New Report Looks Into Innovation In The Cannabis Business: Opportunities, Bottlenecks, And Barriers

This is an excerpt of the Lux Research report, “Cannabusiness innovation: opportunities, bottlenecks, and barriers.” 

Lead Analyst: Joshua Haslun, Ph.D.

• North America represents the majority of the $10 billion cannabis industry, which is dominated by Canada and the Northwestern U.S.

• Investors have moved their attentions to Canada given the newly legalized status for medical and recreational use of cannabis.

• Venture funding in the industry has grown exponentially from $10 million in 2014 to more than $250 million in 2018.

• Investment in the U.S. cannabis industry remains constrained given federal prohibition and state-specific regulations.

• Merger and acquisition activity will continue as Canada’s industry matures. Lux expects continued investment and development in the industry.

• Supply and demand are likely to impact innovation development, but growth will remain dependent upon consumer demand.

Legal status

• The cannabis industry is most developed in North America as a result of more favorable regulations, but Uruguay has also legalized all forms of cannabis use.

• North America’s favorable environment includes Canada’s recent cannabis legalization, the state-by-state U.S. regulations, and Mexico’s approval of medicinal cannabis.

• Many other countries have begun to enact favorable cannabis regulations.

Economic status

• The current estimate of the cannabis market in the Americas is $10 billion.

• Canada and California account for 55% of this market, with the remaining 45% spread across other U.S. states and Uruguay.

• Some markets have become saturated. For instance, Oregon has placed a halt on supplying marijuana business permits until next year.

The cannabis value chain

The cannabis value chain is divided into four segments: cannabis cultivation, distribution, processing, and consumer products. In this report, Lux assesses the opportunities as well as bottlenecks and barriers to innovation for each category within a segment.

Throughout this report, we will use this figure to identify such trends across the value chain in the rapidly developing cannabis industry.

Consumer products

Cannabis products are broadly split into four categories: flower, concentrates, ingredients, and pharmaceuticals. Each category includes a high degree of diversity and specialization. We outline higher-level product diversity below.

Identifying opportunities for innovation across the value chain

Categories filled with green indicate areas where the biggest opportunities for innovation are present.

On the following slides, we provide an analysis of each “green-lighted” category, focusing on the current opportunities within North America.

Barriers and bottlenecks throughout the cannabis value chain

• Supply and demand pressures continue to impact the cannabis industry on several fronts, including production systems, extraction, and dispensaries.

• Distribution remains both a barrier and a bottleneck to the expansion of the cannabis industry.

• Product testing prevents many products from reaching the market, which is due in part to testing techniques, processing and extraction practices, and the complex nature of edibles.

Cannabis industry outlook

• Investment by large companies in the U.S. cannabis industry remains constrained given federal prohibition and state-specific regulations.

• Growth in the U.S. will remain dependent upon consumer demand, and investments will remain insular.

• Investors have moved attentions to Canada given newly legalized status for medical and

recreational use of cannabis.

• Lux expects continued merger and acquisition activity as Canada’s industry matures.

• Many barriers remain to the cannabis industry, including:

– Adapting regulatory frameworks, especially those regarding product testing and distribution.

– Supply and demand are likely to impact innovation development. The relatively small scale of demand,

compared to other industries, inhibits the need for scaling of processing systems.

Find the full report at

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Lead photo by Javier Hasse.


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