{"id":9678,"date":"2023-05-30T00:11:00","date_gmt":"2023-05-30T00:11:00","guid":{"rendered":"http:\/\/cannabis.net\/blog\/opinion\/is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022"},"modified":"2023-05-30T00:11:00","modified_gmt":"2023-05-30T00:11:00","slug":"is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022","status":"publish","type":"post","link":"https:\/\/cannitrol.com\/blog\/is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022\/","title":{"rendered":"Is $30 Billion in Revenue and $4 Billion in Losses Good? &#8211; The Cannabis Industry in 2022"},"content":{"rendered":"<div id=\"wp_fb_like_button\" style=\"margin:5px 0 5px 5px;float:right;height:100px;\"><script src=\"http:\/\/connect.facebook.net\/en_US\/all.js#xfbml=1\"><\/script><fb:like href=\"https:\/\/cannitrol.com\/blog\/is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022\/\" send=\"true\" layout=\"standard\" width=\"450\" show_faces=\"false\" font=\"arial\" action=\"like\" colorscheme=\"light\"><\/fb:like><\/div><p><img src=\"https:\/\/cannitrol.com\/blog\/wp-content\/uploads\/2023\/06\/is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022.jpg\"><\/p>\n<p><img alt=\"billions in cannabis losses\" src=\"https:\/\/cannitrol.com\/blog\/wp-content\/uploads\/2023\/06\/is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022-1.jpg\" \/><\/p>\n<p>Cannabis.net recently put out a piece called, \u201c<a href=\"https:\/\/cannabis.net\/blog\/opinion\/the-cannabis-industry-ponzi-scheme-is-a-sale-a-sale-if-no-one-actually-pays-the-bill\">The Cannabis Industry Ponzi Scheme \u2013 Is a Sale a Sale if No One Actually Pays the Bill? (Or Taxes?)\u201d,<\/a> that questioned how valid the reported revenue streams are in the marijuana industry if no one actually has the cash to pay the bills and invoices.\u00a0 Accounts payable and accounts receivable are very different monsters with cash in the bank being important right now in the cannabis industry.<\/p>\n<p>The article talked about revenue vs. profit as some of the best cannabis headlines talk about how many billions the cannabis market will be forth in 2025, 2028, and 2035.\u00a0 We just found out the big difference between what a market is worth, what the market\u2019s sales numbers are, and what the profit in the industry actually is, or lack there of profit.<\/p>\n<p>Fast forward to a <a href=\"https:\/\/www.greenmarketreport.com\/two-dozen-publicly-traded-u-s-cannabis-companies-lost-4-billion-last-year\/\">great piece today on the Green Market Report<\/a> written by John Shroyer titled, \u201cTwo Dozen Publicly Traded Cannabis Companies Lost $4 Billion in 2022\u201d.\u00a0 The article goes into great detail about how cannabis companies took it on the chin in 2022, and how some of the charges were one-time write downs and write-offs.\u00a0 The overall theme from interviewee Alan Brochstein is that 2023 has to be better because it couldn\u2019t get any worse than 2022.<\/p>\n<p>A quick fact check of a <a href=\"https:\/\/fortune.com\/2023\/04\/12\/cannabis-retail-sales-2023-33-billion\/\">Forbes article says legal cannabis<\/a> sales in America in 2022 came to $30 billion, about $3 billion short of MJ BIZ projections for the year.<\/p>\n<p>Back of the napkin math says $30 billion in revenue and a negative $4 billion in profit is a not a viable business model, but people get confused with \u201cmarket size\u201d and \u201csales\u201d, and don\u2019t focus enough on \u201cprofit margin\u201d and \u201cprofits\u201d.\u00a0 A great example is the supermarket industry. According to <a href=\"https:\/\/www.statista.com\/statistics\/197621\/annual-grocery-store-sales-in-the-us-since-1992\/#:~:text=The%20total%20sales%20generated%20by,to%20848.4%20billion%20U.S.%20dollars.\">Statista<\/a> super market sales topped $848 billion in America in 2022, but did you know supermarkets operate on razor thin margins of 1% to 3%.<\/p>\n<p>As <a href=\"https:\/\/marketingfoodonline.com\/blogs\/news\/what-is-a-good-profit-margin-for-grocery-store#:~:text=In%20general%2C%20the%20profit%20margin,in%20a%20lot%20of%20places.\">Marking Food Online Says<\/a>:<\/p>\n<p><em>In general, the profit margin at a\u00a0grocery\u00a0store is\u00a0<\/em><em>between 1% and 3%<\/em><em>. But, as with most things, these numbers don&#8217;t tell the whole story. Even though big grocery stores have low profit margins, they still make money because they sell a lot of items in a lot of places.<\/em><\/p>\n<p>Selling a ton of product at low margins to make money (quantity volume over quality specialized products) sounds just like a commodity, much like the cannabis industry is heading for with Federal legalization and international trade.\u00a0 At some point cannabis will have a Futures contract and be traded the same way corn and soybeans are traded, it is a plant that grows in 8 to 12 weeks, indoor or outdoors.<\/p>\n<p>But I digress\u2026.<\/p>\n<p>Is 2022 the bottom and it \u201ccan\u2019t get any worse\u201d?\u00a0 Well, yes, those companies did take one time write down and write off charges, but many of those charges HAD TO BE ADJUSTED DOWN due to new market pricing and conditions.\u00a0 So, to say 2022 is the bottom, implies the industry has reached some sort of stability on costs, pricing, and margins.\u00a0 None of that is true in the least sense, in fact, maybe just the opposite as <a href=\"https:\/\/cannabis.net\/blog\/videos\/it-is-probably-legal-to-ship-marijuana-across-state-lines-professor-mikos-talks-the-dormant-com\">Federal legalization and interstate commerce will drive prices down<\/a> on both the legal and illicit markets.\u00a0 Once international trade starts in one form or the other, that will lower price and margins even more as low labor costs and sunny climates will have distinct advantages.\u00a0 Think it is crazy that cannabis will be shipping worldwide soon?\u00a0 Colombia is already shipping medical cannabis around the world, especially to Europe, under <a href=\"https:\/\/cannabis.net\/blog\/news\/how-is-colombia-selling-and-shipping-thousands-of-pounds-of-weed-to-the-us-and-europe-already-r\">resolution 539 of their constitution<\/a>.\u00a0 Their cannabis quality is so good nations are already fighting over getting their hands on a <a href=\"https:\/\/cannabis.net\/blog\/news\/the-world-is-fighting-to-get-their-hands-on-colombias-creepy-cannabis-strain-even-venezuela-is\">strain called Creepy<\/a>.\u00a0<\/p>\n<p>Yes, those $4 billion in losses do not include every brand and every company in cannabis, but it gives a great 5,000-foot snapshot of cannabis retail in 2022.\u00a0 The article even mentions a few companies that turned a profit.\u00a0 Remember, those MSO who are publicly traded are the smart ones how have the resources to vertically integrate in each state and scale up when \u201cMom and Pop\u201d cannabis shops can\u2019t do that.\u00a0 The wicked smart and rich guys who can vertically integrate and scale only lost $4 billion on $30 billion in sales.<\/p>\n<p>Some of those write downs won\u2019t be on the books in 2023, but some of <a href=\"https:\/\/cannabis.net\/blog\/opinion\/cash-is-king-use-your-data-and-go-sell-legal-cocaine-in-canada-benzinga-capital-conference-miam\">those tax bills the MSOs<\/a> are kicking down the road might have to be paid as well.\u00a0 Who is to say that the free fall in cannabis prices doesn\u2019t continue for 2023, or for that matter, into 2024 and 2025 as new states legalize and new black markets start operating in each state.<\/p>\n<p>Cannabis retail is ugly right now but if you think you kissed the ugliest pig with lipstick, wait until you see next year\u2019s profit margins and based on big sales numbers.\u00a0 If we are lucky, maybe the industry only loses $1 billion instead of $4 billion.<\/p>\n<p>The two biggest paradigm shifts in the future for US cannabis, interstate commerce with Federal legalization, and international legalization and trade, are both net negative for US cannabis companies as black-market sales and shipping both domestically and internationally will take off.\u00a0 Smaller suppliers can compete on ecommerce sites with publicly traded MSOs.\u00a0 Their moat of lawyers and building leases come crashing down when small state operators start to drive traffic to their own cannabis stores and start shipping product by USPS and UPS.<\/p>\n<p>Wait until \u201cMom and Pop\u201d operators learn how to use Facebook Ads and Tik Tok influencers.<\/p>\n<p>Right now, it is only $4 billion in losses because those MSOs hold the key to legal supply in many states, when that lock gets broken down by interstate commerce and internet orders, $4 billion in losses may be looked like the glory years before there was so much competition on the selling side.<\/p>\n<p>Oh yeah, don&#8217;t forget to read about how <a href=\"https:\/\/cannabis.net\/blog\/news\/no-bankruptcy-protection-just-receivership-for-cannabis-companies-oregons-chalice-farms-goes-be\">Chalice Farms, Oregon&#8217;s 3rd largest dispensary chain<\/a>, just went belly up and into receivership since cannabis companies don&#8217;t get the luxury of bankruptcy protection.\u00a0<\/p>\n<h3><strong>CANNABIS INDUSTRY NUMBERS, READ ON&#8230;<\/strong><\/h3>\n<p><strong><a href=\"https:\/\/cannabis.net\/blog\/opinion\/the-cannabis-industry-ponzi-scheme-is-a-sale-a-sale-if-no-one-actually-pays-the-bill\"><img alt=\"CANNABIS PONZI SCHEME\" src=\"https:\/\/cannitrol.com\/blog\/wp-content\/uploads\/2023\/06\/is-30-billion-in-revenue-and-4-billion-in-losses-good-the-cannabis-industry-in-2022-2.jpg\" \/><\/a><\/strong><\/p>\n<p><a href=\"https:\/\/cannabis.net\/blog\/opinion\/the-cannabis-industry-ponzi-scheme-is-a-sale-a-sale-if-no-one-actually-pays-the-bill\"><strong>IS THE CANNABIS INDUSTRY ONE BIG PONZI SCHEME OF NO PAYMENTS?<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cannabis.net recently put out a piece called, \u201cThe Cannabis Industry Ponzi Scheme \u2013 Is a Sale a Sale if No One Actually Pays the Bill? (Or Taxes?)\u201d, that questioned how valid the reported revenue streams are in the marijuana industry if no one actually has the cash to pay the bills and invoices.\u00a0 Accounts payable [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[9,1,3,61,1736],"tags":[],"_links":{"self":[{"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/posts\/9678"}],"collection":[{"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/comments?post=9678"}],"version-history":[{"count":0,"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/posts\/9678\/revisions"}],"wp:attachment":[{"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/media?parent=9678"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/categories?post=9678"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannitrol.com\/blog\/wp-json\/wp\/v2\/tags?post=9678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}