Spotlight: Has the Industry Reached Maximum Capacity?

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A look at infused-product manufacturing and how cultivators can capitalize on a crowded market.

April 2, 2018

Just how crowded is the cannabis industry? If you’re looking at infused products, extremely. Market research firm Brightfield Group’s analysis of dispensaries in the top cannabis states (California, Colorado, Washington, Oregon, Nevada, Arizona and Michigan, which combine to make up 91% of U.S. cannabis sales) showed more than 1,600 brands of infused products each month in 2017. Last year also saw a slight decline in the number of unique brands, as we’re seeing some of the smaller independent players disappear from the market.

There was also a steep decline in unique brands in early 2018 as the restructuring of the California market saw brands both permanently and temporarily leave the space. We predict many brands will return to the market in the coming months as the state processes license applications, with brand totals forecasted to climb back to December 2017 levels.

What Does This Mean for Your Brand?

Steep competition in many states makes it much more challenging to earn and keep shelf space. It makes pricing, packaging and branding more important. It also means brands need to identify and clearly communicate to consumers and dispensary buyers their unique selling points: What makes the brand and its specific products stand out from the hundreds of others already in the market? Why should a dispensary carry them?

Entrepreneurs should think twice before trying to enter a crowded market segment in which it is difficult to stand out, such as cartridges. While consumption trends are moving toward vaping, and cartridges in particular are spiking as a key mode of consumption, more than 300 cartridge brands are already on the market, with only a few ways to differentiate themselves beyond dose, strain, taste and user experience.

This is an opportunity for cannabis cultivators. As competition gets steeper and there are fewer ways for infused and processed product brands to differentiate, many of them will look to distinguish themselves by promoting their inputs. Strain-specific infused products are becoming more common, but soon brands will be looking to take it a step further by promoting the region (terroir) or the farm itself.

The industry will not remain fragmented forever. A market of this size cannot support 1,600 distinct infused-product brands, and cannabis businesses have a limited window of opportunity to build their brands into acquisition targets or defensible institutions before the multinationals look at entering the space. Identifying and marketing differentiators will be key to accomplishing those scenarios, as this market is very crowded.

Bethany Gomez is director of research at Brightfield Group. Previously, Gomez worked with a leading FMCG market research firm, managing the company’s syndicated research of industries such as packaged foods, alcoholic drinks and tobacco in Mexico.