Less than half of cannabis businesses are turning a profit, according to a new report from Whitney Economics that surveyed nearly 400 cannabis operators and stakeholders across 20 states.
According to the report, only 42% of respondents were profitable, with 20% more saying they are breaking even. The report also found “little difference” between the results in mature and emerging markets. When broken out by gender, however, 62.5% of the female respondents said they were not turning a profit compared to 54.4% of male-owned businesses — although businesses owned by women were far more likely to be breaking even.
The report notes that California companies, in particular, are struggling financially; only 26.1% of respondents from the Golden State said they turned a profit.
Maybe not thriving after all
According to the report, numbers like that throw cold water on the perception that the cannabis industry is thriving and has a positive outlook, saying the reality is that “most operators are not experiencing jubilation at all,” despite projections that the market could reach $25 billion by 2025.
“The confidence in the current and future environment could be characterized as subdued,” it reads, noting that there are many concerns among respondents, such as lack of banking, market volatility and state and federal taxation issues.
The survey found that just 39.4% of operators said the industry is headed in the right direction, compared to 41.5% who disagreed, with those in emerging markets being more optimistic. When broken down by sector, cultivators are the least optimistic about the industry’s direction.
Biggest issue: Banking
Meanwhile, 70.9% of respondents said the lack of access to banking or investment capital is the top issue facing the industry. And when asked what keeps them up at night, 57% of respondents said the lack of banking and 56% said price volatility. Competition from big business, taxation and market saturation rounded out the top five concerns.
“Operators are kept up at night worrying about how to survive in an environment where there is little support, extremely strong competition from illicit dealers from one side, and the existential threat of corporate competition on the other,” report co-author Beau Whitney said in a press release.