Cannabis Is Big Business … At What Cost?

Joe Evans
Joe Evans - Content Writer

Jun 30 2021 - 5 min read

The legal cannabis industry is big business, but is it growing a little too fast for its own good? The legal cannabis industry in the states is projected to be just short of a $100 billion dollar industry by only 2026. With that massive projection, it only makes sense that cannabis industry brands are growing tremendously.

The legal cannabis industry is in the midst of a job boom. The legal industry already supports more than 321,000 workers across the U.S., with 77,000 jobs created in 2020 alone. That’s an astounding 32 percent increase across the 37 states and U.S. territories that have legalized some sort of recreational or medical program. If those job numbers don’t impress you, then consider the fact that that number has doubled since 2018. For those who aren’t business experts, an industry’s job numbers doubling every two years or so is a good indicator of the health of the industry overall! That growth is expected to continue throughout 2021 as well, so there’s no sign of that growth slowing down anytime soon.

With that incredible and quick growth, however, there are bound to be some downsides. This article is going to explore those downsides. Why could the rapid and incredibly lucrative growth of the legal cannabis industry be a problem for the overall cannabis industry in both the short and long term? What issues might come up for consumers? How might issues impact the small businesses that once made up the unique and diverse face of the formerly forbidden black market that are now forced to compete with multi-billion dollar mega-brands?

The Prohibitively High Prices to Start a Legal Cannabis Business

As with any ultra-lucrative and quickly growing industry, the costs associated with carving out a space in the market are high. For the legal cannabis industry, however, those high costs get taken to the next level.

Someone who wants to open up a dispensary of their own in a legal recreational market needs to have a lot of money on hand and be ready to go through the licensing, regulatory issues, and real estate issues that naturally come along with the legal cannabis industry. Oh, and don’t forget the most important part; having nearly a million dollars to pour into the business just to get the doors open for consumers.

That’s not where the financial struggles for cannabis business entrepreneurs end either. They should be prepared to deal with common cannabis industry business challenges like banking, which could cost as much as $2,000 per month just to do business with cannabis businesses (if they do business with them at all), (restricted) marketing to attract customers which will cost somewhere in the range of $10-25k, hardware and supplies necessary to running a cannabis business that will cost as much as $25,000, and staffing and payroll, which will cost at minimum $250,000 annually just to keep budtenders and growers on staff!

Big Cannabis Is On The Way

All of those costs are often too much to handle for upstart cannabis entrepreneurs, which leaves corporate-backed brands to try to fill the void with lower-quality products. That inevitably leads to worse cannabis for higher costs to the consumer. The best way to make sure that the consumer is getting the best quality product is to have a diverse, rich open market of products to choose from. Otherwise, you’ll just be stuck with the same problem as many other industries, which is three or four ultra-massive monopolies bossing the market and putting out subpar products.

The best way to prevent that is to make sure that smaller cannabis businesses can put out products and compete. If prices keep inflating like they have been, however, that free-market approach won’t be possible for the average upstart business owner for much longer!

The Racial Disparity of Cannabis Industry Business Ownership

Like many ultra-lucrative businesses here in the U.S., the legal cannabis industry has been mostly dominated by rich, white business owners. When it comes to ownership of cannabis industry businesses, an astounding 81 percent is white. An analysis of medical cannabis businesses in Maryland, for example, found that only 10 percent of investors in the legal cannabis businesses were people of color.

While some might shrug their shoulders at a statistic like that and think, “well of course rich people own the businesses. That’s just how business tends to work,” the reality of those numbers is incredibly troubling when it comes to something like cannabis.

According to the ACLU, while the rates of cannabis use between whites and blacks are nearly identical, the rates of arrests and incarceration certainly aren’t. As states around the U.S. propose legislation to legalize state-approved cannabis sales, black and brown people in the U.S. are still nearly four times more likely to be arrested and jailed for possession of cannabis than whites.

While the War on Drugs might have set the table for this type of racially divided policing, the continued growth of the legal industry has not slowed it down at all. Here a just a few recent studies that show race is still very much a factor when it comes to the legal cannabis industry:

  • In a 2020 analysis by The Washington Post, between 2015 and 2019, there were 3,631 marijuana arrests in the District of Columbia. Eighty-nine percent of those arrested were Black, even as they make up only 45 percent of the city’s population.
  • A 2021 analysis from the Milwaukee County, Wisconsin District Attorney’s Office reported that Black Wisconsinites were 4.3 times more likely than their white counterparts to be convicted for having marijuana. The worst disparities in Wisconsin are in Ozaukee County, where Black people are 34.9 times more likely to be arrested and Manitowoc County, where Black people are 29.9 times more likely to be arrested.”
  • A 2020 analysis of marijuana-related citations and arrests in Albany, New York for the time period July 9, 2019 to July 9, 2020 reported, “97 percent of the time, those arrested or ticketed were Black. Only four white people were charged with marijuana offenses during the time period despite nationwide evidence that shows Black and white people use marijuana at roughly the same rate.”

As the legal cannabis industry grows larger by the year, a real effort needs to be made for the industry to be open and diverse. If those types of changes aren’t made now, then before too long it will be too late to reverse coarse and fix things. There will be too much money and massive corporate brands at stake to shake things up properly. The future health and equity of the cannabis industry is essential for growth to continue.

The Bottom Line

While the cannabis industry is without question a cash cow that state and federal governments, big-money investors, and massive corporate brands have been able to take a piece of, the chances for growth from the average person are slim to none.

While the massive growth of the legal cannabis industry has been a win for consumers, if people aren’t careful that win could easily turn into a loss long-term when it comes to prices of products, quality of the cannabis itself, and investment opportunities. Cannabis is for everyone, and if some of the issues within it aren’t taken care of soon, that might not remain the case for too much longer.

Written by
Joe Evans
Joe Evans

Joe Evans is a journalist, writer, editor and contributor for Leafwell. He has, to date, more than 5,000 articles published online under his byline on topics like cannabis, local and National news, politics, automotive news, sports, pop culture and even a cult.

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