Cannabis Customers Demand Quality, Consistency As Industry Grows

The Hemp Farmers Association (HFA) aims to “educate, support and help protect” hemp growers. ( Giles Shell )

As marijuana’s legal availability grows, so do demand and consumer expectations. Large investments, mergers and acquisitions and new technology are booming in this budding industry.

As the industry expands, so do opportunities for growers and input suppliers alike. Farmers who grow the herb are seeing profits hand-over-fist. Learn more about how one Missouri farmer, who doesn’t drink or smoke, is about to churn our 20,000 lbs. of marijuana per year. The industry is poised to continue explosive growth, meaning the opportunities could be long-lasting.

By 2025 the global legal marijuana market is forecast to reach $146.4 billion, according to Grain View Research. In 2016 the U.S. market was estimated at $7.06 billion, with medical marijuana as the largest segment, expected to hit $100.03 billion in the U.S. by 2025.

Ten states and the District of Columbia have adopted the least restrictive laws for marijuana and allow it for recreational use. Twenty-three other states allow its use for medical purposes, according to Governing.com, updated Nov. 7, 2018.

 

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Source: Governing.com

As cannabis is legalized for medical and recreational use customers are no longer as accepting of quality issues as before. With more competition comes higher standards for end users.

Legal marijuana can be purchased in a number of forms, with varying ways to create value-added products. Other forms alternate to smoking include tinctures, oils, vapes and edibles, according to Grand View Research.

“The increasing number of companies operating in the marijuana market is expected to bolster quantity and variety of products reaching end users,” Grand View Research reports.

Cannabis can be grown indoors or outdoors but the industry is moving toward indoor production. Indoor facilities provide security for the high-value crop in addition to greater control over growth conditions. Like any crop, sunlight, water, nutrients and temperature ultimately determine final yield and quality.

 “This control is becoming increasingly important as the cannabis market grows,” according to CannabisNewsWire (CNW), an information service focused on cannabis news and companies. “Customers may be more forgiving of varying quality when companies are small, or their product is hard to obtain. But as companies grow and supplies become more consistent, people expect consistence and quality.”

It’s basic market principles: as the number of suppliers grow, so does product quality, differentiation and consistency. For example, companies are trying to create crops with higher doses of tetrahydrocannabinol (THC) and cannabidiol (CBD).

“The more powerful the plant, the more customers will return, creating a strong brand loyalty,” CNW reports. “Hydroponics can be an essential piece of this success.”

As the cannabis industry booms hydroponics isn’t far behind. One such company, Sugarmade, estimates $30 million in revenue in 2019—a 500% annual growth. The company is pursuing mergers and acquisitions to achieve this level of growth and recently acquired Sky Unlimited LLC, a deal worth $40 million. This deal gives the company control of AthenaUnited.com—an online company proving hydroponic equipment.

“In the first half of 2018, merger and acquisition activity [in the cannabis industry] nearly doubled from a year earlier to 145 deals in North America [compared to 79 the previous year],” Forbes reports. From January to the end of June public and private cannabis companies raised $4 billion, up from just $1.3 billion the previous year.

 

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