This week’s AxisWire and Green Market Report released the 2019 Cannabis Trend Report. This is the third annual report detailing the hottest trends in cannabis made evident by the headlines and press releases that publish throughout the year. This dive into the markets hottest topics looks at where the trends are and where they will lead over the next few years. This insight helps entrepreneurs, business operators and investors navigate the industry. Here are the key takeaways from the report:
The Sophistication of Cannabis Brands
Cannabis consumers are becoming more sophisticated, and slowly but surely, brands are starting to wake up to this new reality. Companies like Green Thumb Industries (CNSX: GTII) are spending millions of dollars to acquire luxury brands like Beboe, and the luxury brands themselves have begun to attract the interest of deep-pocketed investors. For example, several months ago Coda Signature, a luxury infused edibles brand, raised $24.4 million in Series A funding. As the U.S. inches closer to federal legalization, expect to see the demand for luxury brands to rise.
CBD Goes Global
Legal cannabis may be a hot commodity right now, but cannabidiol is even hotter. Thanks to the passage of the 2018 Farm Bill, which legalized hemp and CBD at the federal level, consumer demand for CBD has gone through the roof. According to BDS Analytics and Arcview Market Research, the market for CBD sales in the United States will surpass $20 billion by 2024. Recognizing this demand, Canadian licensed producers are making significant investments in the hemp sector.
At the start of the year, Tilray Inc. (NASDAQ: TLRY), purchased Manitoba Harvest, the world’s largest manufacturer of hemp food products, for C$419 million. If the U.S. Food and Drug Administration choose to regulate CBD as a nutritional supplement, as opposed to a pharmaceutical ingredient, expect to see similar high dollar deals as the demand for CBD continues to soar into the stratosphere.
Cannabis Media Consolidates
The cannabis media space is slowly starting to consolidate. Over the last year, the legendary cannabis publisher High Times has been making moves to acquire other successful cannabis media outlets, such as Green Rush Daily, Dope Magazine, and Culture Magazine. While High Times is snapping up cannabis media properties, the overall cannabis media market remains untapped by investors. As the cannabis industry becomes more sophisticated, and as the cultivation/extraction/brands sectors become more saturated, expect to see investment dollars to start pouring into cannabis media.
Distribution is King
The cannabis industry is starting to become more specialized. As well-funded multi-state operators start cornering the cultivation and retail sector, savvy operators are looking to find success in spaces like distribution. Distribution companies like Indus Holdings are taking their ventures public. In California, the number of distributors has grown to over 150, due primarily to favorable regulations that allow distributors to package, repackaged, and label cannabis products without an additional license. One of the largest and most respected companies in California, Nabis Distribution, will take their platform to additional markets in the coming years. The sector has the potential to grow tremendously over the next five years as states like Oregon consider laws that would allow them to negotiate inter-state cannabis distribution deals.
Multi-State Operators Rule
In the absence of a sweeping federal legalization bill, states are moving to legalize cannabis on an individual basis. This à la carte-style legalization model has to the rise of “multi-state operators,” which are essentially cannabis operators with the money and resources to compete in an increasingly challenging regulatory landscape across many states. In terms of revenue, the three biggest multi-state operators are: MedMen Enterprises (CSE: MMEN), Green Thumb Industries (CNSX: GTII), and Acreage Holdings (CNSX: ACRG.U). Given that a full-fledged federal legalization bill is unlikely in the next few years, it is highly likely that the companies with the capital to operate in multiple states will continue to grow and absorb smaller competitors.
Wall Street Has a Foot in the Door
While the United State is still grappling with the question of legalization, institutional investors are making big bets on legalized cannabis. Encouraged by Canada’s recent legalization of adult-use cannabis, companies like Canaccord Genuity Group Inc., Ackrell Capital, Black Rock, and Navy Capital are spending billions of dollars investing in cannabis. Over the last five years, Canaccord alone has acted as an underwriter or lead bookrunner for over a dozen different leading cannabis companies; including MedMen Enterprise, Canopy Growth, Acreage Holdings. Barring some significant development, this trend will continue unabated.
Manufacturing Infrastructures Are Here
Cannabis is no longer just about flower. Cannabis consumers are becoming more sophisticated, so naturally, the products they use must also evolve. There is a growing need for companies that can manufacture infused products, vape products, pre-rolls, etc… Multi-state operators are making major investments in building up their infrastructure. Earlier this year, Tilray announced that it would invest $32.6 million to expand its manufacturing and production capabilities. In the state of California alone, there are nearly 600 cannabis manufacturers. As there is a growing premium on sophisticated cannabis brand, expect to see similar growth in the value of cannabis manufacturers.
Consumption Events Take Root
Events, where attendees can consume cannabis, is on the rise. While consuming cannabis in public is not permitted in most states where cannabis is legal, some states like California do allow for special permits for consumption-based events. The Emerald Cup, Hall of Flowers and The Cannabis Cup by High Times are perfect examples. Attendees can purchase and consume cannabis on-site in specially designated areas. As the anxiety around cannabis consumption starts to decline, it is very likely that consumption-based events like The Emerald Cup will begin to appear throughout North America.
To view the full report, please visit:
Green Market Report