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California Cannabis: A Golden Opportunity With Unique Challenges

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If the state of California were a country, it would have the fifth largest GDP in the world.

Take this kind of spending power and combine it with the recent legalization of recreational cannabis, and it’s fair to say that the Golden State is primed to become the Holy Grail of cannabis opportunities.

But while the market is home to immense potential, this doesn’t mean that the California cannabis business isn’t without its own unique challenges and obstacles to navigate.

Navigating California Cannabis

Today’s infographic comes to us from High Hampton Holdings and it helps set the stage for the boom in California, as well as listing the regulatory hurdles that companies must be prepared to deal with in the jurisdiction.

California Cannabis: A Golden Opportunity With Unique Challenges

In the next year, it’s expected that recreational cannabis sales in California will surpass the existing total from the already established medical market.

By 2025, those recreational sales could be $4 billion per year – that’s five times the size of the medical market!

Sticker Shock

The potential of the California cannabis market may be obvious, but navigating both the state’s notorious regulatory system and tax regime is a clear threat for companies aiming to succeed in the space.

Since legalization, the price of cannabis in California has become an immediate hiccup that has initially angered consumers, reducing expected demand and state revenues.

According to BDS Analytics, the effective sales tax on a gram of cannabis bought in San Jose works out to a hefty 38%. Add this to the higher cost of doing business in the state, and the sticker shock for consumers is real.

Complex Legislation

After high taxes, companies entering the California market must also navigate the state’s complex rules and regulations about growing, distributing, and selling cannabis.

To give an idea of what this looks like for the average company, here is a brief snapshot of California’s regulatory environment:

  • There are three governing bodies for cannabis in the state: California Department of Food and Agriculture (CDFA), California Department of Public Health (CDPH), and the Bureau of Cannabis Control (BCC)
  • There is a dual licensing requirement in the state, in which companies must be licensed both by the state as well as by local authorities
  • Companies must get their local license before their state license – and this is complicated: there are 58 counties and 482 incorporated cities, each with their own specific set of rules and requirements
  • Currently, many growers do not meet state or local standards
  • The supply of zoned, permitted areas for cannabis cultivation are scarce and in high demand

Even further, the rules around cultivating, distributing, and retailing all involve specific and highly-specialized licenses. For example, only those with a full-service distribution license can coordinate required third-party testing, ensure packaging reviews of products, and collect and remit cultivation excise taxes.

Golden Potential

Despite the challenges that exist in the California cannabis market, it is still the undisputed jewel in the crown of the global legal cannabis space, offering access to 39 million consumers and large amounts of disposable income at play.

Only companies that can navigate this uncharted territory will be able to take advantage of this lucrative opportunity.

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Cannabis

Why Retail Cannabis Could Be the Next Big Investment Boom

Retail cannabis could flourish into a $47.3 billion industry by 2027. What makes this cannabis segment so enticing for investors and consumers alike?

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Imagine being an investor in Microsoft at the time of the company’s IPO in 1986. Or better yet, buying Amazon shares while it was still just an aspiring online book store in the late 1990s.

Chances to be an early adopter in the next billion-dollar industry are far and few in between – but it’s exactly what is happening today with the nascent cannabis market. After close to a century of prohibition, cannabis is back in the limelight as legalization rolls across the U.S. and Canada.

Visualizing the Retail Boom

Today’s infographic from Choom Holdings Inc demonstrates the consumer interest in retail cannabis, and the challenges and opportunities that come with this potential.

Retail Cannabis Investment Boom

Legal cannabis today is a lucrative modern market in the U.S. and Canada. In 2018, sales were $10.8 billion – and they are expected to grow to $47.3 billion by 2027.

Who’s driving this growth? A recent survey reveals that:

  • 58% of U.S. cannabis consumers use it at least once a week
  • 66% of these weekly users are millennials, aged 18 to 34
  • 46% of cannabis consumers who also drink, prefer it over alcohol
  • 74% of cannabis consumers who also drink, believe it to be safer than alcohol

With more people using cannabis frequently, the disruptive potential of retail cannabis becomes clear.

The Cannabis Supply Issue

Colorado, Washington, Nevada, and most recently California have been among the major U.S. states to legalize recreational cannabis in recent years.

Although cannabis sales across all states have soared, there’s one caveat to mention, which is clearly seen in the case of California. As the state began selling cannabis in stores on January 1st, it also simultaneously ran out of supply when the grey market came rushing up.

This trend of pent-up demand is clear across both mature and new markets – even Canada couldn’t escape the same supply crunch, subjecting customers to long lines and wait times on day one of legalization. For example, only one legal retail store was open in the entire province of British Columbia on October 17th.

It’s not surprising to see why cannabis is such a valuable retail product, though: dispensaries typically outsell Whole Foods and other similar retailers.

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(Source: Marijuana Business Daily)

The Value Play in Cannabis

Seizing an early adoption opportunity is a best-case scenario in the investing world.

Today, such an opportunity may come in the form of retail cannabis. The segment still faces specific hurdles, but these challenges have the potential to convert into golden opportunities as the market matures in North America:

1. Inherited demand
Legal retailers will reach new consumers as the grey market begins to come online.

2. Strong foundation
Retail cannabis is only legal in ten U.S. states, but it already shows strong promise.

3. Building bridges
Retail cannabis stores are just now opening in Canada, but licenses are hard to get.

Retail cannabis is a brave new world for consumers and investors alike – and early entrants to the industry with access to capital and a large retail footprint will likely lead the charge.

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The Science Behind the $13 Billion Medical Cannabis Industry

A deep-dive into the science behind the medical cannabis industry can provide some investor insight into what makes it a multi-billion dollar market.

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The Science Behind the Medical Cannabis Industry

There’s nothing quite like cannabis in the plant kingdom. Beneath its humble surface, over 750 unique compounds exist within – all of which have helped propel the cannabis industry into the multi-billion dollar market it is today.

Today’s infographic from The Green Organic Dutchman takes a deep dive into the cannabis components which contribute to its therapeutic potential, how it interacts with the human body, and the ways it can be consumed.

The Chemical Effects of Cannabis

While many people would be familiar with THC and CBD as the two major cannabinoids, there are a few lesser-known cannabinoids which also play important roles: Cannabichromene (CBC), Cannabigerol (CBG), Cannabinol (CBN), Tetrahydrocannbivarin (THCv), and Tetrahydrocannabinolic acid (THCa).

In different combinations, they work together with terpenes – aromatic oils that are present in most plants – to provide relief for a variety of ailments.

CategoryCannabinoidAilment
Pain/ SleepCBD, THCCramps, Migraine
CBC, CBD, CBN, THCInsomnia
CBC, CBD, CBN, THC, THCvPain
CBC, CBD, CBDa, CBG, CBN, THC, THCaArthritis, Inflammation
Gastro-IntestinalTHCAppetite loss
CBD, THCNausea
CBD, THCvDiabetes
CBD, THC, THCaCrohn’s disease
Mood/ BehaviorCBD, CBGAnxiety
CBD, THCADD/ADHD, Stress
CBD, CBG, THCBipolar disorder, OCD, PTSD
CBC, CBD, CBG, CBN, THCDepression
NeurologicalCBC, CBD, CBG, CBN, THC, THCaAmyotrophic Lateral Sclerosis (ALS)
CBC, CBD, CBG, THC, THCaParkinson’s, Alzheimer’s
CBD, CBN, THC, THCaMultiple Sclerosis
CBD, CBN, THCa, THCvEpilepsy, Seizures
OtherCBC, CBD, CBDa, CBG, THC, THCaCancer
THCFatigue

When cannabinoids and terpenes interact, the human endocannabinoid system is already equipped to deal with the entourage effects that are created.

Modern-Day Medical Cannabis

It’s clear that many cultures embraced cannabis long before scientific research came into play. Its therapeutic properties were widely recorded and extolled around the world.

After decades of restricted access and stigma, the tide is turning back towards what our ancestors discovered long ago. Millions of patients rely on medical cannabis today, with Canada and Israel paving the way in cannabis research.

  • Canada
    Medical cannabis has been legal nationwide since 2001, aiding scientists in studying its effects.
    Funding: CAD$1.4 million (US$1.05 million) invested by the government towards research projects.
  • Israel
    Since the 1990s, medical cannabis has been legal for patients of cancer, chronic pain, and PTSD.
    Funding: 8 million shekels (US$2.16 million) annual government funding to support innovation.

Back in the day, typically only dried cannabis flower was used. However, consumption methods have evolved into three broad categories today: ingestion, inhalation, and application.

  • Ingesting
    The dosage of cannabis consumed is easy to control using edibles or beverages, tinctures or sprays, and capsules.
  • Inhalation
    The effects of cannabis are quickly felt through smoking, vaporizing, and/or dabbing concentrates.
  • Application
    Transdermal patches and topicals like balms offer localized relief through a controlled dose.

Each of these methods have their own pros and cons, but in the end, they all offer the medical cannabis patient with a wide variety to choose from. Some of these forms, such as topicals and edibles, even lend themselves to the rapidly growing consumer cannabis segment.

In the seventh part of this series, we’ll delve into the rise of retail that’s set to disrupt the cannabis industry.

The Story of Cannabis: What Investors Need to KnowAnatomy of a Cannabis PlantA Quality Cannabis ProductThe Rise of OrganicA Sustainable Cannabis ProductThe Science Behind the Medical Cannabis IndustryComing soonComing soon

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