The coronavirus pandemic kickstarted a global economic downturn and plunged the world’s economy into the worst recession since World War II. According to the World Bank, most countries should expect their economies to head into a recession, with the global growth rate expected to slow down from 5.7% in 2021 to 2.9% in 2022. This atmosphere will undoubtedly weed out cannabis companies that were only in it for a quick buck as investors become more cautious with their money.
In Europe, marijuana-based startups are having trouble raising capital amid growing fears of a looming recession and global stock markets plunge. Although this is a major disadvantage for companies that are looking to break into the insanely lucrative cannabis space, it could help the industry clear itself of players who weren’t serious about growing and carving out a portion of the market for themselves.
Alastair Moore, founder of cannabis research firm Hanway Associates, says the coming period of economic decline will clear out companies that were only interested in “making a quick buck,” stating that it will be good for the industry. Moore adds that startups with a high chance of survival will have strong and sustainable business models that will attract overcautious investors.
Enexis AB founding partner David Bonnier notes that the medical cannabis space will be resistant to recession as people will still spend on medication. It is a sentiment shared by many investors and executives who believe medical marijuana funding will not be affected as more countries work to legalize medical marijuana use within their borders. Bonnier states that most patients will still make a point to visit their doctors and buy medication, even in the middle of a recession.
The medical cannabis market may be young, but it is already quite lucrative, and experts predict exponential growth over the next couple of years. For example, America’s medical cannabis market is expected to double in size from around $5 billion in 2019 to more than $11 billion in 2024. Cannabis research company Prohibition Partners predicts that the UK’s marijuana market could be worth more than £453 million ($556,016,730) by 2026.
Ben Hamburger is the cofounder of Sana Life Science, a medical marijuana distributor in the UK that recently raised $9 million from investors. He says that investors are asking a lot more questions regarding the company’s growth projections and when it can expect to start turning a profit. What they want to see is marijuana companies with a solid plan that will guarantee them a return on their investments.
The effects of the looming recession aren’t only going to affect marijuana companies in Europe; even North American companies such as Cannabis Strategic Ventures Inc. (OTC: NUGS) are likely scanning the horizon and making contingency plans for when the downturn hits.
NOTE TO INVESTORS: The latest news and updates relating to Cannabis Strategic Ventures Inc. (OTC: NUGS) are available in the company’s newsroom at http://cnw.fm/NUGS
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