9 Things Cannabis Investors Should Know
The swift regulatory changes taking place in the global cannabis sector are almost without modern precedent.
While some find the situation analogous to the repeal of Prohibition in the United States, it’s also fair to point out that such events happened 85 years ago in the midst of the Great Depression. It was a long time ago, and in a very different economic climate.
Today’s infographic comes to us from Evolve ETFs, and it shows what investors should know as the legal cannabis sector comes out of the dark.
What Cannabis Investors Should Know
Since there is so much happening at once with little precedent for what such a market will look like, it’s worth summing up the sector’s potential in broad strokes:
1. Global Size
According to research from The Brightfield Group, the size of the legal cannabis sector is expected to surge from $7.7 billion to $31.4 billion between 2017 and 2021.
Currently the recreational market makes up only 37% of the global total – but by 2021, that will rise to 57%.
2. Versatile Uses
Cannabis comes in different forms. One gram of dried cannabis is roughly equivalent to:
- 5g of fresh cannabis
- 15g of edible product
- 70g of liquid product
- 0.25g of concentrates
- 1 cannabis plant seed
These can be used in various medical applications, including to fight chronic pain, migraines, anxiety, multiple sclerosis, and nausea. Cannabis can also be used to treat Alzheimer’s, PTSD, and cancer.
3. North American Growth
By 2021, it’s estimated that North American sales will make up 86% of the global market. Specifically, the U.S. legal market is projected to hit $18.1 billion by that time, while the Canadian legal market is expected to be $8.9 billion in that same year.
4. A Shifting Legal Landscape
Canada will be the first G7 country to legalize cannabis at a federal level.
In the United States, recreational cannabis is already legalized in nine states – but this could change swiftly as various states undergo referendums.
5. European Markets
In 2017, the legal market for cannabis is estimated to be just $0.11 billion, but by 2021 it will have expanded to $3.8 billion.
According to The Brightfield Group, growth will be quite impressive in Western Europe: Germany’s market will grow at a 284% annual rate, the Netherlands at 364%, and Spain at 334%.
6. Rest of the World
Although markets outside of North America and Europe will not see the same growth in absolute dollar terms, the legal cannabis market will still expand from $80 million to $350 million, led by activity in Latin America.
7. Pharmaceutical Research
Israel has a special place in the cannabis world – the country is world leader in medical cannabis research, and industry expects that it will eventually translate into a $1 billion export opportunity. That said, export plans have hit a recent road bump.
8. Investment Activity
Compare the start of 2018 to that of 2017, and you’ll see an impressive difference in investment activity.
For this we use Canada with its impending recreational legalization as an example: in the first six weeks of 2018, investment was up nearly 7x over the previous year. Further, the average deal size increased from $5.6 million to $18.7 million.
Meanwhile, the Canadian Cannabis Index rose 201% between January 2017 and January 2018.
9. How to Invest?
There are a variety of ways to gain exposure to the sector, including:
- Licensed producer stocks
- Biotech stocks
- Ancillary services stocks
- Licensed retailer stocks
- Cannabis ETFs
Regardless of how you play it, the legal cannabis sector is coming out of the dark – and it will be interesting to see how the industry takes shape.
The Allure of Craft Cannabis to Investors
Craft products are taking the retail world by storm. Find out why investors should be paying close attention to craft cannabis and its potential impact.
The Investor Appeal in Craft Cannabis
They say if you do what you love, then the money will follow. In the multi-billion dollar cannabis business, that has certainly proved true for those who have been passionate about the plant for decades — otherwise known as craft growers.
Today’s infographic from Pasha Brands dives into the huge consumer demand for craft products, and why investors should pay attention to this trend as it extends into cannabis.
The Perfect Craft Product
Chances are, you may have encountered any of the following at least once: microbrewed beer, specialty coffee, premium wine, or organic food. They’ve become so popular, that craft versions of all these are steadily carving a valuable niche in their original markets.
|U.S. Market Size, 2017||Craft Market Size, 2017||Share of total|
|Beer vs Microbrew Beer||$111B||$26B||23%|
|Coffee vs Specialty Coffee||$32B||$10B||31%|
|Wine vs Premium Wine||$80B||$44.8B||56%|
|Food vs Organic Food||$898B||$49.4B||5.5%|
Whether it’s introducing flavors into brews, slow-roasting beans, producing wine in small lots, or using a conscious “farm to table” label — what they have in common is the careful attention that’s paid to the process from start to end.
Craft cannabis bears a strong resemblance to all of these in that way, as growing it involves extra care, compared to large-scale producers. For example, hand-trimming is more labor intensive than using machines, but results in products with superior quality.
What are some other characteristics of craft cannabis?
- Attention to detail
A hands-on approach allows growers to personally ensure each cannabis plant is healthy.
- Sustainable practices
The use of organic farming to save energy, creating a smaller environmental footprint.
- Social responsibility
Smaller growers typically leverage local connections, creating employment opportunities.
- Artisanal branding
Sophisticated and modern packaging helps appeal to different types of craft cannabis consumers.
It’s clear why consumers care about craft cannabis. But what does it offer investors?
Making the Case for Craft
Investors should be paying close attention to craft cannabis for three key reasons: a higher price point, a focus on quality, and access to the retail market.
Upscale Price Tag
On average, organic cannabis has a higher price point attached to it, compared to regular grade cannabis.
- Industry average: $9.02/ gram
- Organic average: $11.40/ gram
Using organic methods to grow cannabis means that the final product on shelves boast an enhanced potency and effect. Since craft cannabis is also grown organically, it’s clear that consumers are willing to spend more to secure a premium product.
Promise of Quality
It might not come as a surprise that the most famous craft cannabis regions are also where the biggest volume of legal cannabis sales come from. California and Canada accounted for nearly 38% in global market share in 2017:
- Worldwide sales: $9.5 billion
- California sales: $3 billion
- Rest of U.S. sales: $5.5 billion
- Canada sales: $0.6 billion
- Rest of world: $0.4 billion
These two areas have a foothold in cannabis sales, and with recreational legalization unfolding in both – and 75 million people living between the two jurisdictions – it will only continue to grow.
Opening the Doors
Following nation-wide legalization in Canada and an increasing number of states in the U.S., the continent is facing a cannabis shortage. Why? As it turns out, while craft growers are abundant, they still face regulatory hurdles in order to move from the “gray” underground market into launching legal operations.
Craft cannabis could be a cornerstone for industry growth, but its growers have been in the shadows for a long time. As cannabis gains momentum, tapping into the huge network of craft growers will be key for success.
The Hidden Problem Looming Over the Cannabis Edibles Market
The cannabis edibles market is one of the most exciting growth segments for legal sales, but a variety of concerns remain, especially for beverages.
A Problem Looming Over the Cannabis Edibles Market
The boom in legal cannabis has been absolutely historic.
According to ArcView Research, it’s already a multi-billion dollar industry – and by 2022, the legal market could be worth $32 billion globally.
As in any nascent industry, the early days of cannabis have been exciting and formative. As it begins to mature, it’ll become clearer what products will drive future growth.
In this context, cannabis edibles and beverages have taken center stage – and today’s infographic from Trait Biosciences outlines the magnitude of this opportunity, along with some of the challenges the market faces going forward.
The Rise of Edibles
From dark chocolate to CBD-infused beverages, the cannabis edibles market is one of the most diverse and exciting markets for both consumers and businesses.
Edibles and beverages have already more than doubled in their share of the overall cannabis market since 2011, and the market is expected to grow in size from $1 billion to $4.1 billion between the years 2017 and 2022.
This year, the Specialty Food Association even named cannabis edibles and beverages as a “Food Trend of the Year” – a nod to the fact that edibles are going mainstream, even within the scope of the much larger food and beverages industry.
Not surprisingly, as this category emerges, there are many big brands exploring options in the edibles market, including Constellation Brands, Molson Coors, Mondelez, Carl’s Jr, Anheuser Busch, Neal Brothers, and Coca-Cola. In particular, the beverages space seems to be hot: Constellation shelled out $4 billion for a stake in the largest cannabis company globally (Canopy Growth), and beer-maker Anheuser Busch partnered with Tilray to research THC and CBD drinks.
There are four major sources of risk that could impact future growth potential for companies in the fast-moving cannabis edibles market:
- Regulatory risks:
Regulators are becoming increasingly concerned about the dosage, packaging, and labeling of edibles products
- Stiff competition:
Mega brands are entering the edibles space at a blistering pace, and could dominate market share from newer entrants
Complex layers of taxation could decrease demand for edibles, such as in California, while also pushing consumers towards the black market
- Consumer concerns:
Unpredictable dosage amounts, taste, and even toxins have surfaced as issues with the media, as consumers voice their concerns with edible products
But above and beyond these known risks, there is another potential hindrance to the edibles and beverages market that flies under the radar: how cannabinoids are absorbed into the bloodstream when ingested.
The Journey Into the Bloodstream
Unlike substances like sugar or alcohol, cannabinoids are not soluble in water. Instead, they are soluble in fats.
A substance such as sugar can enter the bloodstream within 10-15 minutes of ingesting. On the other hand, fat soluble substances such as cannabinoids have to wait – which is why sometimes edibles take hours to kick in.
Ultimately, cannabinoids are absorbed through the body’s fat. This happens in the small intestines, which help distribute them to the rest of the body.
Implications for Edibles and Beverages
For some cannabis producers, fat-solubility just means slow onset times and a generally undesirable taste. For other products, like CBD beverages, it creates bigger problems. Water and oil simply don’t mix.
To get around this, producers are using special emulsion techniques to make oil particles smaller, so that they mix with water better, increase bioavailability, and speed up onset times.
Think of this as mixing oil and vinegar. It’s your common emulsion that will separate over time, since oil and water don’t mix
Stable but thermodynamically unstable. Uses surfactants to keep water/oil binded
Stable, but uses a higher concentration of surfactants (which lower the surface tension between two liquids)
While these techniques are seeing increased usage by producers of cannabis products, they do have their own set of limitations.
Oil and water solutions still unbind over time, and products may only have a limited shelflife. Reporting by WSJ has found that these beverages also have a questionable aftertaste for many consumers, and onset times of these products are still not as fast as smoking or vaping.
It’s also worth noting that various health regulators, scientific journals, and international organizations have raised concerns about using nano-sized particles in food and beverages.
For example, the Canadian government warns that there is a “causal relationship between nanoparticle exposure and adverse health effects”, while the respected scientific journal Nature warns that nanoparticles “may behave differently within the human body”, and that “safety of nanoparticles should be judged on a case-by-case basis”.
The cannabis edibles market is poised to be the next big thing – but when it comes to how these cannabinoids get absorbed by the body, there is still much work to be done.
How will the industry and consumers move forward to capitalize on growing opportunities in the edibles and beverages market?
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