The past decade has seen a sea change in attitudes toward cannabis, and as more and more countries and states have moved to legalize medical and recreational cannabis there has been a boom in production and sales of a variety of cannabis products.
This makes cannabis one of the most exciting emerging markets to get involved in, either as a producer or as an investor. But because it remains an emerging market, participation can be quite risky for those who don’t understand the internal dynamics.
If you’re interested in learning more about the cannabis industry, here are three essential points you need to understand before launching your own cannabis business, or investing in existing companies.
1. Cannabis Comes in Many Forms
When most people think of cannabis, they probably still think of a leafy plant that can be ingested through smoking. And while this remains an essential part of the cannabis market, it is only the tip of the iceberg.
Cannabis comes in many forms. For example, in Canada there were seven classes of cannabis approved for sale as of the beginning of 2020:
- Dried cannabis
- Fresh cannabis
- Cannabis oil
- Cannabis plants
- Cannabis plant seeds
- Edibles containing cannabis
- Cannabis concentrates
Each of these products has its own specific appeal, and not all of them are geared toward what we might think of as being the traditional market for cannabis products. Understanding the cannabis market as a series of overlapping markets is essential if you are to make smart production or investment decisions.
2. Cannabis Remains Highly Regulated
While many jurisdictions have moved to make cannabis legal for recreational and medical use, that doesn’t mean it isn’t regulated at all. Like alcohol, there are plenty of rules around how cannabis can be produced, distributed, and sold that are designed to protect consumers.
For example, cannabis producers need to maintain extensive data about every plant they grow so that every product can be tracked from seed to sale. Not only does this ensure the highest standards of quality control, it also helps keep profits out of the hands of unlicensed or criminal enterprises.
3. Cannabis Offers Many Business-to-Business Opportunities
Because of the unique nature of cannabis as a product, an entire industry is growing up to facilitate cannabis growth, production, tracking and sales.
For example, producers who want to bring their product to market efficiently often invest in payment solutions for cannabis companies designed to reduce the cost of doing business while mitigating risk and ensuring all transactions are compliant with government regulations.
This means that if you are considering investing, you should think beyond just cannabis producers. A great deal of value is being generated by the businesses serving the cannabis industry as well.
For some far-sighted investors, cannabis has already proved to be a lucrative area of investment. But like any exciting new industry, there has been a lot of speculation, and it can be difficult to know exactly how to make smart investment choices.
But by learning more about the breadth of the market, the regulatory framework in your area, and the various business-to-business opportunities that exist, it is possible to make informed investments that will yield a healthy return on investment.