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What are the 4 Major Challenges Facing the Cannabis Industry in 2021?

Despite all that has been going on around the world in 2020, it has been a great year for businesses in legal cannabis and the industry as a whole. And while 2020 is undoubtedly an outlier, we believe the cannabis sector will continue to gain significant momentum in 2021.

Several cannabis stocks such as Aurora Cannabis (NYSE: ACB), Village Farms International (NASDAQ: VFF) and Grow Generation (NASDAQ: GRWG) all made significant gains in November. It is further projected that the market value of the cannabis industry will grow to USD 30 billion by 2025. Good news for investors, right? Well, the industry will continue to face challenges but – what are the 4 major challenges facing the cannabis industry in 2021?

If you had taken our advice to invest in GRWG or VFF earlier this year, you would have made significant return on investment

With such tremendous growth potential, there are bound to be plenty of challenges encumbering the growth of the legal cannabis industry. Savvy investors know that there’s often opportunity to be found amidst pervasive challenges So what are the 4 major challenges facing the cannabis industry in 2021?

1. Uncertainty and an Ever-Changing Landscape

Cannabis Industry Changes in 2021

The entire cannabis industry remains in perpetual flux, despite all the good news that came out in 2020. New cannabis and hemp companies are emerging every day while the established ones are resurging with new products. Emerging new technology continues to make the industry more efficient, and none of the current players can predict exactly where the industry is going.

Many existing cannabis companies continue to pivot to new products and markets, instead of focusing on core competencies, which may not necessarily inspire confidence among investors. 

2. Cannabis Industry Disruption from Big Pharma, Big Alcohol and Tobacco

Cannabis Stocks and Big Pharma

Cannabis investors have seen plenty of capital and influence coming into the cannabis industry from mainstream well-established industries like pharmaceuticals, alcohol and tobacco. These industries have more capital, a well-established distribution network and are seasoned in lobbying the government to get their way. Is this a major challenge for the cannabis industry in 2021?

These established industries could potentially disrupt the cannabis industry and reshape it to suit their interests. This could prove to be both risky or beneficial for the investors already invested in existing companies.

3. Continuing Legal and Regulatory Challenges in Cannabis

Cannabis Legalization in USA - State By State

The legal cannabis industry got a big bump in 2020, especially with the November 3rd election results in the United States. Several states voted to legalize recreational marijuana including Arizona, South Dakota, Montana and Vermont. But the legal challenges are far from over.

The US House recently approved the MORE Act and now, the US Senate is set to vote on the legalization of recreational cannabis. Still, with government as divided as it will likely be during President-elect Joe Biden’s first term, it is anyone’s guess where the vote could go. This uncertainty will soon be reflected in the prices of the cannabis stocks. Will this be a major challenge for the cannabis industry in 2021? Well, cannabis investors may want to wait for things to play out before they commit. 

4. Liquidity Concerns for Cannabis Companies

Liquidity Concerns with Cannabis Stocks

As the cannabis industry continues to gain significant momentum in 2020, one of its biggest constraints remains access to liquidity for cannabis companies in 2021. Cannabis companies cannot access traditional banking services because cannabis is not yet legal on a federal level. 

This keeps cannabis companies operating only on the cash they have at hand and unable access any credit or financing facilities like traditional industries. This banking ban has pushed a lot of the cannabis companies to go public to raise capital early, regardless of what the fundamentals are saying. This does not inspire confidence among investors. 

In fact, there are many major challenges facing the cannabis industry in 2021. Investors should be aware of these dynamics and continue to do their due diligence as there will certainly be winners and losers among cannabis stocks. The trick is to identify the cannabis and hemp companies who will successfully navigate these major challenges in 2021.

What are the 4 Major Challenges Facing the Cannabis Industry in 2021?

About Cannin: Your Cannabis Stocks Resource

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