Secondary marijuana industries

The legal cannabis industry is growing in more ways than one

By all accounts the future is certainly green in more ways than one. Many ‘potrepreneurs’ in the US aiming to cash in on the green rush are looking north to Canada.  With a medical marijuana program already in place, and legislation to legalize marijuana now on the table, it’s a market many people have set their sights on.

However, if you’re hoping to be one of the few LPs joining those that currently have licenses from Health Canada, you’d better hope your application is already submitted. From thousands, there are still hundreds of applicants in the pipeline, with many complaining of waiting in the interminable limbo that is the LP application process. Given the head start that many of the larger producers already have, it would be foolhardy to believe that new players could hope to capture a significant portion of the market share.

And yet there is still the feeling of money waiting to be made—especially in a recreational market. Where are these new start-ups going to appear? What shape can we expect them to take, and what niches are there yet to be filled?  There are some lessons we can hope to learn from our neighbors to the south.  But these comparisons should be tempered by remembering that each of the states with fully legalized marijuana on the books has a smaller area and population compared to Canada. Also, they are bordered with at least one other state that does not have similar laws, and their state laws still contravene the federal law that keeps marijuana as a scheduled substance.

Of course, California passed proposition 64 this past November and will plan to have a legal market in place early 2018. Soon they may just set the standard we see applied in many areas, including our own. The population of California was an estimated 39.1 million people in 2015. By comparison the population of Canada was estimated to be 36.2 million the summer of this year. California is also the epicenter of the tech industry in the United States (and some would argue the world). Who knows what might develop where tech and cannabis overlap?

Along with this, there are a few things we can extrapolate from the examples set in Colorado, Washington, Alaska, and Oregon, as well as our own medicinal marijuana market at present.

Where tech meets marijuana

In every industry, web developers are a sought after group. A company’s website is their de facto storefront these days and you can’t hope to compete if your landing page looks like something more than five years old (or god forbid… from the 90’s). With every new marijuana-related business looking to grab a piece of the market, websites will be springing up left, right, and centre. Those developers who are able to capture the needs of their clients while still providing an attractive, modern, and easy-to-use platform (because people out there will be high) for businesses and consumers alike will be in great demand. In fact, a quick Google search will land you at a number of marijuana focused branding agencies and web development companies.

Social weed

Visit the angel investors website, angel.co (a website dedicated to connecting startups and angel investors) and you’ll see that marijuana focused social networks and apps already exist. You’ll also see that it isn’t preventing everybody and their cousin from trying to be the ‘facebook of weed’, the ‘Yelp of marijuana’, or the ‘Uber Eats of cannabis’.

Can these networks and apps survive in a world flooded with social media services? Once a legal market opens up, the already existing large social networks will make space to incorporate (acquire) the marijuana networks and apps that are currently being developed. It’s the rational choice, given that it will allow them to widen their advertising platform to a new demographic. There are separate apps and communities for food recommendations, book reviews, wine, and everything else under the sun—so why not weed?

Advertising

The amount of media coverage and advertising we can expect to see will be limited in large part by government regulations. As it stands now there are strict prohibitions on advertising tobacco products, but alcohol product advertising enjoys quite a bit more freedom. A likely middle ground would be a set of regulations somewhere between these two. How companies choose to market themselves, develop their brand, and engage the community at large will be interesting to see. It also has the potential to earn some companies and individuals a lot of money.

Waxed mustaches and weed

This is a new age. Marijuana legalization in Canada will occur during a time in which we’ve seen a resurgence of the craft producer. The young urbanites of today eschew the easily obtained, mass produced products that seemed to be more than sufficient 20 or 30 years ago. From small independent coffee roasters and cafés to the explosion that has been craft beer, it seems as though a large portion of the young urban demographic prefer to get something unique that’s just a little superior in quality.

New growers may not necessarily need to compete with large LPs, they might do just fine producing a quality niche product that can be sold at a premium and appeals to consumers who are more likely to choose products that are singular, sustainably grown, and novel.

How the smaller craft market evolves and takes shape will be interesting to see.

Gadgets and other retail

There is a seemingly endless supply of new tech toys that are in development for the burgeoning marijuana market. There are high tech grow boxes that allow even the clumsiest gardener to harvest at home with little effort, there’s a steady stream of slick new vaporizers, oral mucosal sprays, portable dab rigs, and high-tech cannabis humidors—if you can think of it, someone is making it.

But one gadget to keep your eye on isn’t geared towards the consumer market.  It’s aimed at law enforcement authorities. Since the idea of legalization first gained steam there’s been concern regarding smoking and driving. With this in mind, whichever team is able to get the first marijuana roadside testing device to market is likely to see a huge financial windfall. There are still some considerable hurdles to overcome, but government and regulatory authorities want their police equipped with these in a recreational market.

High tech gadgets don’t even include all the other items that are likely to come to market once recreational marijuana becomes the status quo in Canada. There are already all kinds of marijuana focused products: fertilizers and nutrients specifically for cannabis, literature and guide books, rolling papers, bongs, pipes, and you better believe someone will be selling t-shirts and hats the day marijuana is fully legalized. Expect to see an increase in these products.

Concentrates and marijuana infused products

Whatever happened to just having a joint? That’s a question oft heard uttered by older consumers unused to the wide variety of products that you can find in today’s dispensaries. Not only is it possible to find marijuana that is much more potent than the strains grown 30-40 years ago, but there is a wide range of extracts and concentrates on the market that just weren’t available back then.

Wax, oil, shatter, butter, rosin….  hash is considered relatively tame by comparison. The number of these butane, heat, CO2 hyperfractionated, or other organic solvent extracts can be quite dizzying (both literally and figuratively).  Plus these extracts and concentrates can be used to produce all kinds of edibles and beverages dosed with varying degrees of potency. The candies, cookies, brownies, and other food products are pretty standard at this point, but there have been groups producing marijuana infused coffee and coffee pods, teas, sodas, beer, and even wine. And if you don’t feel like eating you could choose to use some of the infused lotions, lip balms, salves, suppositories, oils, patches, or toothpicks that are being produced.

There are a wide variety of uses for marijuana extracts and the list is growing all the time. Following resolution of the June 2015 Supreme Court of Canada case, R v Smith, that determined patients would be allowed to consume marijuana in forms other than smoking dried plant material, LPs have started to receive licenses from Health Canada to produce extracts. But they are both less concentrated and considerably more expensive than the products you’d find in grey market dispensaries. This will almost certainly change in a recreational market.

To meet the increasing medicinal and recreational demand for these concentrates, extraction companies will crop up offering their services to both small and large producers, as well as home growers. You can already see regular job postings from companies looking for extraction technicians. Aside from this there is likely to be a small fortune made by the group of mad scientists that develops a marijuana extract capable of being satisfactorily and stably mixed, without eventual separation, into liquid used in electronic cigarette devices.

Testing services

There are already a number of laboratories that offer marijuana testing services in Canada. These companies need to be licensed dealers—a designation that sounds more entertaining than it actually is. Licensed dealers are entities licensed by Health Canada to handle controlled substances. It is a certification that is not easy to attain, nor lightly given out.

LPs are already required to screen their marijuana products before release for disposition. The minimum level of testing is for THC and CBD levels, certain fungi and bacteria, heavy metals, and pesticides. Dispensaries aren’t required to do this because they already operate outside the law.

With the increase in medical marijuana patients and the impending recreational market, testing laboratories have begun offering a wider variety of testing services than they already do. This can include a complete cannabinoid profile (including some of the over 80 other cannabinoids beyond just THC and CBD), measurement and analysis of terpenes, stability studies (these studies are conducted to determine expiry dates; without these studies companies may not legally apply an expiry date to their product), genetic screening of strains, and any number of other properties I can’t currently imagine.

So with the increase in the amount of marijuana to be tested once legalization occurs and an increasing number of possible tests to be run, the analytical laboratories offering these services are likely to be quite busy, and I wouldn’t be surprised to see many new labs popping up.

Wholesale distributors

When looking at the developing marijuana market, it helps to look at similar industries.  Whether that’s pharmaceuticals, alcohol, or tobacco, there’s usually a middleman between manufacturers and retail outlets—the wholesaler.  Wholesalers are required to meet their industry specific standards, and licensing and marijuana wholesalers are likely to be the same.

Companies able to jump through the necessary hoops to become wholesalers will be able to buy and stock marijuana products obtained at wholesale prices before then selling and transporting them to retail outlets, whether that retail outlet ends up being a private, state-owned, or pharmacy model is still up in the air.

Wholesalers solve the supply chain management issue of getting product from manufacturers to the end consumers. They are also able to stock and provide a selection of products from a variety of producers. If you happen to have qualified individuals, the capital required to get through the licensing procedures, and a warehouse, wholesale distribution is likely to be just as lucrative a venture as it is in the alcohol, tobacco, and pharma industries.

Facility development and climate engineering

Growing a crop—any crop—that will meet the demand for an entire country means more than just planting lots of seeds and taking more cuttings. Existing LPs will need to scale up operations for a recreational market and there will be an influx of new producers. Each of these operators will be required to hire the services of companies and professionals to help them with facility/greenhouse design and construction, environmental monitoring and control, HVAC, water/irrigation systems, grow rack design and construction, lighting, security, and quality assurance.

Greenhouses supplemented with lighting allow for some of the cheapest production costs per gram of marijuana, but these are not the kind of greenhouses you might set up in a backyard garden. Whether it’s inside or outside, growers are looking to take advantage of the newest technologies available to them. These can include measuring and manipulating air current (beyond controlling humidity and temperature, air circulation can affect plant growth), CO2 levels, light spectrum, rates of growth, and more. Add these to the humidity, temperature, lighting times, total dissolved solids, and pH that are already monitored by producers, and you’ve got a lot of different parts to the growing climate that need to be maintained.

This is a lot to setup and it’s also a lot to record and analyze. There will not only be a boost to the industries that setup, maintain, and develop these technologies, both old and new, but also the companies that record, track, and analyze the data being generated. With each new point of control, in every room and in some cases for each individual plant, you produce a new metric that can be manipulated, measured, and studied.

Where’s the ceiling?

So maybe you’re looking to jump on board the wild ride that is investing in an emerging industry. If that’s the case, this article may give you some food for thought regarding where to look for opportunities regarding cannabis. There are sectors that will be affected that aren’t even listed here (automated production machinery anyone?),  and there is a huge amount of speculation on how large the industry will grow. From a few billion dollars, to potentially surpassing the alcohol industry.

There will certainly be happy days for those few that are early, smart, and lucky enough to make wise investments or career choices.

- Matthew Trudeau

Featured image via Wikipedia user M88nly.


Matthew Trudeau works as a quality assurance consultant for CanCanna Inc., a licensed producer applicant based out of Richmond, BC. His previous work includes employment in health and fitness as well as molecular biology research. He is generally interested in drug and health policy, the developing cannabis industry, and writing on what captures his attention.

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1 comment

  1. Ryan BB Reply

    The government hasn't spoken up about the so called craft businesses and how they are intended to run. Looking forward to seeing how it all plays out. All I know is I'm applying for my growing permit now, before they lower the legal plant limit to 4 per person. Doesn't seem fair that people have rights to grow 1000s of plants while others other have a right to grow 4. The rich get richer...meh, I'm still higher 😛