Cannabis Related Industries Are On the Rise (And Getting Higher…)
Cannabis and its related industries have experienced explosive growth due to regulatory, medical and investment factors. Native American tribes looking to further develop their economy may want to consider participating in the growth of the cannabis market.
There are a number of ways to get involved in the cannabis market. According to The Marijuana Index, there are 11 sectors related to the cannabis industry.
Sectors Of The Cannabis Industry
- Biotech – consists of pharmaceutical companies focused on the research and development of new drugs and products utilizing cannabinoids, the active compounds within cannabis.
- Cultivation & Retail – companies that grow and sell cannabis flower and related products.
- Hemp Products – companies that produce and sell hemp products. While hemp is a member of the same plant species as cannabis, the focus is on its higher concentration of the non-psychoactive compound cannabidiol (CBD).
- Marijuana Products – Companies in this sector are focused on developing and selling marijuana-infused products. The growing popularity of cannabis has led to a wide and evolving range of new cannabis products including infused food products, drinks, oils, extracts, and lotions.
- AgTech – companies focused on providing technologies, equipment, and supplies to assist in the production and cultivation of the cannabis plant.
- Real Estate – consists of companies that develop, own, and/or lease commercial real estate properties to licensed cannabis operators.
- Consumption Devices – consists of companies focused on developing and selling personal consumption devices such as vaporizers and inhalers for cannabis consumers.
- Investing & Finance – consists primarily of companies focused on investing in the cannabis industry. This includes holding companies which own and/or manage a portfolio of cannabis assets.
- Tech & Media – covers companies that provide technologies, software, and media for cannabis companies and consumers.
- Secondary Services – companies that provide consulting and other business services directly to marijuana cultivators and retailers.
- Other Ancillary – companies that provide products and services related to the broader cannabis economy that do not fit within the other sectors. This sector includes companies focused on developing breathalyzers and testing kits for marijuana consumers and organizations.
While these sectors present a number of avenues for tribes to get involved – specifically AgTech, Real Estate, Hemp and Cultivation – there are 6 reasons WHY an investment in any of these sectors would be beneficial to your tribe:
Recreational marijuana will become legal in Canada on Oct. 17, 2018. This makes Canada only the second country in the world to legalize the drug for both medical and recreational use.
When Canada’s lawmakers recently approved legislation to fully legalize cannabis, it spurred more activity in the marijuana/cannabis industry by driving cannabis related equities higher and making a compelling case for new stock listings.
Here in the US, marijuana is legal in some states for medical purposes, and it is legal on a state level – it is still illegal federally. Mounting pressure from the medical community as well as political considerations may change the legality in the US which will explode the market.
U.S. pot sales could reach $75 billion by 2030 if the nation fully legalized recreational use, says a report by a Cowen & Co analyst, potentially making the industry bigger than the U.S. wine market ($60B) and compared to cigarette market ($77B) and beer ($110B).
- Investment by Large Corporations
Large corporations are positioning for the long term in the cannabis market. Lawn-care company Scotts Miracle-Gro (SMG) has been bulking up its hydroponics business to take advantage of a potential boom in marijuana demand. Alcohol company Constellation Brands (STZ), the makers of Corona beer, invested $3.8 billion to boost its stake in Canadian grower Canopy Growth Corp., betting legalization will gain traction around the world and especially in the U.S.
This has been a major plus for cannabis-related equities. Along with new investments by large corporations, Canada’s Cannabis Act approval has sent cannabis related equities higher. A rising tide lifts all boats.
- Medical Studies on the Benefits of Cannabis
Research on medical marijuana has shown patients with chronic pain needed fewer prescription pain meds, patients with multiple sclerosis had less painful muscle spasms and patients with severe inflammatory bowel disease began to eat again.
As positive medical research on the health benefits of cannabis expands, so will its market.
- Increasing IPO Activity
There’s a saying on Wall St. that says “the trend is your friend”. It means that you want to go in the direction of the trend. Right now, the trend shows more and more investment in cannabis related companies. Private companies have taken advantage of the trend of Wall Street taking companies public and reaping whirlwind profits when their stock has its IPO. These companies see that by going public they can raise money and profit handsomely. With large Wall St. firms backing these new issues, the trend is definitely on a positive upward slope for the cannabis industry.
- Hemp Production
Hemp comes from the same family of plants that produce marijuana. Under U.S. law, and with a permit from the U.S. Drug Enforcement Administration (DEA), hemp can be grown only for research purposes.
However, the Department of Justice opened the door for hemp cultivation by Native American tribes in 2014 when it agreed that tribes can set cannabis-related laws just as states can.
Native American-owned CannaNative LLC signed a resolution with the Navajo Nation, the largest federally recognized tribe, to grow industrial hemp. The Navajo Nation has determined hemp to be an acceptable crop to grow.
Hemp is used in a wide variety of products, from food to construction materials. It is a revenue source that is seen as something to level the playing field for all tribes, as not all tribes have profited as well as others in the casino industry.
- Explosion in Cannabidiol Use
Cannabidiol, or CBD, is a compound derived from cannabis. The CBD industry is growing and continues to gain popularity. CBD is used in oils, lotions and infusions to manage pain, and help with such things as migraines, bowel conditions, insomnia and menstrual cramps.
One of the factors influencing CBD’s success and continued demand are the numerous ways in which it can be used in products ranging from food/edibles to cosmetics, beverages and health supplements. The industry’s success and increasing demand for more CBD-based health products have led to the creation of its own industry.
Cannabis data analytics firm New Frontier Data predicts CBD sales will nearly quadruple over the next four years, from $535 million in 2018 to over $1.9 billion by 2022, while research firm Greenwave Advisors estimates the US market will grow to $2.1 billion in the next two years.
Between the potential for further legalization, changing perceptions of marijuana, the proven health and medical benefits of cannabis and the explosion in Wall St investment, investing in cannabis companies and related industries is a potentially lucrative long-term investment for Native American tribes.