The year 2020 was a really good year for the cannabis industry. Asides from the obvious surge in cannabis sales, the cannabis world saw some positive steps made in different regions towards the general acceptance of cannabis. The UN’s vote over the rescheduling of cannabis is bound to prompt the lifting of restrictions in many places. The Presidential elections in the US also saw the ushering of a pro-cannabis president in the White House. 5 new markets were also opened by those elections for recreational and medical uses. All of these along with the major sales made during the pandemic made 2020 a very good year for cannabis.
The success of 2020 makes the expectations for 2021 pretty high as more is expected of the cannabis industry. One of the expectations is that stakeholders see cannabis as more than an industry. This article will explain more about why we should look at cannabis as the economy and not just an industry.
Before delving into what the cannabis economy entails, let’s understand what an economy truly means. An economy is a system of connected activities from production to consumption aimed at converting available resources to wealth through trade systems. An economy is comprised of different series of sectors while these sectors are then converted to industries. The cannabis economy, therefore, refers to a system of inter-related activities for the exchange of cannabis goods and services to convert resources to wealth. The goods and services also facilitate cannabis enabled commerce, education, and commerce.
The definition of cannabis as an industry placed a number of restrictions on entrepreneurs and investors. However, the global trend of cannabis legalization expected to continue in 2021 means players involved with cannabis are selling themselves short by only seeing it as an industry. The growth of cannabis has seen the emergence of new sectors and industries. Likewise, cannabis has influenced different pre-existing industries in the community and now that it is here to stay, we best see it as it is.
The next trend is to call cannabis what it is, a global economy. Governments should start looking into how to harness the cannabis economy to generate much-needed revenue. The banking systems should also find ways to open up to cannabis companies along with insurance companies. This will prompt more investors and entrepreneurs to push the growth of the economy and invest more. With this, the entire global community gets to benefit from the effects and the revenues made from the natural herb.
As said earlier, economies are divided into sectors which are then divided into industries. These sectors are well-defined as their industries are interconnected to making the cannabis resources converted to wealth. Using the North American Industry Classification System (NAICS), relevant industries in the cannabis economy can be grouped into sectors.
The first cannabis sector is the Primary or Extraction sector. This sector primarily has to do with everything concerned with the cultivation of the natural herb. It involves all the processes of the cannabis economy that has to do with agriculture and mining.
The output from the primary sector is then transferred to the next sector called the Secondary or Production Sector. This sector generally involves all the processes done on the extracted product to make it ready for the final consumer. The nature of the product from the cultivation process can be changed to make products such as concentrates, oils, and tinctures. These sectors make the product available in the form acceptable by the customer.
The next sector in the cannabis economy is the Tertiary or Service sector. This sector is multi-faceted as it involves different series of services that are done to promote the revenues made from the production sector. Majorly the service rendered in this sector is retailing which involves the exchange of the product for revenue. There is also a need for proper distribution mechanisms to ensure that the finished product gets to where it is needed when needed. Some of the actions done in this sector also involve connecting with other industries outside the cannabis economy. Examples are banks, insurance companies, real estate, and health care.
The fourth sector in the cannabis economy is the Quaternary or Knowledge sector. This sector involves the role that IT and technology play in activities involving cannabis goods and services. It also includes the education, HR, and staffing aspect of the economy. This sector is very important towards ensuring the competency of all involved in the economy. The final sector in the cannabis economy is the Quinary sector which primarily involves only the government. This sector shows the role the government plays in maintaining and promoting the industry.
Industries are made up of companies with similar business activities and a common source of revenue. Most of the industries grouped under the five sectors are well-known and not necessarily new. The growth of the cannabis economy is bound to promote the emergence of new industries in some sectors. Examples of such industries include
Tourism and entertainment
And non-profit in the tertiary sector
Proper understanding of these industries is important if they are to be properly maximized.
It is important that the development of cannabis industries are properly aligned around the growth of companies in the industry. This prevents the risk of irrational exuberance which can cripple such industries. Time should be taken by the companies and other players in such industries to understand the fundamentals of such industries. Proper strategies and policies should also be put in place to ensure each industry is operating at an optimum level.
The beauty of a new and booming economy like the cannabis economy is that it attracts players. Players like investors and entrepreneurs bring the capital needed to push the various systems of the economy. These systems ensure products get to the final consumer who provides the needed revenue that circulates through different industries. The cannabis economy is growing daily and at this rate, any individual or government not actively involved in the global economy is missing out.