Since the societal attitude towards cannabis is shifting away from treating it like a criminal drug to more like medicine, the government response has begun to change as well. Canada most recently legalized cannabis use federally, which means there is a vast sea of Canadian companies flooding the market. Picking a winning company to invest in this market can be hard if you’re only looking at one facet of the industry. Manufacturers and producers make up a large portion of the industry, but that is just one facet to the cannabis chain. Plenty of cannabis stocks can be classified as pump and dump just based on it being the new hot industry, so here’s how to spot real winners that are worthy of your investment.
How to Choose Winners
According to New Frontier Data, the cannabis industry is expected to grow at 15% annual over the next five to 10 years. That’s a lot of growth in a relatively short period. With so many new entrants into the market, you want to make sure you’re investing in companies that will grow your investment. The cannabis companies that will be the most successful during this period will be those who have intellectual property or a fresh way of production that can be monetized and protected. Some examples of this include genetic strains for medicinal use, childproof packaging, and new production techniques. While cannabis cannot be classified as being organically grown due to its federal status in the United States, growers are still utilizing those ideas to set their companies apart. Stem is an example of a company that tracks their product from germination until it is sold directly to the customer. Stem calls it a ‘seed to sale’ model, and this is what lets them maintain control over every level of operation. Companies that maintain tight control over their operations can charge a premium for a product that can be sold at a premium to consumers. As the industry continues to evolve, we will see more connoisseurs and catering to the recreational side of cannabis use.
Successful cannabis companies will have branding that targets a niche audience within the industry. Cannabis no longer has a reputation of being the domain of hippies and junkies. New demographics are being carved out by cannabis consumers who have access to the drug legally for the first time. Branding is the best way to grab these customer’s attention on retail shelves, where space can be limited. Every facet of the retail cannabis industry is growing, and sometimes local products that use seed-to-sale models outperform those that have less than scrupulous origins for their product.
While the cannabis market is exploding in growth, that’s without much marketing that can be shown on a national level. Cannabis consumers are left to their own devices when it comes to learning about new products that are available. Local dispensaries can run ads on radio and TV for their businesses, but we are still a few years away from seeing vape commercials on TV. Savvy companies will understand that social media and internet promotion is the future for most companies.