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Writer's pictureDecater Collins

The State of Cannabis: Challenges and Insights from Ancillary Businesses Highlight the Difficulties Faced By All Legal Businesses

Since Oregon’s legalization of recreational cannabis in 2015, the industry has seen dramatic shifts in both opportunity and sustainability. What began as a highly promising market has faced numerous challenges, with the initial excitement giving way to oversaturation and economic struggles. Oregon’s experience is now being echoed in other states, where a similar cycle of boom and bust is playing out as more regions open their doors to legal cannabis. For both plant-touching businesses and ancillary service providers, the reality of operating within a highly regulated, rapidly evolving industry is far from easy.


The Hood Collective, recently featured in Oregon Business Magazine, has experienced these cycles firsthand. As a cannabis marketing firm, we have witnessed the rise and fall of businesses both within Oregon and beyond. By adapting our approach and focusing on helping businesses build resilient brands, we’ve managed to navigate this shifting landscape. Our experience has underscored the importance of starting slow, growing sustainably, and helping our clients adjust to an increasingly competitive and challenging market.



The Rise and Fall of the Cannabis Green Rush


When Oregon legalized recreational cannabis in 2015, the industry exploded with opportunity. Entrepreneurs were eager to tap into the growing demand for legal cannabis, and businesses across the state raced to open dispensaries, cultivation facilities, and processing plants. The excitement extended beyond plant-touching companies, with a surge in ancillary businesses providing essential services like marketing, legal consulting, testing, and accounting. For a brief period, it seemed as though Oregon was at the forefront of a cannabis gold rush, where everyone—from growers to ad agencies—could cash in on the newly legalized market.


However, the boom didn’t last. The high demand that fueled the initial success of Oregon’s cannabis market soon led to oversupply, as the state issued thousands of business licenses without placing limits on production. Dispensaries and growers quickly found themselves with more product than they could sell, which caused wholesale prices to plummet and left many businesses struggling to stay afloat. The oversaturation was worsened by federal restrictions, which prevented Oregon businesses from selling their products outside the state. As a result, the once-promising industry faced significant challenges as cannabis companies, both plant-touching and ancillary, dealt with a steep decline in profitability.


This rapid expansion and subsequent contraction hit not only the growers and sellers but also the service providers that had risen alongside them. Marketing firms, testing labs, and legal consultants that once thrived on the influx of new cannabis businesses began to feel the pressure as their clients’ profits dried up. The green rush, once full of potential, had become a sobering lesson in market saturation and the harsh realities of navigating a heavily regulated, unpredictable industry. For many businesses, both plant-touching and ancillary, the dream of easy success quickly turned into a struggle for survival.


The Impact on Ancillary Businesses Reflects the Difficulties Faced by Legal Cannabis


The struggles faced by ancillary businesses in Oregon’s cannabis industry offer a clear reflection of the larger challenges within the legal cannabis market. Ancillary businesses—such as marketing firms, testing labs, and law firms—are not directly involved with growing or selling cannabis, but their success is deeply dependent on the health of the plant-touching sector. When growers, processors, and dispensaries experience financial strain, the ripple effects are felt throughout the entire industry, highlighting the interconnectedness of all legal cannabis businesses. As the industry suffers from issues like oversupply, price drops, and restrictive regulations, ancillary businesses find themselves facing the same economic pressures as their plant-touching counterparts.


At The Hood Collective, we’ve seen firsthand how closely our fortunes are tied to the health of the cannabis companies we serve. During the boom years, the demand for marketing services was high, as businesses rushed to build their brands and stand out in a competitive market. But as the market became saturated and profits thinned, many companies were forced to cut back on marketing and other essential services, leading to a significant drop in business for firms like ours. This downturn mirrors the struggles of the wider cannabis industry, where tight profit margins and a shrinking customer base have forced businesses at every level to make tough decisions.


The challenges faced by Oregon’s cannabis industry are not unique—they are repeating across every state that has legalized cannabis. As new markets open, the initial boom creates a surge of plant-touching businesses and, by extension, a demand for ancillary services. However, without careful regulation and limits on production, these markets quickly face the same issues Oregon has experienced: oversupply, price drops, and thinning profit margins. For instance, in California, a similar market oversaturation has led to plummeting prices and forced both growers and service providers out of business. In Michigan, an influx of cannabis companies and a slow rise in consumer demand have resulted in financial struggles for many in the industry. This pattern highlights how the broader issues of market saturation and regulatory challenges are mirrored in every state, affecting all legal cannabis businesses, both plant-touching and ancillary.


The Current State of the Legal Cannabis Industry


Both plant-touching and ancillary businesses in Oregon continue to face significant challenges, and these issues are indicative of a broader trend throughout the cannabis industry nationwide. In Oregon, market saturation has led to an overwhelming surplus of cannabis products, which in turn has driven wholesale prices to historic lows. Dispensaries and growers are struggling to sell their products, leading to financial strain across the board. According to data from the Oregon Liquor and Cannabis Commission, the state’s cannabis industry generated $1 billion in revenue last year, but that amount was spread thinly across more than 2,400 active licenses, leaving most businesses operating on razor-thin margins. This lack of profitability makes it difficult for companies to invest in necessary services like marketing, legal counsel, or compliance testing, creating a ripple effect throughout the ancillary sector.


However, this isn't just an Oregon issue. Similar market dynamics are playing out across the country as legal cannabis markets mature. States like California and Michigan are also grappling with oversupply, falling prices, and high taxes, all of which make it difficult for businesses to remain sustainable. In California, the cannabis industry brought in over $5.1 billion in taxable sales in 2023, but with more than 1,200 active cannabis retail licenses, many companies are finding it hard to stay profitable as competition drives prices down. In Michigan, businesses have similarly struggled with price drops as production has outpaced consumer demand.


Across the U.S., high federal taxes, costly compliance measures, and limited access to capital are compounding the economic difficulties that legal cannabis businesses face.

These challenges affect both plant-touching and ancillary businesses alike. For service providers, the decline in profitability of their clients directly translates into fewer contracts and reduced demand. Whether it’s marketing firms, testing labs, or legal consultants, the health of these businesses is intricately tied to the success of the cannabis companies they serve. As seen in Oregon and elsewhere, when the market faces strain, every segment of the industry feels the pressure, underscoring the interconnectedness of the cannabis ecosystem nationwide.


Adapting to the Current Cannabis Reality


As the cannabis market continues to face challenges, The Hood Collective remains focused on helping businesses build strong, resilient brands that can survive and thrive during difficult times. Our approach emphasizes sustainability and strategic growth, particularly in an industry as volatile as cannabis. By working closely with our clients, we ensure that their branding efforts are not just a short-term fix, but a long-term strategy designed to withstand market fluctuations. From creating a distinct brand identity to helping businesses differentiate themselves in a crowded market, our goal is to position our clients for success, no matter the economic climate.


One key strategy we've adopted is encouraging businesses to start slow and grow sustainably. In an industry where many companies rush to expand too quickly, The Hood Collective advises a more measured approach. By taking the time to understand the market, adjust to changing regulations, and build strong foundations, cannabis businesses can better navigate the inevitable ups and downs. Whether it's focusing on building local loyalty before expanding or investing in digital strategies to reach new audiences, our clients learn to adapt to the rapidly changing landscape of the cannabis industry while preparing for future growth opportunities.


This approach has proven crucial as many cannabis businesses, particularly in mature markets like Oregon and California, face increasing financial pressures. By helping our clients adjust their branding and marketing strategies in response to these challenges, we position them to continue growing despite the obstacles that come with operating in a saturated and highly regulated market.


Looking to the Future of Legal Cannabis


The future of the cannabis industry, especially in states like Oregon, could be significantly impacted by federal rescheduling and potential reforms. The recent push by the Biden administration to consider rescheduling cannabis from a Schedule I drug is creating optimism within the industry. Federal rescheduling could lower the tax burden on cannabis businesses, reduce restrictions on banking, and open the door for interstate commerce. Such reforms would bring much-needed relief to both plant-touching and ancillary businesses, allowing them to operate more efficiently and sustainably. Additionally, the potential for future federal legalization may finally allow Oregon businesses to expand beyond state borders, tapping into larger national and even global markets.


At The Hood Collective, we are proactively preparing our clients for these potential changes. We help them strategize for the future by focusing on long-term goals, such as expanding their brand presence beyond Oregon and positioning themselves for federal legalization. This includes advising on seeking investment opportunities that can help businesses scale, as well as building flexible business models that can adapt to regulatory changes. By guiding our clients through these challenges, we ensure they are not only ready for the next phase of legal cannabis but positioned to thrive as the industry grows and evolves.


Expanding beyond state borders is a key strategy for businesses looking to tap into new markets, and we help our clients build brand recognition and loyalty in these areas well in advance of any federal reforms. Whether it's through digital marketing campaigns, strategic partnerships, or targeted investments, The Hood Collective is committed to helping cannabis businesses grow sustainably and succeed in the long term. As federal rescheduling and legalization move closer to reality, we are focused on ensuring our clients are ready to seize new opportunities and navigate the changing landscape of the legal cannabis market.


Preparing for the Future of Cannabis with The Hood Collective


As the cannabis industry continues to evolve, businesses must be ready to navigate the challenges and seize new opportunities, especially with potential federal reforms on the horizon. By focusing on building strong, adaptable brands, The Hood Collective helps cannabis businesses not only survive but thrive in an increasingly competitive market. Whether it's expanding beyond state borders or preparing for federal legalization, we’re here to guide your business every step of the way.


Ready to future-proof your cannabis brand? Contact The Hood Collective today to learn how we can help you build a resilient, scalable business that thrives in the evolving cannabis landscape.

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