The Evolution of the Cannabis Industry

[vc_row][vc_column width=”2/3″][vc_column_text]In 1996, the modern-day cannabis industry was forever changed when medical cannabis was legalized in California. In the years that followed, cannabis legalization became a global phenomenon and spread to other countries and continents. Today, over 50 countries have legal cannabis programs and 6 countries have also legalized use for adults.

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The evolution of the cannabis industry can be divided into three eras:


Era 1: The Infancy Years

During this period (1996-2018), many industry players were driven by a passion for cannabis and its therapeutic benefits which were widely based on anecdotal evidence. Unfortunately, these industry forerunners were generally ill equipped to handle high growth businesses and were focused on secrecy, in addition to having little to no understanding of the need for regulatory compliance.

Investors lacked the necessary knowledge to perform effective due diligence. Additionally, they failed to understand that as with most mainstream agricultural crops, the cannabis flower would inevitably turn into just another commodity.

Era 2: The Adolescence Years

The era we are currently in began in 2019. This era has been defined by increasing regulatory oversight, intensified competition, and continuous product development. This has been overshadowed by short-term opportunists and market speculators entering the market. Capital access has played a significant role in a company’s abilities to grow and become a competitor in the market, and flower prices drop as a result of competition and oversupply. Venture capital and private equity groups with at best limited expertise in the cannabis industry are backing large-scale operations.

However smart investors are on the lookout for new ventures to add true value to the market, in particular in technology-driven companies which service the industry. These technology companies can ride the upward trajectory of the product and have higher profitability than cultivation-based operations. In the words of Mark Twain: “During a gold rush, it’s a good time to be in the picks and shovels business.”

This era is likely to continue until cannabis is legalized on a federal level in the United States, which could happen during the first term of the Biden Administration, although nothing is guaranteed.

Era 3: Full Maturity

Once cannabis becomes legalized at a federal level, the industry will enter the era of full maturity, which will be defined by the wide legalization of cannabis for adult use. Therapeutic/well-being uses will likely be supported by new scientific evidence, and a new wave of pharmaceutical drugs may enter the market after years of research and clinical trials.

International trade will be facilitated and corporations will be the major players of the industry, as is the case in the pharmaceutical and food industries. Playing a major role in supporting the industry’s capital needs will be professional institutional investors, and cannabis will become just another commodity.

Maximizing yield will become a focus and economies of scale will be critical. Focus will also be shifted to cannabis quality assurance and an increase in productivity and throughput, and more value will be placed on brands.[/vc_column_text][/vc_column][/vc_row]2021-03-04 13:10:59Itayganot

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