What Brands in your Area Could be Dealing With
Posted on February 20, 2025
Why Some Cannabis Brands Are Struggling and How They’re Fighting Back
The cannabis industry has experienced rapid growth over the past decade, but not all brands are thriving. Many companies are facing financial hardships, regulatory hurdles, and an increasingly competitive market. While some businesses struggle to stay afloat, others are adapting and finding ways to push forward. This article explores the key challenges cannabis brands face and the strategies they are using to fight back.
Challenges Facing Cannabis Brands
Regulatory and Compliance Issues
The cannabis industry remains highly fragmented, with each state enforcing its own set of rules. This patchwork of regulations makes it difficult for brands to scale operations across multiple states. Additionally, tax burdens like Section 280E prevent cannabis businesses from deducting standard business expenses, leading to financial strain. Marketing restrictions on major platforms like Google, Facebook, and Instagram further limit growth opportunities.
Market Saturation & Competition
The number of cannabis brands has exploded, creating an oversaturated market. Dispensaries have limited shelf space and often favor established, high-volume sellers. Smaller brands struggle to differentiate themselves and compete for consumer attention, especially in mature markets like California and Colorado.
Declining Profit Margins
As more growers and brands enter the market, prices have dropped significantly. Oversupply in certain states has led to price compression, making it difficult for brands to maintain profitability. Meanwhile, operational costs remain high due to licensing fees, compliance requirements, and production expenses.
Consumer Brand Loyalty Struggles
Unlike industries such as alcohol or cosmetics, cannabis consumers often make purchasing decisions based on price and potency rather than brand loyalty. This makes it challenging for companies to build long-term relationships with customers, forcing them to rely on aggressive promotions and discounts.
Banking & Financial Challenges
Due to federal prohibition, most cannabis businesses cannot access traditional banking services. This limits their ability to secure loans, process credit card transactions, and scale operations efficiently. Brands that lack funding often struggle to invest in marketing, innovation, and infrastructure.
How Brands Are Fighting Back
Leveraging Direct-to-Consumer (DTC) Sales
Many brands are shifting towards direct-to-consumer sales through online ordering and delivery services where regulations allow. This helps bypass the reliance on dispensaries and allows brands to create deeper connections with their customers through loyalty programs and exclusive deals.
Investing in Data & Personalization
Successful cannabis brands are using data analytics to better understand customer preferences. Platforms like Buddy: The Cannabis App help brands analyze product trends and tailor recommendations based on individual cannabis identities. This level of personalization improves consumer engagement and retention.
Expanding into Strategic Partnerships
To combat market saturation, brands are forming partnerships with influencers, lifestyle brands, and dispensaries. In-store promotions, limited-edition collaborations, and co-branded products help create excitement and drive traffic to both retail and online sales channels.
Focusing on Differentiation & Premiumization
Brands that stand out are those that offer unique product experiences beyond just THC percentage. Companies are innovating with terpene-rich formulas, effect-based marketing, and premium packaging to appeal to a more sophisticated consumer base.
Optimizing SEO & Digital Marketing
Since traditional advertising avenues are restricted, cannabis brands are investing heavily in SEO, content marketing, and cannabis-friendly platforms like Buddy: The Cannabis App. By creating valuable educational content and optimizing for search engines, brands can attract organic traffic and convert potential customers.
Future Outlook
Despite the current struggles, the cannabis industry is still evolving. Federal legalization could reshape the market, providing access to banking and lowering tax burdens. Brands that focus on differentiation, digital strategy, and consumer experience will be best positioned for long-term success.
Cannabis companies must remain agile, leveraging data, technology, and community-driven strategies to stay competitive. Those who adapt will not only survive but thrive in an increasingly crowded marketplace.