, we also expect the cannabis industry to see a rapid increase in hiring and employment.

    In 2021, we really expect to see cannabis companies separate from the pack. We all saw the “cannabis bubble burst” with Canadian public companies in Q4 of 2019, and in 2021 we expect to see a large number of winners and losers. Good hiring makes all of the difference for cannabis companies looking to end up in the “W” column.

    While there’s a lot of advice to impart regarding hiring, such as making sure you have a solid HR manager and grow a strong company culture, I would recommend that business owners utilize an enterprise software business partner that can help track communication across multiple teams at a rapidly scaling company and allow them to manage their workforce in a real-time environment.

    Software tools can provide transparency, so if you’re a business owner you can see from seed to the shelf where the products are in the supply chain and track information all of the way from the grow to the products reaching store shelves.

    Several states mandate tracking compliance software, but that doesn’t always help cannabis business owners have transparency with their operations and know what the person on the front lines is doing with their grow as compared to what the executives in the C-suite are looking to have visibility into. The right hand has to know what the left hand is doing, it’s all about maximizing efficiencies that ultimately end up saving money for the operation in the end.

    That is why it’s very important for executives to do their research and find the right software that can integrate with state-mandated compliance software.

    The best software applications for MSOs (Multi-State Operators) and vertically integrated cannabis businesses looking to scale rapidly will have compliance tools built-in at a very base minimum. But what will set them apart from their competition will be services that also offer predictive analytics allowing the business owner to see what’s coming in the new year and offer insight for how to scale their operations and be consistent with their product lines year over year.

    It’s important for any business leader that invests in technology that they vet their tools, and make sure that the partner they’re investing in can integrate with compliance tools that are mandated by the state, but also provide meaningful insight into their operations from top to bottom. At the end of the day, any grower will understand the fundamental principle that if it is not measured, it’s not managed.

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