The budding opportunity in the $12 billion (~€10.6 billion) cannabis industry

The budding opportunity in the $12 billion (~€10.6 billion) cannabis industry
© iStock/Darren415

Lux Research identifies the immense opportunities in the cannabis industry, and its about time the world pays attention to the innovative trends in the developing medicinal and recreational market.

The cannabis industry is booming, with medical and recreational cannabis becoming big business. To better understand this promising industry, the team at Lux Research, a leading provider of tech-enabled research and advisory services for technology innovation, identified and analysed the opportunities and barriers across the cannabis value chain in a new report, ‘Cannabusiness Innovation: Opportunities, Bottlenecks, and Barriers.’

What does the report reveal?

“The cannabis industry will continue to grow. North America’s favourable environment includes Canada’s recent cannabis legalisation, the state-by-state U.S. regulations, and Mexico’s approval of medicinal cannabis,” said Joshua Haslun, Ph.D., analyst at Lux Research and lead author of the report.

“Many other countries have begun to enact favourable cannabis regulations, but the evolving industry makes differentiating between opportunities and pitfalls difficult. The opportunities lie in innovative technologies that are readily adaptable to the cannabis industry, such as novel and sustained delivery methods, product testing, genetics and trait development, and consumer packaged goods.”

The Lux report reveals that adapting regulatory frameworks, especially those regarding product testing and distribution, are likely to inhibit investment and impact innovation. However, the regulation framework remains dynamic, and there are innovation opportunities at every point in the value chain.

Let’s talk about the cannabis value chain

According to Lux, the cannabis value chain is divided into four segments: cannabis cultivation, distribution, processing, and consumer products. The report breaks each segment down into categories to provide deeper insights into both opportunities and barriers. Below are some of the opportunities Lux identified:

Segment: Cannabis cultivation

  • Seed and trait genetics: partnerships between cannabis producers and genetics companies are forming and provide an avenue to improve cannabis production and enrich the cannabinoid profiles currently available to consumers; and
  • Production systems and inputs: the price of wholesale cannabis has dropped. Technologies and innovations that increase yield and/or quality at low price points provide a competitive advantage and opportunity for growth through innovation.

Segment: Distribution

  • E-Commerce and dispensaries: marketing restrictions on targeted ads for illegal and recreational drugs limit options for dispensaries to reach beyond local customers. However, e-commerce represents an opportunity for companies to reach a larger target audience and requires little upfront investment.

Segment: Processing

  • Product testing: the evolution of the cannabis industry from illicit underground trade to a mainstream commercial market requires the guarantee of safe and consistently effective products. Many larger cannabis companies are acquiring lab testing companies or developing more reliable practices that can be applied across product types; and
  • Novel formulations: cannabis plants produce more than 100 different compounds. The big opportunity now is in the production CBD for medicinal/therapeutic purposes. Many companies have begun to invest in the development of bio-synthetic production of CBD.

Segment: Consumer products

  • Opportunities abound as consumer products approach the mainstream. The key categories are flowers, concentrates, edibles/health, and pharmaceuticals. Large companies are beginning to position themselves to capture shares of the emerging market, with beverage companies providing the greatest momentum.

About Lux Research

Lux Research is a leading provider of tech-enabled research and advisory services, helping clients drive growth through technology innovation. A pioneer in the research industry, Lux uniquely combines technical expertise and business insights with a proprietary intelligence platform, using advanced analytics and data science to surface true leading indicators.

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