Lux Research Identifies Budding Opportunities in the $12 Billion Cannabis Industry

BOSTON, June 13, 2019 /PRNewswire/ — Medical and recreational cannabis is becoming big business. The size of the cannabis market in the Americas is $12 billion, with an estimated five-year CAGR of 15%. Additionally, venture funding continues to grow exponentially, rising from $10 million in 2014 to more than $250 million in 2018. To better understand this nascent industry, the team at Lux Research, a leading provider of tech-enabled research and advisory services for technology innovation, identified and analyzed the opportunities and barriers across the cannabis value chain in a new report, “Cannabusiness Innovation: Opportunities, Bottlenecks, and Barriers.”

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.

“The cannabis industry will continue to grow. North America’s favorable environment includes Canada’s recent cannabis legalization, 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 favorable 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.”

According to Lux, the cannabis value chain is divided into four segments: cannabis cultivation, distribution, processing, and consumer products. This new 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.
• Production systems and inputs – The price of wholesale cannabis has dropped nearly $3/g. 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, especially for full-spectrum cannabinoids.

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.
• 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. With increased consumption of concentrates and pharmaceuticals, antiquated delivery systems will experience advancement as consumers demand an improved experience.

Lux’s “Cannabusiness Innovation: Opportunities, Bottlenecks, and Barriers” report offers details on a range of patent, funding, merger and research activity. In addition, the report delves deeper into the opportunities and challenges within each market segment and category.

For more information, download the Executive Summary.

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. With quality data derived from primary research, fact-based analysis, and opinions that challenge traditional thinking, Lux empowers clients to make more informed decisions today to ensure future success. 

For more information, visit www.luxresearchinc.com, visit our blog www.luxresearchinc.com/blog, connect on LinkedIn, or follow @LuxResearch. 

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SOURCE Lux Research