Growing cannabis

Main trends and segments of cannabis market

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Disclaimer: This article does not constitute investment advice. For information purposes only. 

Cannabis market has been gaining momentum worldwide for the past couple of years, projected to reach $66.3 billion by the end of 2025. According to BDS Analytics, 2018 cannabis sales in the U.S. cashed in $11 billion, and this number is expected to rise significantly in 2019 and 2020.

Apart from recreational purposes it is widely known for, cannabis is getting recognized in a variety of industries – as a painkiller, dietary supplement, material for clothes, packaging and more. Combined, it is expected to make a hundred billion dollar market in the upcoming ten years or less.

The rapid growth of the market, regulatory clarity and successful use cases attract the attention of professional and retail investors to cannabis. While the market is still in its early stages, it opens a unique opportunity for early investors. 

For those who are new to this market, Stobox is kicking off a series of introductory materials about cannabis. In this article we’re breaking down the main segments of cannabis markets that are getting attractive from an investment perspective.

Medical and recreational marijuana

Marijuana, a drug from the Cannabis plant, is getting increasingly recognized for its medical benefits, proven to be effective in the treatment of chronic pains, muscle spasms and even severe forms of epilepsy. According to the Marijuana Policy Project, there are over 3 million medical marijuana patients  registered in the United States and its territories, and this number keeps growing. Medical marijuana can also be prescribed by doctors in the U.K.

While cannabis is decriminalized in many countries around the world, it is currently fully legal only in Canada and several states in the U.S. But discussions around the change of marijuana’s legal status are starting to be lead in other countries as well. As an example, Luxembourg has just recently announced the intention to fully legalize cannabis for recreational purposes – the first country in Europe to do so. 

Growing cannabis

Industrial cannabis

Hemp (species of Cannabis Sativa, similar to marijuana) can be used for industrial purposes due to the fiber structure of its stalk. In the U.S. it has been gaining popularity as an environmentally friendly alternative to plastic packaging, paper and even some construction materials. Oil extracted from hemp seed can be used in varnishes and paints.

As a renewable source for raw materials, hemp also can take in CO2 and detoxify the soil, attracting the attention of impact investors. 

The massive trend around sustainability, provoked by the rising consciousness of the state our planet, puts this material forward as an attractive business and investment opportunity. 

Dietary supplement

CBD (cannabidiol) oil is the second most common cannabinoid identified in cannabis plants after tetrahydrocannabinol (THC) that is used for recreational purposes. Unlike marijuana, CBD is a non-psychoactive compound, but it is famous for its antioxidant and anti-inflammatory effects and is widely used as a dietary supplement to facilitate sleep and appetite.

According to BDS Analytics and Arcview Market Research, collective market for CBD sales in the U.S. will surpass $20 billion by 2024.

CBD oil

CannTech 

The booming cannabis market attracted the attention of tech innovators. Right now, cannabis tech is considered to be one of the most attractive cannabis-related sectors by VCs. 

In QII 2019 cannabis tech company PAX labs that develops vaporizers and other products, raised $420 million from such giants as Tiger Global Management, Tao Capital Partners and Prescott General Partners.

in December 2018, cannabis delivery platform and mobile app Eaze closed its Series C on $65 million.

New apps and services, catering for this new industry, keep emerging on the market and raising capital. 

Investing in cannabis

Challenges 

The change in the legal status of cannabis in new jurisdictions keeps opening entirely new markets, creating an absolutely unique situation for entrepreneurs and early investors. Many new businesses, starting from the production of medical and recreational marijuana, to the supporting infrastructure, are emerging on the market.

However, the investment opportunities are not as easy to reach, especially for retail investors, because of the existing stigma around this industry and the lack of information. Due to that, there is currently no technical infrastructure for cannabis businesses and retail investors to connect. 

On the other hand, even in those jurisdictions where cannabis is fully legal, businesses are unable to use banking instruments and are forced to turn to large institutional investors at worse terms.

Stobox believes that these issues can be solved for companies in the cannabis industry through tokenization and raising funds from retail investors. Stobox is currently developing a fully legal model to enable cannabis companies to tokenize their assets, as well as accept investments in cryptocurrencies. 

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