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Cannabis

A Budding Business

The 4th Annual Cannabis World Congress & Business Exposition in NY took place last week, and the buzz is substantially dimmer. Compared to last year, the crowd was more sophisticated, knowledgeable, and connected. But as the cannabis industry becomes more settled, it’s also becoming clear that (consumer products) licensing is not going to be a significant player anytime soon.

TLL estimates that retail sales of licensed cannabis and related accessories was anywhere between $100–140 million in 2016, compared to $60–100 million in 2015. That figure is still less than 1% of all retail sales in the cannabis industry. There are no estimates on how much sales of related accessories totaled—and considering the novelties craze we can see in areas like toys and apparel, that is slightly troubling.

Know Your Product

Cannabis product can be divided into three major “types”:

THC is the primary psychoactive ingredient in marijuana and the most well-known cannabinoid. Cannabis strains with more than .3 percent of THC are legally regulated.

CBD or cannabidol, which is sold as an extract or purification in health and beauty aids such as pills as well as food and beverages. The ingredient is espoused for its health and wellness applications thanks to its anti-inflammatory, analgesic and seizure reduction properties. Cannabidol is legal nation-wide.

Industrial hemp, the non-psychoactive strain of cannabis, is used for food and fiber production. Compared to strains grown for recreational usage, hemp has low concentrations of THC and higher concentrations of CBD. Some companies refer to their products as hemp rather than CBD.

While retail sales of Bob Marley and other brands (the list remains virtually unchanged from when we last tracked it) remain strong, there are some other troubling trends. The retail market remains split: head shops that aren’t licensed (by their state) to sell cannabis instead stock accessories and CBD-infused goods, while distributors and other licensed retailers sell only THC-infused products. Many attendees mentioned that consumers are increasingly demanding a “one-stop” shopping experience, but that the current distribution breakdown isn’t likely to shift anytime soon.

Many smaller players at the show still lacked the basic business sense for branding, merchandising, and distributing. They’re getting help from a lot of new service providers, however, including lawyers, accountants, marketing agencies, and even what is dubbed the “Shark Tank of Cannabis,” The Marijuana Show. But I saw no manufacturers eager to profit off of one of the biggest and quickest growing political and cultural movements in the last 50 years. It felt like half the attendees were institutional investors, the other half were people who were vaguely interested in going into the business, and a tenth were actively, hands-on engaged in the cannabis business.

What is interesting is the highly political (and local) slant the show has taken on. The organizers of the show launched, with the help of Rev. Al Sharpton and other cannabis activists, the Decode Cannabis movement (decriminalization, entrepreneurship, civil rights, opportunity, diversity, education—with the “national campaign coming soon,” according to the website). Other political figures included former Minnesota governor and WWE personality Jesse Ventura, Republican political strategist Roger Stone, and NY State Senator Diane Savino. Savino noted that it’s not likely NY will get legalized recreational adult-use cannabis anytime soon. The rule of thumb? Ten years after medical is legalized. What is happening in NY, and many other states with medical, is that the consumer base is not growing as fast as expected, thanks to bottlenecks with doctors and the licensing process.

I’m not sure what other business is so obviously politicized—coal, maybe? What is clear is that as other countries like Canada step up as the primary source of legal cannabis in the U.S., the first big (as in, on a national level) branding deals might just be happening up north instead.

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