3 Ways the Cannabis Industry Will Weather Turbulent Headwinds in 2023
When it comes to the cannabis industry, there’s one thing we know for sure: It remains one of the fastest-growing industries globally.
Consider some of the most recent numbers. In November 2022, voters in Maryland and Missouri approved the legalization of recreational marijuana, bringing the total to 21 states. Meanwhile, 37 states allow legal medical use of cannabis products. And today, global cannabis sales are expected to increase from $13.4 billion in 2020 to $148.9 billion by 2031.
Despite that growth, however, the global COVID-19 pandemic, macroeconomic forces (like inflation and a looming recession), stagnating sales in mature markets, vanishing capital, and a generally volatile market have all created some significant headwinds in the cannabis industry as we close out 2022.
These challenges—among many others—were top-of-mind for cannabis business leaders attending the world’s largest cannabis business conference this year, MJBizCon—especially as they look to fine-tune their strategies for 2023.
But there’s good news—despite this anticipated turbulence in 2023, the cannabis industry remains cautiously optimistic. Leveraging the support of partners, solutions, technologies and tools will be vital for cannabis businesses as they look to conquer some of today’s biggest roadblocks.
“There is still have a lot to be celebrated in this growing market, such as new states legalizing and potential federal reform,” said MJBiz CEO Chris Walsh during his recent state of the industry presentation at MJBizCon, which brought together nearly 35,000 attendees and 1,300 exhibitors from across the industry. “It’s easy to get lost in all the present-day challenges and growing pains, but zoom out to the longer term and there is still exciting industry growth and opportunities ahead. We just have to buckle down and drive through the storm—riding the green wave isn’t going to be enough in these economic conditions.”
In this blog post, we break down the top three ways the cannabis industry can set itself up for success in 2023.
Business Analytics and Forecasting Will Give Your Business a Competitive Edge
Because of challenges like high competition, low differentiation among products, lack of historical data, and diverse and complex regulations, many cannabis businesses are struggling to gain a competitive edge. Fortunately, among all these problems and changes, advanced business intelligence technologies like data analytics and machine learning offer a silver lining for this industry.
Here’s why: Data generated through seed-to-sale tracking systems, dispensary point-of-sale systems and even cannabis consumer apps can be used by cannabis companies to improve their offerings, their forecasting and their overall operations. But it’s the companies that successfully collect, consolidate, analyze and activate this data that will be able to make split-second decisions, quickly adapt to evolving customer demands and forecast accurately for successful long-term planning.
Here are a couple ways modern enterprise analytics solutions will help cannabis businesses cut through a crowded market and drive competitive differentiation.
Real-Time Sales Data: As the cannabis industry continues to expand and grow rapidly, companies are expanding their products, channels and locations to better reach the end consumer. While this might mean more revenue, it also means a rise in the complexity—and sheer volume—of raw data. Advanced machine learning and analytics technologies can help make sense of this data in real time, churning out valuable insights into which products are trending, in what locations, and through what channels. Being able to tap into this data gives cannabis companies actionable insight into where to double down and focus their efforts moving forward—giving them the ability to emphasize key products, locations and trends to drive competitive differentiation.
Rightsized Inventory: For many businesses, determining their product inventory numbers and how much to produce can seem like a guessing game. By leveraging predictive analytics, cannabis businesses can remove uncertainty and risk by getting a clearer picture across their entire operations—giving them the data needed to optimize their inventory, make informed production decisions, balance supply and demand, and streamline their supplier and distribution network.
Don’t Neglect Your Cybersecurity Initiatives and Strategy
It’s no surprise that the cannabis industry has grown rapidly over the past few years—but that rapid growth has also made this industry a new hotspot for cybersecurity attacks.
Verizon’s 2022 Data Breach Investigations Report found that ransomware increased by 13% in a single year—representing a jump greater than the past five years combined. Despite this staggering statistic, however, a 2022 survey by MJBizDaily found that most cannabis companies haven’t taken steps to defend themselves against cybersecurity threats like ransomware attacks. Of the people responding to the poll, 59% said their companies haven’t implemented a strategy to prevent attacks.
Similarly, during the recent MJBizCon event in November, very few cannabis organizations said they had formal cybersecurity teams in place. Other companies said they have very little insight into their third-party suppliers’ own cybersecurity policies—and in doing so, they’re exposing themselves to high-profile risks like never before.
As cybersecurity threats increase and become more sophisticated across all industries of all sizes, it’s never been more important for the cannabis industry to build a sound cybersecurity strategy into its 2023 business strategy. This is especially true as cannabis increasingly becomes more of a tech industry, as things like point-of-sale tech have become essential to operations.
Cannabis businesses looking to establish a solid security foundation should start by auditing their current environment to identify existing and potential threats. It’s also important to take a deep dive into your third-party ecosystem. Make sure you’re properly vetting every single vendor—however big or small. Your work doesn’t stop there, however. You need to continuously monitor each vendor for any security incidents. You also need to be prepared with an action plan in the event that a breach within your supply chain does occur.
Having all of this information at your fingertips will help you determine the right cybersecurity programs, tools, training and resources for your organization and team. Managed service providers like Navisite can help with that initial audit and risk assessment—as well as offer ongoing managed security services—to help your cannabis business build a strong security posture and stay protected against cybersecurity threats.
Establish Your IT Foundation Now to Prepare for Seamless Growth
The cannabis industry has become increasingly saturated. To rise above the noise, compete and thrive, the cannabis industry’s growth opportunity has spawned a big wave of cannabis-related mergers and acquisitions that involve companies in production, distribution, real estate, retailing and more. This onslaught of mergers and acquisitions has led to extremely fast growth—pushing companies that previously operated as small businesses into the world of the mid-market. It’s also created a complex ecosystem of disjointed and varied operations, processes, IT systems, regulations and so much more. Ultimately, this can make it hard to keep up with the pace of growth—and make it difficult to operate as a seamless, connected business across all units.
That’s why today’s growing cannabis businesses need to adopt a unified ERP system to bring together disparate and siloed systems. For example, as Navisite customer Trulieve continued to grow via acquisitions, the company realized it needed a modern, more intelligent ERP system to support its business-wide infrastructure and expanding footprint. By deciding to implement SAP S/4HANA as its core solution, Trulieve was able to introduce a single platform—and a single source of truth—across its growing business.
“The ability to manage our business in such a unified way allows us to operate more effectively than ever before, on a single source of truth—ensuring we always have the right products in the right stores at the right times,” said Nilyum Jhala, CTO at Trulieve.
For businesses looking to grow in 2023, establishing an ERP foundation like SAP will help you build a streamlined, optimized and modernized IT environment by consolidating applications, ramping up new ones and empowering your businesses to easily scale alongside your growth.
Partnering for Technology Expertise
No matter what your priorities are for 2023, there’s one major takeaway: digital transformation can help your cannabis businesses navigate an ever-changing landscape, stay ahead of cybersecurity threats and prepare for a future of big growth. But how do you know which enterprise solutions and technologies are right for your business? That’s where Navisite can help.
Navisite helps cannabis companies compete and grow with business advisory and end-to-end digital transformation solutions. We collaborate with stakeholders across the organization—senior business, operational and IT leaders—to identify opportunities and accelerate growth with tailored, vertically-integrated solutions that span the entire seed-to-sale process.