Views:1 Author:Site Editor Publish Time: 2018-02-01 Origin:Site
Despite being controversial, the U.S.
cannabis industry is growing rapidly.
With a product that is quasi-legal, the industry faces
many uncertainties regarding its future direction. At the
same time, the speed at which the industry is growing
leaves companies struggling to keep up with demand as
well as the frequent changes common to any nascent
The complexities can seem daunting.
Yet the upsides are often worth the risk, and many
cannabis producers are rising to the task of balancing
stringent regulations, rising consumer demand, and
shifting market landscapes.
The cannabis industry shares many similarities to the
pharmaceutical, cosmetic and food & beverage
industries but must also address unique needs and
Cannabis companies and their ancillary partners have
to be innovative and flexible to keep up with the fast
pace of change.
Market Growth – Booming
The U.S. cannabis industry is booming despite its inconsistent legal status.
In the past five years, the industry has grown over 200% as more states
began legalizing some marijuana use for medical purposes. This has
prompted an influx of business startups and has helped legitimize mari-
juana use in the eyes of many. Last year, the industry topped $7.3 billion
– a 35% growth over 2015 – which is higher than the dot com and broad-
band booms and which many believe is conservative. Indeed, industry
experts see this pace of growth continuing over the next five years.
Market Growth – Breaking it Down
Currently, 65% of cannabis sales stem from medical marijuana, which is
legalized to various degrees in 29 states with legislation pending in 15
more. However, recreational or adult use of cannabis (legal in nine states
but only in effect in five currently) is fast growing. It usually outpaces
medical sales by a 15:1 margin the first few years it becomes available.
Nevada, the latest state to legalize recreational use, expects to see 20:1
or higher sales of recreational cannabis due to the state’s high tourism
volume. Experts believe that by 2021 every state in the U.S. will have
legalized cannabis for medical use and that sales of medical marijuana
will top $15 billion at that point. An additional six states are expected to
permit recreational cannabis sales in the next two years.
As sales are growing rapidly, the formats are shifting away from can-
nabis as a flower/bud into more processed formats of oils, edibles, and
topical products. This provides an opportunity for ancillary businesses
(e.g., packaging) to grow and expand within the industry as well. Current
estimates put the cannabis packaging market at less than 1% of indus-
try sales at $15 million. However, experts believe the pace of growth for
packaging may eclipse the growth rate of the overall cannabis market as
legalization spreads to more states, packaging becomes more regulated,
and cannabis brands move towards higher-end and more customized
packaging options. When sales were under $5 billion, most packaging
companies were not willing to invest in creating products specifically for
the cannabis industry, preferring instead to borrow and adapt packaging
products from other industries such as pharmaceuticals and cosmetics.
Now, however, with cannabis sales approaching $10 billion, firms are
finding it worthwhile to develop products specifically designed for the
unique needs of cannabis companies.