The Economy
With the threat of a recession hanging over the U.S. economy, the nation's cannabis industry appears to be on shakier financial ground than when the last downturn struck two years ago, at the start of the COVID-19 pandemic. The industry weathered the 2020 coronavirus-induced recession relatively well, with sales booming thanks to federal stimulus checks and anxious consumers turning to cannabis for stress relief. This time around, it might be different. Cannabis industry executives point to rising inflation - which tends to curb consumer purchases - as well as the lack of progress in Washington DC for federal cannabis reform.
Other factors are at play too
Newer state markets with limited licenses - think Florida, Illinois, Massachusetts, New Jersey, and New York - commonly experience relatively higher wholesale cannabis prices and a less competitive landscape. Industry officials said companies in those states are better positioned to weather a downturn than operators in more mature markets such as Colorado, Oregon, and Washington state. Consumers
Like cannabis companies, consumers are feeling the pinch of rising costs by way of gas and food prices, among other inflationary pressures. In response, cannabis consumers could purchase more bargain-priced products and take fewer chances on their selections, according to Skip Motsenbocker, CEO of Pacific Stone, a cannabis cultivator based in Carpinteria, California.
Recession-proof? A recession could play out differently depending on the state cannabis market. Taking into account that the cannabis industry is still relatively young, it's hard to know whether it is indeed recession-proof. However, using the spirits and tobacco industries as an anecdotal guideline historically these industries have experienced fairly steady demand during a recession. This week, New York Federal Reserve President John Williams said he expects the country to dodge a recession, but other economists believe the chances as much higher. Economists at Nomura Holdings, for example, said on Monday that the U.S. economy will likely slide into a mild recession by the end of the year as the Federal Reserve raises interest rates to slow inflation, Cannabis industry executives, for their part, are crossing their fingers.
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