How Would a Recession Hit the Marijuana Business Industry?

If you’ve read the news recently, you’ve probably learned that many economists suspect a recession is looming. Recessions are periods when economic activity declines, leading to reduced retail sales. With current inflation rates and global politics affecting supply chains, economists suggest that businesses should prepare for a potential recession.

The marijuana business is so new that many vendors have never gone through a recession before. Keep reading to learn more about how experts expect the marijuana business to react to a recession and how you can prepare for a potential economic downturn.

How Recessions Affect the Economy

In general, recessions are a sign of a struggling economy. Recessions typically begin when something reduces the sales businesses make. For example, high inflation prevents consumers from being able to buy as much as they used to, reducing revenue for many companies.

This reduction in revenue impacts consumer goods heavily. Consumers can’t stop paying for housing or utilities, but they can opt out of buying luxuries. As a result, recessions often put significant pressure on businesses selling consumer goods.

Impact of Recessions on Marijuana and Alcohol

If you sell marijuana, recessions may be alarming. After all, marijuana products are a consumer good. However, substances like marijuana and alcohol are typically less affected by recessions than other items.

For instance, in the 2020 recession, cannabis retailers saw booming business as people turned to marijuana as a safe form of at-home entertainment. Similarly, in previous recessions such as the 2008 and 2001 downturns, overall alcohol sales remained relatively stable, though specific products saw swings in popularity.

This relative stability is due to how people choose to entertain themselves on limited budgets. When consumers can’t afford to buy high-end luxuries, they turn to the more affordable option of alcohol or marijuana to have fun at home. 

Is marijuana recession-proof? Not entirely. Sales of high-end marijuana products such as designer strains and luxury paraphernalia will likely slow down during a recession. However, popular products and basics will likely continue to see robust sales despite a potential economic downturn. 

How To Recession-Proof Your Business

Now is the best time to start preparing for a potential recession. Some of the most effective ways you can recession-proof your business include:

  • Prepare for tight cash flow. Your business’s existence shouldn’t be tied to consistent cash flow. Work with a cannabis financer like Bespoke Financial to give yourself options to free up cash flow if there’s a downturn in sales.
  • Focus on reliable products. It’s never wrong to offer a wide variety of products, but it’s best to focus on the basics during a recession. Keep your bestsellers in stock, and worry less about luxury products.
  • Refine your inventory management. Do your research on suppliers and ensure you’re ordering your products in cost-effective amounts from reliable wholesalers.

In short, focus on your core competencies and connect with trustworthy financing and wholesale partners to keep your cash flow consistent and avoid wasting money.

Stay in the Marijuana Business with Expert Help

Recessions can be nerve-wracking for any business owner. You can take the first step toward protecting the marijuana business from a downturn by opening a cannabis line of credit with Bespoke Financial. You can avoid cash flow problems and keep your business operational despite a downturn by getting help from dedicated cannabis financer Bespoke.

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