The Impact of Cannabis Legalization on Hemp Market Growth

Challenges and Opportunities Across The Hemp Market

The steady rise of medical and adult-use cannabis legalization across the country is reshaping the hemp market, bringing a mix of challenges and new avenues for growth. Both hemp and cannabis come from the cannabis sativa plant, yet their reach and regulations differ greatly. We explore how the evolving cannabis landscape influences the hemp market, examining whether hemp-cannabinoid businesses should consider pivoting to cannabis or vice versa.

 

A Dual Market of Cannabis and Hemp Emerges

Different Uses for Different Products

In states with legal cannabis, two distinct but overlapping markets have emerged. While cannabis attracts those seeking recreational or medicinal use, hemp products draw a health-conscious demographic interested in CBD and other non-intoxicating compounds. Beyond CBD, other cannabinoids like CBN (cannabinol) and CBG (cannabigerol) are gaining traction for their potential benefits in relaxation, sleep, and anti-inflammation. This dual market shows that cannabis and hemp can coexist, each appealing to a different audience.

Older Businesses In Newer Markets

Hemp has seen significant growth due to rising consumer interest in wellness products like CBD, CBN, and CBG for pain relief, anxiety, and overall health. Yet, as cannabis gains wider acceptance, hemp-only businesses face new competitive pressures—the challenge to maintain relevant while the cannabis market rapidly expands.

 

A Symbiotic Relationship Between Cannabis and Hemp

While the legalization of cannabis does impact the hemp market, the most noticeable effects are seen in states where cannabis remains illegal or the license application process is stalled. In these regions, the hemp-cannabinoid market fills the gap with products like beverages and edibles. 

Both cannabis and hemp share a common goal—normalizing cannabis use and breaking down long-standing stigma. This creates a potentially symbiotic relationship, with both industries benefiting from broader acceptance.

 

The Rise of “Intoxicating Hemp” Products

A potential hurdle for the hemp market is the growing dominance of “intoxicating hemp” products, like “THC-O” and “Delta-10”, which are usually produced chemically and offer effects that can be similar to those of plant-derived delta-9 THC (but under a less stringent regulatory system). The rise of these products followed the decline in hemp-derived CBD sales around 2021, filling a demand for hemp-derived alternatives. 

Regulators are taking notice. States like California, Arkansas, and New Jersey have introduced stringent measures. These actions hint at a future with tighter regulations, similar to the cannabis industry.

 

Navigating a Patchwork of Hemp Regulations

State-Driven Regulations

States vary widely in their approach to regulating hemp. California recently imposed emergency regulations banning any detectable amount of THC or other intoxicating cannabinoids in hemp-derived food, beverage, and dietary products. New Jersey has taken similar steps and will start enforcing bans on intoxicating hemp products. In Arkansas, a proposed THC ban for hemp products was overturned (citing the Federal Farm Bill) but is currently on appeal. 

Searching For Unity Through Cannabis

This fragmented approach creates challenges for businesses navigating compliance in multiple states. Some states, like Minnesota and New York, are exploring a more unified regulatory framework, merging cannabis and hemp oversight to streamline compliance and enforcement.

The cannabis industry’s regulatory successes and failures provide a roadmap for the hemp market. If enforcement tightens, hemp may face compliance standards similar to those seen in cannabis. This could foster greater stability and consumer trust but may also strain smaller hemp-cannabinoid businesses.

 

Should Hemp Businesses Pivot to Cannabis?

Reasons to Stay With Hemp

While the allure of the cannabis market is strong, staying within the hemp sector offers unique advantages. Hemp’s versatility extends beyond cannabinoids, with opportunities in sustainable construction, textiles, and health products. The growing interest in minor cannabinoids offers additional revenue streams, allowing businesses to diversify their product lines and appeal to a broader audience. 

Highlighting hemp’s potential beyond hemp-derived cannabinoids, the U.S. Department of Energy recently awarded $8.4 million to a hemp-based company for sustainable building materials, and hemp has increasing potential in the automotive industry. 

Reasons to Expand to Cannabis

For hemp businesses contemplating a move to cannabis, there are a myriad of reasons to consider pivoting, such as expanding your consumer base and brand recognition, diversifying your product offerings, or leveraging existing knowledge or infrastructure for potentially higher profit margins, but the decision isn’t straightforward. Transitioning to cannabis means navigating complex licensing and compliance, investing in infrastructure, and creating customer loyalty in a competitive market. Companies must weigh these factors and their unique opportunities and obstacles.

 

A Dynamic Future Requires An Expert Pulse

Business Goals Can Help Guide You

Cannabis legalization is reshaping the hemp industry, creating both competition and collaboration. While some may fear that cannabis will overshadow hemp, the reality is more nuanced. Each market has distinct strengths, and businesses should carefully assess whether one or both arenas aligns with their business goals and capabilities. Whether to stay in the hemp lane or venture into cannabis depends on a company’s resources, vision, and risk tolerance. 

Hemp Consultants Can Get You Over The Finish Line

The future is full of possibilities for those ready to navigate the changing landscape, and the professional and experienced team at Canna Advisors can help guide you along the way.

Whether you need initial consultations to make a strategy, financial modeling to understand the numbers, a business plan to pull your ideas together, or other consulting or startup assistance, our hemp consultants are ready to help you make moves in either industry.

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