Cannabis Industry Predictions for 2023

The medical and pharmaceutical cannabis businesses are anticipated to have a solid year as the first prospective recreational markets and models in Europe start to take shape in 2023.

FREMONT, CA: In 2023, as the buzz from recreational markets recedes, the medical and scientific side of the industry is expected to expand. Investors appear to be shifting away from the recreational cannabis business in favour of the European medical cannabis pharmaceutical market as they prioritise solid, regulated regulations and goods that have been supported by science.

Life Science investors are increasingly interested in investments that target the endocannabinoid system and the pharmaceutical sector. As industry standards continue to converge with the pharmaceutical sector, suppliers will be better able to comprehend and satisfy regulatory demands from pharmaceutical companies. The process of creating innovative products that are compliant and getting them authorised for sale to patients will benefit from this. The competition will compel suppliers to leave markets or Europe altogether. Because of the severe pressure on the world economy, access to cash and investments will become a competitive advantage for businesses. The businesses that can demonstrate sales and provide value for their shareholders/investors will succeed as a result.

In 2023, topline growth and a solid bottom line will be more critical than ever. This might seem challenging, but doing so will help the industry gain credibility with investors and get it closer to the long-awaited sustainable business model.

Germany is nearing the end of the legalisation process for recreational marijuana, which is scheduled to take effect in 2024. Germany's market, which is twice the size of Canada's, will serve as a crucial test case for European legislation, but careful planning and enforcement are still essential if the market is to be used as a model for best practices. At a time when both governments and consumers are experiencing economic instability, there is a rare chance to use the cannabis sector to assist in closing the funding gap by focusing on stringent legislation and regulation along with stakeholder engagement.

The year 2023 will bring a conundrum for the European cannabis market. On the one hand, cannabis industry veterans can now enjoy liberalisation and commercial expansion that they could only imagine ten years ago. Germany, the Czech Republic, Switzerland, and other countries in Europe will serve as the early prototype for an adult recreational market that has undergone liberalisation after 2023. Medical cannabis markets will also expand.

But on the other hand, Cannabis is labour and resource expensive, with a very stringent and ambiguous regulatory environment. It will be difficult for cannabis and CBD companies to develop value in a downturn market while still remaining nimble and extending their capital runway. Given that energy prices are crucial to the production process and are expected to remain high in the first quarter of the year, even when energy costs decline, suppliers won't be eager to give up the higher pricing and will work to maintain them high.

The majority of industrial hemp uses have an abundant supply, which is likely to continue. Many businesses experiencing financial strain and being compelled to curtail or even stop their purchase activities are likely to blame for this. The CBD market has a very strong supply, with the majority of products coming from the US, where costs are still significantly lower than in the EU. Seed availability, although it seems like it will be very restricted after the harvest, providers still have stock to offer on the spot market signalling that it is highly likely that they also received order cancellations/reductions from their current long-term contracts.

After a less successful year than anticipated in 2022, demand for hemp fibre and technological fibre should increase in 2023. This increase will bring in the establishment of new businesses producing materials that address climate concerns. The only remaining issue is transportation expenses, which are excessively high for such a low-value good. However, if diesel prices continue to decline, things should get better at the start of the year.