What Type of Investment Opportunities Exist in the Cannabis Industry?
As more countries and states in the U.S. modify their laws so that recreational and medicinal cannabis is available, the marijuana market has steadily grown with them.
According to Health Canada, 25% of people nationwide reported having used cannabis in the past 12 months, increasing from 22% from the previous year. The provincial/territorial estimates ranged from 19% to 33%. In young age brackets, 44% of 16 to 19 years old reported using cannabis, while the percentage for 20 to 24-year-olds was 51%. This information lets us know that not only has the market increased every year in availability, but cannabis usage has as well, creating many opportunities for investment in this type of product.
The two licenses have different fees depending on the size of the cultivation, the security requirements, the amount of cannabis product produced, among other characteristics of the desired project. The licenses vary depending on the business's revenue. It can include either a fixed fee under a certain revenue threshold or a percentage of revenues after exceeding the previous revenue threshold. For the Micro-Cultivation License, businesses can obtain it for either $2,500 annually, if the revenue is under $1mil or 1-2.3%. For the Standard Cultivation License, it can be either $23,000 or 2.3% of revenue.
The investors get to choose what they think will work best for their business!
Cannabis Investment Risks
As most people know, every investment comes with a risk, especially in an emerging industry. The cannabis industry is highly profitable but hardly risk-free. Here are some of the uncertainties that come with investing in the cannabis industry:
Government Regulations and Legal Considerations
Depending on your jurisdiction, regulators are exploring new cannabis laws and requirements. They have yet to establish a fully one-size-fits-all framework on how someone can produce and sell cannabis products. For instance, suppose that there are restrictions on branding and advertising cannabis products. These restrictions can heavily influence how consumers find and buy cannabis products. Those sorts of challenges can affect the cannabis business' ability to make a profit.
Cannabis companies must abide by all the laws and regulations of the jurisdiction in which they operate. Should the law change, the modifications may require the company to adjust operations, sometimes resulting in high costs. In the cases where the companies don't do so, it risks legal action taken against them.
Taxation and Pricing
Companies must price cannabis products below the black market value to attract a good clientele, especially for products meant for recreational use. Suppose that the government prices cannabis or taxes them high enough. In that case, the companies growing and selling the products may not sell enough to profit. This risk is, of course, very dependent on your area.
Share Price Inflation
There is a high level of interest among investors looking to jump in on the cannabis bandwagon. However, investors base the investment costs in a cannabis company on its future success rather than current performance. In many cases, companies that have announced their plans to develop a cannabis business have seen an increase in their stock price before showing concrete plans. This type of investment runs the risk of never increasing in value.
High Operating Costs
Development and operating costs that come with running a commercial cannabis business can be high. Growing cannabis needs a high-end and large-scale agricultural process. If you also add construction and energy costs, the sum requires a considerable amount of capital to cover.
Why choose us?
At U Cann Grow, we provide Turn-Key Cannabis Solutions, which means that we take care of responsibilities regarding sourcing properties, floor plan design, facility build-out or retrofitting licensing documents, training & consultation, and supply agreements. We help businesses get fully ready to operate and flexible in the amount of investment. Just sign your name and leave the rest to us.
We also help and train cultivators with everything they could need to know about the cannabis growth process. With two cultivation licenses available, investors will need to understand the difference and choose which one they will need to take advantage of the market opportunities and achieve their business goals.