Profitability As margins shrink, insurance can help protect profits in 2025. Product pricing in cannabis has been erratic, often Case Study leaving businesses struggling to stay solvent. Mergers One HUB cannabis client was in the midst and acquisitions have become the main vehicle for strong of a challenging purchase that looked like businesses to expand into new regions and weaker it might fall through at the last minute due organizations to exit the market. to unresolved risk. With HUB’s assistance, An increase in marijuana licenses has resulted in market problematic issues were identified and 1 and while overall cannabis sales have saturation, addressed. An expert was called in to 2 increased, competition has driven down individual perform a flood analysis, and creative organizations’ revenues: Prices dropped roughly 10% in solutions were designed to protect the 3 2023 and are only beginning to stabilize. And even the buyer from unnecessary exposures. more mature markets were not immune, with sales falling The deal was finalized soon after. off dramatically in Colorado, as legalization in neighboring Arizona and New Mexico siphoned customers away from the Centennial State. According to the HUB International 2025 Outlook resiliency efforts will be poised for success through the 4 implementation of a robust business continuity plan that Executive Survey, nearly three-quarters of cannabis industry respondents say their organizations do not have can pressure test these potential loss scenarios. adequate insurance to protect against risks that will harm As many operations will struggle, others will see profits. Companies are often left with a choice between opportunity in the form of M&A. Buyers acquiring unaffordable rates and no protection. distressed companies will need to proceed with caution to A tight market for commercial auto insurance means avoid taking on unnecessary liability. An insurance advisor premiums for transportation have tripled. Rising costs with cannabis industry expertise can help educate both and low capacity have made it challenging for cannabis the buyer and the seller on best practices, making sure businesses to secure appropriate coverage. However, businesses secure proper runoff or D&O policies to protect there is hope on the horizon with alternative risk transfer the bottom line. options, including captives and parametric insurance. In addition, there is optimism around the possibility of new 1. MJBiz Daily, “Approved and pending marijuana licenses rise in US entrants and capacity in the insurance market as a result for first time in 2 years,” August 19, 2024. of the SAFE Banking Act. 2. Cannabis Business Times, “Whitney Economics Forecasts US Regulated Cannabis Sales to Top $31.4 Billion in 2024,” March Companies must make improved risk management 20, 2024. a cornerstone of profitability, as many companies 3. PR Newswire, “Leaflink’s 2024 Wholesale Cannabis Pricing Guide Now Available,” April 2, 2024. are one event — a weather disaster, supply chain 4. HUB’s Outlook Executive Survey polled 900 C-Suite and VP-level breakdown or cybercrime — away from bankruptcy. executives on the issues facing them on profitability, employee Cannabis organizations who focus on organizational vitality and organizational resilience. 3