CANNAINVESTOR Magazine August 2016 - Page 74

Cannabis Industry Sparks Dynamic Innovation Boom

Pace of industry startups unsurpassed in Colorado corporate landscape; two subcategories of the cannabis industry alone have fostered nearly 100 companies in the last year

Opportunity in Colorado’s cannabis industry has sparked a wave of innovation and investment that may be unprecedented in recent business history. The commercial hive surrounding cannabis is boosting more than dispensary traffic, grower income and state tax receipts. A review by Boulder-based BDS Analytics, a firm that tracks retail sales and trends in the cannabis industry nationwide, shows that new cannabis brands are hatching at an intense pace.

During the past 12 months in Colorado alone, for example, just two subcategories of the industry, concentrates and edibles, have seen the emergence of 93 new brands — and this comes not from a well-established, investor-packed industry, but a fresh one that hinges almost entirely on new-to-the-business entrepreneurs. Add to that the difficulty in acquiring bank loans, and the pace of innovation approaches the miraculous.

The new companies are busy launching novel edibles products, such as lozenges and beverages, and seeking commercial success in the busy concentrates subcategory, which includes a variety of products from pre-filled vaporizer cartridges to oil, budder, and live resin.

"Most of us at BDS spent years working in market research companies in different industries, including hotbeds of innovation like natural foods and outdoor sports. Yet we are astounded by the rate and the variety of corporate innovation in this industry — none of us has experienced anything like it," said BDS Analytics founder and CEO Roy Bingham. “This must be the most innovative industry in America today.”

This rate of innovation is ramping up even as the industry matures. Consider just the first five months of 2016, January through May. During this period the concentrates subcategory, which saw Colorado sales of $111 million, grew by 114 percent compared to the same time period in 2015; it now represents 24 percent of the total cannabis market.

Within concentrates, the fastest-growing subcategory of the cannabis industry, 103 different brands recorded sales during the first five months of 2016. The top 10 companies had sales of $50 million for a 45-percent share of the market, and the next 10 captured a further 11 percent. Of those 103 brands, more than 50 percent — a staggering 53 companies — had no sales in the same time period in 2015. These newcomers chalked up sales of nearly $15 million, or 13 percent of the total market, since January.