Make no mistake about it: Marijuana is going mainstream.
Legal cannabis is already the fastest growing industry in the United States, with the first two states to legalize recreational use, Washington and Colorado, currently generating more than $100 million per month in sales. The floodgates will truly open this winter as California transitions to a regulated, adult-use market, worth an estimated $7 billion annually.
Within the next couple years, projections indicate the legal marijuana industry could be worth anywhere from $20 billion to $45 billion, representing an incredible opportunity for a wide range of ancillary industries, from legal services to equipment manufacturers to packaging suppliers.
And one of the fastest growing sectors in North America’s fastest growing industry is cannabis-infused edibles.
According to data provided by BDS Analytics, infused edibles represented 13% of the legal cannabis market from May 2016 to May 2017, accounting for more than $280 million in retail sales in Washington, Colorado and Oregon during this one-year time frame.
These numbers are only a fraction of the national market. Several states, including California, Massachusetts and Maine, are anxiously awaiting the start of adult-use sales. Plus, while eight states have legalized recreational marijuana, 30 states (plus Washington, D.C., Guam and Puerto Rico) allow cannabis for medicinal purposes.
Americans, in general, are increasingly opposed to smoking, and edibles provide medical patients, in particular, a much healthier alternative to smoking marijuana. Plus, edibles are more discrete, easier to use, provide pinpoint-accurate dosing and are capable of delivering a higher concentration of THC and CBD for those seeking pain relief. There are tens of millions of people in North America who would never consider smoking pot — but they might be willing to have a piece of chocolate every now and again, either for a fun buzz, pain relief, a better night’s sleep or to boost their appetite.
A research study published in September by two professors at Dalhousie University indicated that 46% of Canadians would be interested in trying marijuana edibles recreationally if it were legalized — and Canada is expected to do so by the summer of 2018.
It’s safe to say the future of this multibillion-dollar industry will be more closely tied to food products than a smokable herb.
And the possibilities are endless. Peruse any marijuana retail shop and you’ll find a dizzying array of cannabis-infused products: sweets dominate the market, but shops carry everything from pretzels and potato chips to condiments and olive oils. It’s not just “space cake” anymore. As incredible as it might sound, there are marijuana-infused barbecue sauces, sodas, ice creams, vegan granola bars, pizzas, maple syrups, mints, caramels, taffies, honey, sugar, salt and even Sriracha.
Marijuana marinara? Yep. Cannabis coffee? Yeah, that too. Pot popcorn? Sure thing.
Gummies and chocolates are currently the most popular edible categories, accounting for 28% and 21% of the market, respectively, followed by hard candies (8%), baked goods (7%) and beverages (5%), according to BDS Analytics.
But the edibles industry still has a long way to go. Only a small handful of brands have developed any sort of consumer loyalty and none have the mass market appeal or consistency of snacks found in supermarkets and convenience stores across the country. Plus, very few infused product manufacturers have the infrastructure needed to scale up to meet market demands. Just as marijuana growers have had to embrace experts in commercial agriculture, edible manufacturers will likely turn to established food companies to white-label superior products, increase efficiency, improve the flavor and texture of infused snacks, generate instant brand recognition through licensing agreements and ramp up production.
The cannabis industry also represents a major opportunity for non-infused snack food manufacturers. Jokes about cotton-mouth and the munchies aside, marijuana retailers are incentivized to sell as many non-cannabis products as possible, due to federal tax rules that prevent standard business deductions on “illegal activities.” Most states allow licensed marijuana retailers to sell non-infused snacks in addition to cannabis products, meaning millions of consumers will be grabbing a tasty snack or a refreshing beverage in addition to buying a joint at their local pot shop.
Ancillary companies that jump on board early could gain a major, strategic advantage in the fastest growing industry in North America. Those that hesitate could be left to fight over the crumbs.
Garrett Rudolph is the editor of Marijuana Venture, the top business magazine for the legal cannabis industry in the U.S. and Canada. On Jan. 17-18, 2018, Marijuana Venture will host The Retail and Dispensary Expo in Portland, Oregon, a trade show specifically catering to licensed cannabis retailers and ancillary suppliers, including interior design firms, retail fixture manufacturers, snack food companies, packaging suppliers, clothing companies and more. For more information, visit www.TheRADExpo.com.