With the changing landscape for cannabis in the U.S. and around the world, more companies are seeing the profit potential and making moves to shift or expand into the marijuana industry. Companies that traditionally served markets outside of cannabis are realizing that many of their products and services can be adapted to take advantage of the fastest growing industry in the U.S.
Cannabis: Birth of An Industry
The marijuana industry is unique in that it presents an opportunity for businesses and entrepreneurs to be part of an industry that is basically being built from the ground up. Due to the Federal Prohibition on weed, the traditional business foundations for an industry do not exist for marijuana. Everything must be invented, built, & established; from raw goods to processing to distribution.
Forbes recently reported on the Cannabis World Congress & Business Expo held this past week (June 17-19) in New York City. The article focused on the growing number of “crossover” companies.
Those with know-how in other industries, hoping to show how their products can play a part in the weed world.
There were firms on hand pushing cannabis oil extraction hardware, showing off their complex stainless steel machinery; marijuana vaporizer designers, touting their products’ ease of use and compactness. Other companies talked up proprietary bud-friendly fertilizers, greenhouse components, indoor growing equipment and little air-tight jars to put your weed in. Cannabis-centric business consulting service firms made an appearance as well.
Companies Crossing Over Into Marijuana Markets With Success
Some of the notable “crossover” companies at the Cannabis World Congress & Business Expo noted by the article include “Two Rivers Waters & Farming“. Two Rivers is a fiver year old agricultural business that is shifting from growing fruit to growing cannabis at its greenhouses. The company formed GrowCo in May of last year and plans to open four 105,000 sq. ft. greenhouses over the next 18 months. Two Rivers CEO John McKowen is quoted as saying:
“The gross revenue for us, per acre, for a cannabis crop is $5 million.”
“Our highest yielding conventional crop – which would be watermelon – comes in at around $12,500 per acre. There’s just no comparison.”
“Apeks” is another company that is seeing great success in expanding their products to serve the cannabis industry. The 15 year old company makes extraction equipment for “spices, coffee beans, fruits and plants, largely to be used as food flavorings or in natural products”.
The “light bulb” lit up for Apeks founder, Andy Joseph, when he learned some of this customers were using his equipment for cannabis oil extraction. In the 3 years since he started marketing his extraction equipment to the cannabis industry in 2012, the company has seen its sales go from under $1 million to almost $10 million, with cannabis accounting for “about 95% of Apeks’ total business”. Joseph went on the state:
“The industry is an entrepreneur’s dream”
“It’s a perfect storm where you have an explosive growth industry with a lot of money and potential for growth still out there.”
Looming Threat of Big Corporations With Further Marijuana Legalization
Some of those attending the Cannabis World Congress & Business Expo in NYC this past week expressed concerns about the implications of full deregulation at the federal level.
One of the main reasons big corporations have not jumped into the cannabis business arena is precisely because of the current laws against marijuana. This has left a vacuum in states where marijuana is legal and has allowed the “smaller” guys to ride the wave of state legalization.
Andy Joseph of Apeks stated the general concern by businesses like his:
“Usually, if you’re an entrepreneur and you’re looking to start a business, you’re going to compete with a big player… In the cannabis industry that big guy could be Philip Morris, it could be Budweiser, it could be Pfizer. But because of the legal landscape, they’ve chosen not to play, at least not in any apparent way.”
If and when the legal barriers to entry are removed for the marijuana industry, the projected growth estimates as well as the total aggregate cannabis market size will mean big corporations will get into the arena. Tobacco companies could and most likely will get into the marijuana business in a big way. The fight between grassroots and potential “big marijuana” will be looming once the battle against prohibition is won.
Until then, the small guys will be scrambling to establish their piece of the cannabis “entrepreneur’s dream”.