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In March of 2021, the United States Department of Agriculture (USDA) granted Oregon State University ~$300,000 to fund studies focusing on hemp byproducts as a source of cattle feed.4 There are several driving forces behind this connection, including allowing hemp to be grown on cattle farms, maximizing the nutritional value of livestock feed, and providing a use for the extracted hemp biomass that is currently going to waste. At present, the cattle feed market is valued at $76.9 billion with a compound annual growth rate of 3.2%.

Cattle Feed Market Size

Cattle Feed Market Size

One percent of the total global cattle feed market equates to ~$769 million, and if hemp captured that market share, it would boost the CBD hemp industry’s annual revenue by more than a 29%. Approximately 130,000 acres were planted last year, and assuming that there are 165 pounds of hemp per acre, that represents ~21,450,000 lbs. or 10,725 tons of CBD hemp..6 The North American region alone consumed 27.7 million tons of beef cattle feed.7 Turn a waste product into an opportunity.

By adding revenue through a waste stream, you’re creating a sustainable, mutually beneficial relationship.

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RETAIL

The ship that blocked the Suez Canal, the Ever Given, is being held by Egypt until a fine of nearly $1 billion is paid, and this spells trouble for the retail sector of the cannabinoid supply chain.

The cannabis industry is arguably the least environmentally-friendly industry, particularly when it comes to consumables. Everything purchased at a licensed dispensary, including vape pens and CCELL cartridges must come in plastic, child-proof containers. All of these packaging materials are sourced from China, and limited access to these supplies could springboard into a price jump for consumables. This is particularly true for cannabis companies that have already been struggling to make ends meet, as they’re now faced with an increase in their cost of production with no way to make up for their losses. Losing access to the exact SKU of containers previously ordered is also a potential roadblock cannabis companies may encounter.

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Analysis of the Cannabis Pre-Roll Market

Pre-Roll Market Size

PRE-ROLL MARKET SIZE

Additional data from Headset* provides more insight into the current state of the industry. It’s clear that certain factors associated with differences in sales volume between states can and should be examined.

The above chart outlines the correlation between average price per unit and overall market sales data. Based on this chart, there does not seem to be a correlation between annual pre-roll sales and unit price. When viewing the results of the correlation, there does not seem to be a direct relation between annual pre-roll sales and unit price. California and Massachusetts, where the unit price is the highest out of any states, also boast the first and third largest markets by sales, respectively. Washington on the other hand has the second largest pre-roll market and has the lowest average price per pre-roll unit.

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Brand FOCUS: PLATINUM VAPE

PLATINUM VAPE

Why we Love them: Their bright colors and fun, easy visuals make Platinum hard not to like.
Why we docked stars: The gummies are the only product that explore the possibilities of their branding.

Sometimes it pays to be boring.

Boring is good. Boring is the comfort you find in your standard Sunday routine, the no-thought-required way you do your hair, and the same playlist you always use whenever you clean your house. In a world of products that constantly strive to beguile you with flash, unexciting brands can provide a welcome reprieve. Though there’s no right or wrong answer, next time you’re contemplating which direction your brand should take, think about what category you align with most: the trendy, or the reliable?

Simple, professional, and clean – that’s where Platinum comes in. Unfussy and containing no bold personality, this brand is much like your mom’s chicken soup; you may branch out from time to time and try some fancier, new versions, but at the end of the day, when you want something that hits the spot with no muss or fuss, you’ll go back to the original. Though they haven’t reinvented the wheel when it comes to design or packaging, Platinum’s run-of-the-mill style is comforting to those looking for a reliable product. While it’s true that wildly unique visuals are a great way to draw in users who want to try something new, a large portion of the cannabinoid market is morphing into one that wants to get their high in a consistent and reliable way. Platinum isn’t trying to compete with the flashy brands that market themselves with all the bells and whistles – they’re just waiting until you get bored of them and decide to come back home.

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As more adult-use states come online, the more we see an expansion in the infrastructure necessary for federal legalization. The increasing speed at which this groundwork is being developed has sparked a sense of urgency.

Urgency, by definition, refers to “a psychological trigger that is deeply rooted inside our brain: it relates to the human loss aversion or the so-called Fear-of missing-Out (FOMO). Scientifically speaking, urgency is a time-based concept that prompts us to act quickly.”2 As key states quickly dole out their finite number of licenses, urgency becomes less about the fear associated with missing out and more about the actuality of it.

I feared if I didn’t move now for our shareholders, that we’d be locked out of most municipalities

Cannabis Battleground

Businesses are battling to capitalize on the unique, singular opportunities offered by friendly municipalities in key battleground states, and those that miss out on the action may face repercussions from their lack of proactivity. Jon Sandelman, CEO of AYR Wellness, explained it best as he discussed AYR’s acquisition of Liberty Health on Rena Sherbill’s podcast, The Cannabis Investing Podcast: “The reason why I felt I had to move on Liberty at the time I moved on Liberty is because I thought there was a land grab that was going to end. I feared if I didn’t move now for our shareholders, that we’d be locked out of most municipalities, because right now, I just can’t see certain municipalities having 10 cannabis stores in their towns, and if I waited, I would be locked out.

You’ve got the really small fish and these medium fish, which are the large fish right now, but the megalodons still haven’t come into the waters yet.

And when the laws change and federal stance changes, you’re going to see big shifts in the market.

Speed to Move in Cannabis

While the previously outlined scenario is a prime example of FOMO, a sense of urgency can also be sparked by the desire to protect yourself from outside threats. When we describe the large MSOs, we’re really just talking about big fish in a small pond. As regulations change and the pond becomes an ocean, the environment will completely change.

Bruce Eckfeldt, host of podcast Thinking Outside the Bud, echoed these sentiments in Eighth Revolution’s podcast, The Dime. “You’ve got the really small fish and these medium fish, which are the large fish right now, but the megalodons still haven’t come into the waters yet. And when the laws change and federal stance changes, you’re going to see big shifts in the market. That said, it’s going to be a going to be a dynamic, growing market, and there’s still going to be lots of opportunities. If you can find a niche strategy, you can create a very nice business out of it,” said Eckfeldt.

The best way to leverage urgency to your advantage is by understanding the finer details of the industry as a whole. Understanding your exposure to risk, working to fortify current approaches, and recognizing future areas of growth are crucial to preparing yourself for future changes.

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As the industry enters its third summer of cultivation post 2018 Farm Bill, market conditions are beginning to stabilize. Price fluctuations in CBD products seem to have decreased significantly when compared to the volatility we witnessed this time last year. There was also a huge uptick in crude oil derivative pricing, which Hemp Benchmarks has attributed to a flood of USDA organic hemp extract hitting the market. We believe that the cannabis industry will follow suit and that USDA organic certified crops will fetch higher market prices, but in order for farms to obtain this certification, federal legalization is required. Even without access to this certification, the industry’s steps toward product differentiation is a signal of the explosive growth that’s yet to come. The summer of 2021 will be jam packed with riveting headlines, and we look forward to being there with you every step of the way.

Kellan Finney

The recent legalizations in New Mexico, New York, and Virginia are prime examples of an industry hellbent on moving forward. As states like Connecticut, Delaware, Minnesota, and Rhode Island flirt with the idea of fully embracing cannabis, the strategic opportunities continue to multiply. To get ahead of the competition, you need experience, willingness to go out on a limb, and an understanding of the unique challenges that the cannabinoid space brings. That’s where we come in – reading our report will put you three steps ahead of your peers and put the wind beneath your wings so that you can be ready for whatever comes your way.

Bryan Fields

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