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The Science Behind the $13 Billion Medical Cannabis Industry

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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

The Science Behind Medical Cannabis

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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Cannabis

How Consumers Are Shaping Cannabis Consumption

Cannabis consumers could spend up to $10.5B on concentrates by 2022—and they’re increasingly relying on the influence of branding to make their choices.

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How Consumers Are Shaping Cannabis Consumption

The cannabis industry continues to reach new heights, and according to market analysts, global legal spending on cannabis could reach $32 billion by 2022 — a majority of which is thanks to U.S. and Canadian consumers.

What’s driving the evolution of the market?

Cannabis is in the midst of a shakeup, and today’s infographic from Ionic Brands highlights how consumers are significantly shaping the landscape of cannabis.

Cannabis Concentrates: A New Frontier

For years, joints and blunts dominated the industry—but sales of traditional flower are swiftly losing ground to new products. Here’s how cannabis consumer spending looks across North America in a few short years:

Product typeFlowerEdiblesConcentratesOther
2017$4.2B$1B$1.9B$1.3B
2022E$10.5B$4.1B$10.5B$4.1B
% Market Share↓ 14pp
From 50% to 36%
↑ 2pp
From 12% to 14%
↑ 13pp
From 23% to 36%
↓ 1pp
From 15% to 14%
CAGR20%33%41%26%

Cannabis consumers are clearly moving away from simply smoking the product. Concentrates are the fastest growing industry segment, which is not surprising since they’re needed to make all sorts of products, from edibles to topicals and tinctures. Cannabis concentrates are also discreet, convenient, and more potent than other cannabis products, all of which contribute to their consumer appeal.

In fact, these changing preferences are disrupting other mammoth industries. Take JUUL Labs for example: the inconspicuous, smokeless device is chipping away at the tobacco industry, and now accounts for almost 73% of the e-cigarette market. JUUL’s growth is proof that consumers are driving the market, and this trend is also reflected in cannabis.

Among all cannabis concentrate types, vaporizers (vapes) overwhelmingly come out on top in established markets, accounting for 43% of sales in Colorado, 70% in Oregon, and 79% in California.

Concentrate Sales (2018, Jan-Jun)VapeWaxShatterLive ResinOilsOthers
Colorado$97M$17M$16M$29M$12M$14M
Oregon$60M-$10M$4M$5M$8M
California$282M14M$14M$21M-$42M

Branding is Everything in Cannabis

The cannabis concentrates space is becoming increasingly sophisticated. With more money to be made from less product, concentrates offer higher margins as well. But in a fragmented market, brand recognition is arguably the biggest factor guiding consumer demand.

Returning to JUUL’s example, the company’s branding played a big hand in its accelerated trajectory—and in grabbing the attention of major players like Altria, the corporate parent of Marlboro. Altria made a landmark investment into 35% of JUUL in December 2018, bringing the latter’s value up to $38 billion.

In the nascent cannabis industry, consumers are still wondering who they can trust. A recent survey revealed that 72% of cannabis consumers rated branding as somewhat or very important in assessing a product’s quality and safety. Branded cannabis products are on the rise, but they’re not as established as Starbucks coffee or Apple iPhones quite yet.

When done right, cannabis concentrates brands are able to capture quite a significant chunk of the market:

  • California
    Top 10 brands: 48.4%
    All other: 51.6%
  • Colorado
    Top 10 brands: 46.6%
    All other: 53.4%
  • Oregon
    Top 10 brands: 59.7%
    All other: 40.3%

In a budding industry, such brand market domination is an impressive feat. However, a few barriers still stand in the way of these brands’ ability to scale on a national level: cannabis and related products aren’t legal in every U.S. state, while diverse state regulations also complicate the process.

Cannabis consumer brands that can spread out into multiple states, and develop consumer trust, will emerge as winners in this new, dynamic market.

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Cannabis

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.

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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, 2017Craft Market Size, 2017Share of total
Beer vs Microbrew Beer$111B$26B23%
Coffee vs Specialty Coffee$32B$10B31%
Wine vs Premium Wine$80B$44.8B56%
Food vs Organic Food$898B$49.4B5.5%

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.

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