The cannabis cultivation market in the U.S. continues to expand, though COVID-19 will affect or is affecting the majority of these businesses, while operations get bigger, facilities become more numerous, and overall profits continue to increase, according to a report out this week looking at the past five years for the industry.
The Cannabis Business Times State of the Industry report shows the average reported revenue inched up from $3.73 million in 2019 to $3.74 million in 2020, with 27% of companies reporting that profit increased in 2020 compared with 22% reporting that in 2019.
It’s not all roses for cultivators, and one headwind not identified in the report is the insurance market.
Cannabis cultivators, like most cannabis businesses, face what some would consider a hard insurance market.
“The market’s hardened in so many areas, property especially, where companies don’t want to write it,” said Morgan Moore III, founder of NutraRisk and a life science practice leader for Worldwide Facilities. “The bar is very low to enter into the space, so nobody wants to write it.”
On the property side, this is largely due to a lack of capacity, which has made pricing the front-and-center consideration of too many insurance buying decisions being made by cultivators and other cannabis operations, he added.
“It’s a function of ‘What’s your pain threshold,’” he said. “There’s just not enough markets in the space.”
The problem is made worse because cannabis is a newer industry, and one in which there are companies that have sophisticated insurance buyers, as well as businesses that just want to get by.