10 cannabis business themes to look out for in 2023

February 19, 2023
credit card processing for dispensaries

The marijuana market is entering the new year with fresh hope and confidence, and executives in the cannabis sector may witness various unexpected phenomena.

Inflation and other macroeconomic challenges, as well as sector-specific challenges, including overproduction and a lack of capital investment, made 2022 a challenging year overall for the cannabis business.

Shortly, the marijuana industry may anticipate, to mention a few:

• Prolonged stagnation in mergers and acquisitions.

• In mature markets experiencing oversupply, request moratoria.

• The segmentation of items at the retail level as customers' purchasing practices advance.

According to the employees of Sprout Processing, the following are the top 10 marijuana industry trends to watch out for in 2023:

1. Increased consolidation in crucial markets

The cannabis sector no longer seems as recession-proof as it once was after boom periods like COVID-19 pandemic lockdowns.

Falling prices are causing businesses in established recreational markets like Colorado and Washington State to struggle.

Other markets, which tend to sell more adult-use products and are younger, including Massachusetts and Michigan, are already at capacity.

Companies that contact plants and auxiliary businesses are both reducing staff in response.

This year, many businesses will still fail despite cost-cutting measures, more giant corporations will absorb licenses, and only the most successful players will endure.

2. Acquisitions and mergers cease

At one point, Sprout Processing often covered business transactions valued at over $100 million. However, they are becoming increasingly rare.

Many of the deals we reported in 2022 were for less than $25 million.

Along with the stock market, the value of every stock agreement or partial stock agreement made last year has decreased dramatically.

Most certainly, the trend won't alter.

3. Delta-8 THC is a sore spot for the business.

In the previous year, nearly every legal marijuana market in the state implemented some kind of guideline to control delta-8 THC.

Even in states with strict restrictions and limited or no legal marijuana markets, delta-8 products proliferated with little to no control, posing a severe threat to the licensed business.

Cannabinoids generated from extracted CBD are lawful under the 2018 Farm Bill as long as the plant from which they were derived complies with the legal definition of hemp. This includes domestic hemp cultivation, hemp "derivatives," and hemp "extracts."

A hemp flower's CBD may therefore be extracted, and the CBD can subsequently go through a manufacturing process without breaking the US Controlled Substances Act.

The delta-8 market is likely to remain as it is, which is a significant burden for the cannabis sector, barring any changes to the legislation, which are highly improbable.

4. Laboratory acquisitions and the concern with THC potency are gaining more attention.

The industry's fixation with THC potency will eventually become an issue.

The potency issue, which has been a concern for a while, only became a significant issue in 2022 when testing laboratories were sued for giving false THC readings, and state authorities from Florida to Nevada moved to punish and suspend labs for infractions.

Industry watchers are hopeful that this will result in fewer lab purchases and improved consumer education on the many other advantages of the cannabis plant.

The industry's attention may then gravitate away from cannabis content as a result of that.

5. More people are demanding moratoria

As new crop capacity comes online, some producers in mature markets are turning to state governments for assistance due to price compression and oversaturation.

State regulators are urging businesses in states like Colorado and Michigan to intervene and impose a ban on issuing new licenses.

It remains to be seen how these artificial market constraints will affect how successful businesses are.

A similar step in Oregon a few years ago did not end the overproduction issue there. When it comes to the top merchant processing for the cannabis industry, Sprout Processing leads the way.

6. In the retail environment, product segmentation and consumer sophistication

Sales of flowers will increase in almost every market, but as customers get more savvy, alternative goods like vaporizers, concentrates, and edibles are taking the market share away from flowers.

Instead of substituting other items for the flower, frequent users continue to smoke flowers at the same rates while incorporating new form elements into their consuming routines.

The live resin will remain a popular extract among consumers as a stand-alone concentration and an ingredient in pre-rolls, cartridges, and edibles.

The product is gaining more traction than distillate, and while distillate won't entirely disappear, it will lose appeal in the face of preferences for live resin.

According to cannabis analytics company Brightfield Group, located in Chicago, new consumers make up just 6% of the cannabis industry and don't spend as much money.

Instead, regular marijuana users account for the majority of sales: 47% of cannabis users use the drug several times per day, 17% only once per day, and 10% five times or more per week. Our compliant credit card processing for dispensaries helps storefronts and deliveries to gain more revenue.

That pattern will only get stronger.

Watch the following further segments:

According to data analytics company Headset, sales of infused pre-rolls have increased by a factor of 5 since January 2020.

• Vaporizers are currently the second-best-selling marijuana product, not only have recovered from the 2019 vaping crisis.

7. After recreational marijuana is legalized, New York will struggle to control the criminal market.

Long-held belief: ordering marijuana online and delivering it to your New York apartment is more straightforward than ordering pizza.

The regulated market still has a lot of work ahead of it, especially given the zealousness that entrepreneurs displayed this year in the state by opening up pop-up cannabis shops, unregistered dispensaries, and trucks that sell marijuana out their back doors.

To differentiate between legitimate and illegal cannabis businesses, the state is attempting to think outside the box, but sticking a QR code on a store window definitely won't be sufficient.

Regulators must provide welcoming trading circumstances and maintain low tariffs to deter customers from the black market.

It won't be sufficient to only rely on the security and testing of authorized items.

8. There may be a pause in Canada's trade issues

Large Canadian corporations have been selling cannabis at a loss in recent years with the assistance of Wall Street financiers, losing billions of dollars and hurting rivals in the process.

If Wall Street's cheap money runs out and big businesses are left to fend for themselves, that trend may stop.

Canada has grown significantly more cannabis through cultivation than it can sell. Although inventory may peak and then begin to decline, this won't alter in 2023.

Some retail establishments have started to close in several areas, particularly those with oversaturated metropolitan markets.

Retail consolidation and closures will continue even if there are more shop openings elsewhere. As a result, stores should make a profit. Credit card processing for cannabis in the United States is made possible thanks for Sprout Processing.

9. Organizing initiatives will be a sustained success

The cannabis sector will keep becoming more unionized.

Considering the cannabis business to be one of the biggest in the US with significant growth, organizations like the Teamsters and United Food and Commercial Workers view it as an ideal target for their efforts.

Workers' concerns, such as poor salaries and health and safety concerns, are said by labor activists in Canada to be the reason for strikes and unionization among cannabis retail staff.

Expect to hear more arguments between workers and corporations, as not all cannabis businesses support union initiatives.

10. Legalization attempts are intensified following a mixed 2022.

The campaign to legalize marijuana met a brick block in conservative southern and western states, but Maryland and Missouri won in the 2022 election.

On the federal level, analysts in the business were optimistic about the banking reform's eventual success. Although it didn't occur, this year will present a different opportunity.

The ultimate objective is federal legalization, and President Joe Biden's statement that his government will examine whether marijuana should remain a List 1 substance is likely to give supporters and reformers more momentum.

It's also important to note that states like Delaware, Kansas, and North and South Carolina did not pass legislation legalizing marijuana in 2022. Our technology allows for your cannabis storefront to be able to process both credit and debit cards.

Dashboard reviewing compliant credit card processing for dispensaries.

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