Cannabis Delinquencies: An Existential Threat to the U.S. Cannabis Industry
Beau Whitney, Chief Economist
March 29, 2024
There are a lot of conversions happening within the industry and among state and federal policy makers about the future state of cannabis. Issues include existential topics, such as:
While these topics are important in the long term, they do not address the immediate, short-term health of cannabis operators. Basic issues like profitability and cash flow are critical for the industry to be viable and sustainable. This report articulates how vulnerable the cash flows are for operators in the U.S. cannabis supply chain.
Delinquent Payments and Receivables in U.S. Cannabis In previous reports, we examined the business conditions of U.S. cannabis operators. Notably, since 2022, operator profitability has fallen from 42% to 24%. One common theme in the U.S business conditions report was that operators have learned to do more with less. A critical element of doing more with less is cash flow management.
“I would love to pay my bills, if others would simply pay me first so I could do so.” There are two basic elements of cash flow: accounts receivable (what is owed to you) and accounts payable (what you owe to others). Data from our previous surveys indicated that there were potential issues with cash flow and we wanted to explore the data more closely. This United States Cannabis Delinquent Payment Report examines the impact of late payments on operators, and the extent of the issue, across the country.
Neither Viable Nor Sustainable Based on a survey conducted in Q4 '2023, delinquent accounts receivable are a major issue for U.S. cannabis operators, totaling $3.8 billion of the $28.8 billion in total legal cannabis sales. This amount equates to 1.6 months of all U.S. cannabis revenue in 2023. The issue is having an impact across all sectors of cannabis, some more so than others. This is neither viable nor sustainable for cannabis licensees, who operate in a low-margin industry.
Selected findings contained in this report:
This is An Existential Issue for the Cannabis Industry in the United States While there is plenty of blame to go around, the single most important finding contained in this report is that delinquencies are an existential threat for the U.S. cannabis industry. To remain viable, it is critical that the issue be addressed.
Vetting and Validating the Data Takes a Village Based on data provided by Cannabiz Collects, state regulators, proprietary models and our survey respondents, the data has been triangulated and validated as credible. We would like to thank the cannabis operators across the country who completed our survey with such high-quality inputs and Cannabiz Credit & Cannabiz Collects for providing additional data that validated our findings. It was through this collective effort that we were able to articulate the impacts and shine a light on this important issue.
Beau Whitney is the founder and Chief Economist at Whitney Economics, a global leader in cannabis and hemp business consulting, data, and economic research. Whitney Economics is based in Portland, Oregon. Beau has provided policy recommendations at the state, national and international levels and is considered an authority on cannabis economics and the supply chain.