January 7, 2016
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When you think of the marijuana economy, the first types of businesses that you’d expect to link with the industry are the primary players—growers, producers, dispensaries, and even testing labs. But the marijuana industry opens doors to business opportunities far beyond the primary players.
As with every other industry, the marijuana industry needs a lot more than the actual manufacturers and retailers. It also needs a lot of players across the entire supply chain, and that’s where some of the biggest business opportunities in this industry currently exist.
It’s an opportunity that has not gone unnoticed. In fact, many companies have already seized the opportunity by extending their current businesses to service the primary marijuana players.
A key finding in Cannabiz Media’s report, Tracking the Connecticut Licensed Marijuana Economy: 2015 Edition, was that a significant opportunity in the Connecticut marijuana industry is investing in picks and shovels. It’s not surprising that recent news reports have been highlighting the secondary players in the industry that have discovered their own opportunities to generate big profits from marijuana.
While the marijuana economy is expected to grow to $29 billion by 2019, the market for all of the products and services marijuana growers, producers, dispensaries, and testing labs need is expected to grow as high as three times that amount.
According to a December 2015 report by Merrill Lynch, Medical Cannabis has a High Potential: A Joint Biotech and Tools Primer, the market for equipment used to test cannabis for potency and quality (i.e., Life Sciences Tools) is expected to grow to between $50 million and $100 million by 2020. Add in all of the services and equipment that growers, sellers, and testers need—such as lighting, shelving, temperature and humidity controls, storage containers, trimming tools—and the size of the market grows exponentially!
The Cannabiz Media report says, “Companies in the agriculture space see cannabis as simply another crop that needs their products. They’ll make money regardless as marijuana businesses need grow lights, fertilizer, greenhouses, and extraction machinery.”
Cannabiz Media’s research found that for many companies in the agriculture space, shifting into marijuana was a natural extension, but this is something businesses beyond agriculture are discovering and starting to pursue.
Waters Corporation was mentioned in the Cannabiz Media report as an example of a company that has successfully expanded into the marijuana industry. Waters Corporation financed its hardware to 75% of Connecticut’s marijuana growers. Merrill Lynch also mentioned Waters Corporation in its report along with Aligent Technologies and Thermo Fisher Scientific. All three are multi-billion dollar companies that are providing equipment to producers and marijuana testing labs.
However, smaller businesses are jumping on the marijuana business opportunity, too. The Milwaukee Wisconsin Journal Sentinel reported this week that multiple Wisconsin-based small and mid-sized companies are finding ways to profit from the marijuana economy.
Roastar created a new brand, Vessel Verde, to sell its digitally printed, flexible pouches to hold marijuana edibles for retail sale. Cubic Designs entered the market when a marijuana distributor contacted the company to purchase its mezzanine platform structures to hold marijuana plants. And when marijuana growers began purchasing multiple Quest dehumidifiers from Therma-Stor, the company saw an opportunity and created a complete business plan to ramp up selling its Quest products to marijuana growers.
There are many reasons why the marijuana industry is such an attractive opportunity for businesses outside of the primary testing, growing, and dispensing players. Current marijuana laws make it difficult for those primary players to make money.
There are laws preventing the primary players from getting traditional bank loans and credit. There are tax rules that don’t allow marijuana companies to take ordinary business deductions. And of course, there are still societal concerns about marijuana in general.
Despite these challenges, the marijuana industry is here to stay. All that’s left to find out is which companies will profit from it the most. The opportunity is wide open.
