Only 27% of US Cannabis Operators Profitable in 2024, Whitney Economics Reports

PORTLAND, Ore., Aug 13, 2024 – PRESS RELEASE – Whitney Economics (WE), a global leader in cannabis and hemp business consulting, data, and economic research, announced preliminary findings from its 2024 Cannabis Industry Business Conditions and Sentiment Survey. Cannabis operators remain optimistic despite averaging only 27.3% overall profitability.

Source: Whitney Economics 2024 U.S. Cannabis Business Conditions Survey

The survey was conducted in June in order to compile data on the potential impact that cannabis rescheduling would have on small and minority-owned businesses. The initial findings are being compiled for a Minority Cannabis Business Association submission to the White House Office of Management and Budget on the impacts that the current scheduling policy is having on cannabis operators, particularly those who are minority-owned or small businesses. The survey results indicated that while on average 33.7% of white operators in cannabis are profitable, only 17.5% of their non-white counterparts are profitable.

“The cannabis industry is under economic distress, primarily due to the confluence of heavy federal taxes, lack of access to financial services and heavy state and federal regulation,” WE founder and Chief Economist Beau Whitney said. “Although states have programs dedicated to social equity in cannabis, the fact that most regulators do not track data related to social equity’s impact makes it difficult for regulators to know what is working and what is not. Obviously, with only 17.5% of minority operators being profitable, there is a lot of work to be done in this space.”

According to the U.S. Chamber of Commerce, 65.3% of all small businesses in the U.S. are profitable, so the cannabis industry is well below national averages. Initiatives are being proposed federally to change federal scheduling or to provide cannabis operators with greater access to financial services.

Heavy taxation is one of the top issues facing cannabis businesses, with some businesses facing an effective tax rate of 52.5%. The proposed rescheduling of cannabis would result in a lower tax burden and increase cash flows. In 2024, the cannabis industry is forecasted to pay an additional $2.3 billion in excess taxes as a direct result of the current scheduling policy. Without reform, this excess tax burden is expected to increase to $5.2 billion by 2030.

 

The proposed scheduling change would be a stimulative monetary policy allowing operators a greater chance to achieve profitability and enable them to invest back into their communities.

Note: While this release announces preliminary findings, the detailed Business Conditions Report to be published in September 2024. Other upcoming Whitney Economics reports will include Cannabis Debt Financing Projections (September) and Cannabis Beverages Analysis (October).

For more information about the economics of cannabis and hemp, contact Beau Whitney, chief economist, at +1 503-724-3084 or beau@whitneyeconomics.com.