Innovate January 2019

Innovations in Cannabis

Written By: David Whitney

The global cannabis industry continues to demonstrate innovation is alive and well. In the United States, innovation has increased in response to more states’ legalization of cannabis for both medicinal and recreational purposes. And with increased innovation activity, the economic potential of the market in the United States becomes more attainable.

That is because the intersection between cannabis and innovation continues to strengthen and lengthen, especially as pot prohibition dwindles. In the United States, and around the world, the pace of innovation in the cannabis industry – in terms of technology, operational systems, payment models, supply chain (from seed to sale) advancements and how companies engage with consumers – is solid.

Canada remains the undisputed leader in the global cannabis industry. Canada’s leadership was solidified by enactment of federal legislation that legalized cannabis – medicinal use was legalized first and then followed by recreational use – in Canada’s 10 provinces and three territories.

However, innovation in the cannabis industry is a global sport, and Canadian companies are feeling the heat from companies around the world – most notably from the United States – to produce and commercialize innovative products, services, devices, systems and processes that continue to revolutionize the cannabis industry.

As the cannabis market grows in the United States, creative innovators and smart, opportunistic entrepreneurs are making their mark. Scores of innovations have debuted, with some unique to the cannabis industry while others with roots in legacy industries have taken hold in the marketplace. The following innovations and their applications reflect my research and serve as a representative sample of the types of innovations that continue to shape and stimulate the cannabis industry. 

LED Lighting

Lighting is a critically important element in how effectively and productively indoor grow facilities can operate. So, it reasons that the cannabis industry continuously seeks innovative solutions for producing less expensive and more efficient and sustainable methods to keep the lights lit and the plants growing fast. Innovations in LED lighting have resulted in longer-lasting bulbs, lower cost of bulbs, fixtures that produce more light using less power and customized light spectrums that increase yields and shorten growing cycles. 

Terpene Isolation

A technique that is common to the fragrance industry, terpene isolation, has been applied in the cannabis industry. Terpene isolation is a technique that isolates certain aromas from flowers or other plants; the technique evolved and expanded from the essential oils and fragrance industries to become a crossover technology into cannabis. Both cannabis-derived and non-cannabis-derived terpene isolates can be used to infuse various cannabis products. Isolated terpenes and blended terpene have opened new opportunities for companies looking to enter an increasingly popular trend in cannabis concentrates.

Big Data and Data Visualization 

Data visualization technologies uncover value from raw data. The emergence of big data has emphasized both the opportunity and the challenge facing cannabis industry companies: To discover how best to make sense of the enormous amounts of data that is produced, stored, retrieved and analyzed. Opportunities to innovate abound for coders, software developers and engineers and designers to build problem-solving solutions that make sense of the data produced from the tracking, purchasing, reporting, identifying, verifying and regulatory oversight functions that are standard operating procedures in the cannabis industry.

Modular Grow Facilities

Innovations in the construction of marijuana grow facilities have followed practices in other industries. Standard operating procedures follow best practices of custom designing and building modular grow facilities in factories – and then shipping and assembling the units on site. A grow facility is a complex structure with a myriad of systems that are needed to operate extraction labs, dry/cure rooms, flower rooms and cultivation rooms. By focusing on modular designs, innovative designers, architects and builders have collaborated to accelerate the process of launching grow facilities quickly while simultaneously reducing facilities’ construction and operating costs. 

Alternatives to Alcoholic Beverages 

(Full disclosure: I am an investor in a company that produces, distributes and sells marijuana-infused beverages.)

The beverages and drinks segment of the cannabis industry is exploding. Growth estimates for the segment vary, though Canadian investment bank Canaccord Genuity has forecast that marijuana-infused beverages are expected to become a $600 million market in the U.S. by 2022, with CBD-infused beverages a $260 million market and THC-infused beverages a $340 million market. CBD, or cannabidiol, is a non-psychoactive compound in marijuana that is thought to have therapeutic benefits. THC, or tetrahydrocannabinol, is the compound responsible for the high associated with ingesting marijuana.

What is not speculative is the interest of large global beverage companies in the space. In August 2018, Constellation Brands — the industry-leading beer maker behind the Corona and Modelo brands — paid $4 billion for a 38 percent stake in the Canadian cannabis company, Canopy Growth.

Automating Compliance in the Cannabis Industry 

The cannabis industry is heavily legislated, regulated, inspected and taxed. Federal law classifies cannabis as a Schedule 1 drug, and companies operating in the industry face a myriad of restrictions and limitations – even prohibitions – when doing business; state laws and local rules vary, and regulations change frequently.

Commercialized innovations have resulted in products and services that help companies capture data about sales, inventory, distribution, delivery, tax revenues and customer habits. This data is sliced and diced and analyzed to make business decisions involving marketing, inventory management and supply-chain optimization.

Similarly, innovations continue to evolve in which products and services are helping companies satisfy compliance regulations, track tax receipts and maintain reporting requirements that fulfill industry standards and assure government watchdogs all regulations are followed.

Although the cannabis industry is not for everyone, I see signs of a revolution everywhere. Whether appearing on the ballot boxes of individual states in the U.S. or enacted as federal legislation in Canada, cannabis continues to march toward the mainstream. The November midterm elections reiterated that 2018 was a big year for marijuana legalization; during 2018, California opened the world’s largest legal market, and Vermont legalized marijuana possession.

After the midterm elections, the United States has 10 states that legalized marijuana for recreational and medicinal uses, while 22 other states (including Florida) have legalized marijuana for medicinal purposes only.

Innovations in the U.S. cannabis industry continue to evolve. Whereas Canadian businesses are able to legally operate within a framework that encourages economic growth and innovation, cannabis in the U.S. faces the financial and legal barriers erected by state and federal laws.

But the trend at the ballot box and in the marketplace is for the U.S. cannabis industry to follow Canada’s lead. If, or when, the U.S. cannabis industry matures and evolves to complete with Canada’s cannabis industry, I envision U.S.-based cannabis companies will flourish in a more hospitable business environment and be liberated to unleash the types of game-changing innovations and American ingenuity that will create a “green rush” within the U.S. cannabis industry.   

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