Cannabis Market Competition Intensifies

Canada is currently racing to get into pole position in time for its October 7th date for recreational sales, California began recreational sales at the beginning of this year, major U.S. companies are investing in the yet-to-be-legal industry and a plethora of other, smaller mergers and acquisitions are ongoing. The market is already getting saturated, according to Brightfield Group’s blog, and more and more products are hitting dispensary shelves as even small start-ups vie for market share in the growing industry.

This is where competition breeds. At this point, innovation is what may make or break companies as they compete for an increasingly smaller space on the dispensary shelves. Different ideas are getting attention, like Constellation Brands (NYSE: STZ) and Molson Coors (NYSE: TAP) investing in the Canopy Growth Company (NYSE: CGC) and Hydropothecary Corp. (OTC: HYYDF), respectively, in an effort to create cannabis-infused beverages and get a foot in the market early. These investments are big indicators of support for the industry from proven U.S. companies. What is important to notice is the variety of ways in which cannabis can be consumed, from being smoked, vaped and even absorbed, the edibles segment, however, is one of the fastest growing within the market. As such, C21 Investments (CSE: CXXI) recently acquired Grön Chocolate LLC and Grön Confections LLC, a brand of premium cannabis-infused chocolates in an effort to get ahead in the segment.

While edibles and tinctures are growing in popularity with the public and importance with the companies, cannabis-derived oils are already a major player because of their importance to the medical side of cannabis. Medical cannabis emerged as the largest cannabis sector in 2016 and is expected to exceed USD 100 Billion by 2025, according to Grand View Research, while the entire cannabis market hits about USD 146 Billion that same year.

While some companies have been investing in edibles and beverages, the processed cannabis market has been growing. Part of the reason has been the less detrimental effects of inhaling vapor instead of smoke, but also because processing the cannabis plant into oils makes a stronger product, as well as a more convenient one. The oils are often sold to medical users due to their health benefits but have crept into the recreational side as well. The problem had been the extraction methods, so far in the infancy of the industry there hasn’t been many technological breakthroughs, but CLS Holdings USA (OTCQB: CLSH) have recently been granted a non-provisional U.S. Utility Patent for a more efficient extraction method of cannabidiol. The Company intends to license the intellectual property to other operators as the cannabidiol market is expected to grow at a CAGR of more than 39% until 2021.

As efficiency and quality become more important in the industry it will begin to become leaner and shake off some of the saturation through competition, and until that time, companies have to innovate.

 

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