As a variety of states across the US, the entire country of Canada and many other regions around the world legalize the production, sale and recreational use of cannabis products, the growth potential of the industry is increasing like never before. With the North American market valued at $7.2 billion USD of the global $9.3 billion USD and a compound annual growth rate of 34.6% expected, business across the cannabis spectrum are looking to maximize their profits from the outset (Grand View, 2018).
These major changes are opening up incredible opportunities for farmers, product developers, distributors, vendors and all the other players of the cannabis industry. However, with many government agencies, financial institutions, delivery companies and corporations still weary about getting into the marijuana industry, business owners need to strategically position themselves for long-term success.
Here, we explore the issues that face those in the cannabis industry and how using innovative platforms for marketing, distributing and accepting payments for their products are vital to immediate and long-term success.
The Challenges Facing the Cannabis Industry
Overcoming the Original Obstacle
The greatest challenge facing the cannabis industry over the last century has always been legalization. With 10 states in the US already having legalized recreational marijuana use and 32 others legalizing medical use, the cannabis industry is finally beginning to shed the one barrier that has significantly held it back for decades.
With legalization quickly sweeping across North America, as well as into Europe, Australia, South America and other parts of the world, there are new challenges to focus on for those in the cannabis industry.
Challenge #1 – Banking and Finances
Banks and financial institutions have always been the furthest behind in adopting new, unconventional trends. This concept is further reinforced by their reluctance to work with cannabis companies, even in states and countries where marijuana is completely legal.
With cannabis companies ranging from production to retail sales pulling in hundreds of millions in revenues per year, the idea that they cannot keep it in traditional bank accounts is worrying. Keeping seven-figure balances in either cash or in a ‘gray area’ of banking can lead to a wide range of complications for business owners, as well as potential problems with tax authorities (Weed, 2017).
Challenge #2 – Accepting Payments
The secondary challenge with banks in the cannabis industry is that they control the most convenient methods of payment. Especially in the cases of farmers and product manufacturers who have to accept large payments from their clients, payment through cheque, bank wire, credit card or direct-debit are virtually impossible for those in the marijuana sector.
As banks refuse to work with farmers, distributors and other key figures in the cannabis cycle, their options for accepting payments are scarce. Not many clients will want to pay for a six-figure order in cash, nor do the suppliers want to have to accept and hold such large quantities of currency.
With retailers that have storefront operations, having clients pay for their goods under $1,000 may be slightly inconvenient, yet it is possible. The trouble arises with the amount of cash being held in a retail environment at all times, as they cannot accept debit or credit card payments, making them prime targets for robberies.
Challenge #3 – Marketing Cannabis
The marijuana industry is extremely fortunate that the legalization of cannabis is happening during a time where they internet allows for a more widespread and uncensored sharing of information.
With so many restrictions on cannabis marketing through traditional methods such as billboards, television or radio commercials, in malls, with sports teams and more, the marketing directors of companies need to get creative.
Currently, a majority of the states that have legalized recreational cannabis have done so with the following guidelines for marketing any marijuana-related products (Business and Professions Code. California, 2017):
- No advertising marijuana products within 1,000 feet (or another specific distance) of a school or area where children often spend time, which often includes television, radio, or print ads that could be seen, heard, or distributed in those areas
- No advertising on public or private vehicles
- No marketing to children, which also means no using toys, inflatables, cartoon characters, or anything else that appeals to children in marketing efforts
- No mascots (human, animal, or mechanical such as inflatable tubes, people in costumes, or sign spinners)
- No billboard advertising (some states make an exception for marijuana retailers)
- All ads must include text that says marijuana products can only be purchased by people who are 21 years of age or older
- No indoor advertisements unless minors are not permitted in the facility
- No advertising in arenas, stadiums, state fairs, shopping malls, arcades, and farmers markets
- No TV or radio advertising unless it can be proven that over 70% of the audience is over the age of 21
Opening Up the Promising Future of Cannabis
Fortunately for those in the marijuana industry, there are a variety of innovative companies working hard to promote the adoption of cannabis worldwide by developing platforms that directly address these issues.
By creating an alternative to traditional payment, financing and marketing methods, companies that once started out as passion-projects for those who genuinely care about growing the industry have turned into major global platforms used by the producers, distributors, retailers and consumers of the cannabis industry.
As legalization continues to sweep the US and other parts of the world, these platforms will become integral in facilitating the entire chain of cannabis, from the production to the end-user.
A Cannabis-Friendly Banking Alternative
With Colorado, the first state in the US to legalize recreational marijuana use, seeing its highest-ever monthly sales in March 2019 at $142.4 million USD with $114.3 million from recreational and $28.1 million from medical (Mitchell, 2019), it is evident that the demand is only growing.
With over $6 billion USD in total sales in Colorado alone since legalization began in the state, there is a lot of money changes hands across all elements of the industry. One company that is facilitating payments across the marijuana industry in JanePay.
The easy-to-use money transfer system allows anybody to simply send or request payments from another user over their completely secure platform. Using just a mobile phone, everybody from farmers to distributors to retail consumers are able to transfer money quickly between each other.
This drastically reduces the near for cash payments, which creates a safer and more secure cannabis industry. By connecting the various players of the cannabis industry through one system that includes payment processing from PayPal, Mastercard, Visa, CoinPayments and more.
Plus, the security and anonymity offered helps with concerns that retail cannabis users have about purchasing products. With roughly one-third of recreational users willing to purchase cannabis products online but held back by privacy and personal information concerns, a platform such as JanePay has the power to boost buyer confidence (Deloitte, 2019).
Merging Cannabis with Crypto
Another fast-growing alternative industry that is facing constant backlash from traditional financial institutions is cryptocurrency. As the decentralized form of digital currency exchange over the blockchain platform continues to grow in global adoption, it has become a natural integration into the cannabis industry.
Cryptonug, a peer-to-peer digital currency that offers a secure all-in-one payment for the cannabis industry, is revolutionizing the way that industry players not only share funds with each other, but also protect them.
From farmers looking to accept secure payments from distributors, product creators to retailers and even retailers to end-users, cryptocurrencies will play a dynamic role in the growing industry as both a payment method and a secure store of value.
With banks unable or unwilling to keep the profits of cannabis companies in their holdings, the ability to use PotCoin, CannabisCoin, HempCoin, CannaCoin and more growing cannabis cryptocurrencies as a means to keep their funds safe yet accessible financing option (Dale, 2019).
Innovation in Marijuana Marketing
In 2017, the worldwide cannabis market grew by 37% (Merkovich, 2019), largely in part to companies using innovative methods to market their products and business. As traditional marketing channels have been regulated so harshly that they are virtually unusable for the cannabis industry, businesses are turning to cutting-edge technology to connect with consumers.
One of the most effective methods of cannabis marketing has been using niche platforms to connect businesses throughout the entire life cycle of recreational and medical marijuana products. One such platform is www.Nuggplug.com, which is a premium online platform that serves as a directory for cannabis businesses.
By taking cannabis marketing online, companies are able to bypass the intense regulations for print advertising and get in-touch directly with those looking for their services. Furthermore, by building trustworthy online communities that include real peer reviews and GPS-based data to help find local cannabis businesses, NuggPlug is bringing the global cannabis market together.
As the cannabis industry’s marketing extends far beyond typical retail-to-consumer advertising, having a platform that includes a wide range of sponsors, vendors, delivery services, doctors, head shops, growers and more from across the industry, online cannabis marketing will not solely be a compliment to advertising plans as with more traditional products, but in fact the standard in marijuana-related marketing.
As Legalization Grows, So Do Possibilities
Out of the 50 states in the US, already 43 allow for some form of marijuana use and with 62% of the American population in favor of legalizing recreational cannabis use, the number of states is sure to grow (Merkovich).
One of the most surprising factors is the growing support of marijuana legalization among Republicans, generally the more conservative political party in the United States. While democrats have long-supported medical marijuana use, studies show that 51% of Republicans are in favor of legalizing cannabis, largely driven by the younger generation of the political right (Horvath, 2019).
This has caused savvy investors to put in over $10 billion into the cannabis industry in the US (Reisinger, 2019) already, with more major corporations looking to partner with companies in the sector. Coca Cola, Marlboro, Corona and a host of other global brands are joining the rapidly-growing industry, partnering with cannabis farmers, producers, distributors and more to develop innovative new products.
The mass adoption and backing from industry giants will not only help inject capital into the cannabis industry, but their influence and deep pockets for lobbying lawmakers can drastically help the push for legalization.
The Global Cannabis Market is Growing, Too
While the United States currently accounts for 90% of the global cannabis industry, the favorable attitude towards legalization in Europe is a driving force behind a worldwide market (Horvath).
Leading the way is Germany, which is set to be the European leader of the cannabis market, with Italy just behind them with a projected $1.2 billion in recreational marijuana sales annually by 2027 (Pellechia, 2018).
With companies such as NuggPlug, JanePay and the host of cannabis-based cryptocurrencies connecting the United States, Europe and all other cannabis markets through their global platforms, the potential for growth is endless. No matter where a companies are based, they all have the incredible potential to take advantage of the quickly-evolving cannabis industry, especially as legalization continues to occur in the United States, Europe and emerging markets.
California (2017). Business And Professions Code – Bpc Division 10. Cannabis [26000 –
26250] (Heading of Division 10 amended by Stats. 2017, Ch. 27, Sec. 3.).
Dale, Oliver (2019). Blockonomi. Cryptocurrency & The Cannabis Industry: Two Hot Markets
Deloitte. A society in transition, an industry ready to bloom. 2018 cannabis report.
Horvath, Tyler. Marijuana SEO. 32 Incredible Cannabis Industry Statistics.
Merkovich, Aleks (2019). FitSmallBusiness. Cannabis Industry Statistics.
Grand View Research (2018). Legal Marijuana Market Size, Share & Trends Analysis Report
By Type (Medical, Recreational), By Product Type, By Medical Application (Chronic
Pain, Mental Disorders, Cancer), And Segment Forecasts, 2018 – 2025.
Mitchell, Thomas (2019). Westword [online]. Colorado Marijuana Sales in March Hit Highest
Monthly Total Ever.
Pellechia, Thomas. Forbes [online]. Legal Cannabis Industry Poised For Big Growth, In
North America And Around The World.
Reisinger, Don. Fortune [online]. The Legal Marijuana Industry Is Soaring—And 2019 Could
Be Its Best Year Yet.
Weed, Julie (2019). Forbes Magazine [online]. Cannabis Executives Reveal The Industry’s
2019 Challenges And A Few Opportunities Too.