By Eli McVey
The lion’s share of cannabis infused product makers have chosen to expand into multiple categories of goods rather than focus exclusively on a single segment such as edibles, concentrates or topicals.
The diversification appears aimed at allowing infused product companies to maximize their revenue in a competitive environment that grows more intense by the day.
Data published in the newly released Marijuana Business Factbook 2017 shows that nearly 70% of edibles manufacturers produce other products such as concentrates and topicals. Sixty percent of concentrates manufacturers also offer a diverse product mix.
Despite the dominance of edibles and concentrates, less than a quarter of infused businesses produce these types of products solely.
Similarly, only a fraction of infused companies manufacture just topicals, given that the category accounts for a relatively small portion of the retail and medical marijuana markets.
Why the diverse product lineup? A number of factors are at play:
- Sales for each major infused product segment continue to rise every year.
- Historically low cannabis prices have helped keep a lid on production costs and allowed the expansion into new categories.
- Diversification provides an additional stream of revenue in an increasingly competitive market.
In Colorado, for example, the number of recreational marijuana infused product manufacturer (MIP) licenses shot up from 92 in December 2014 to 236 in December 2016 – a 157% increase.
To be sure, these remain early days for both infused product companies and the marijuana industry as a whole. Just a few years ago the market for products like vape cartridges and infused lotions was essentially nonexistent in most states.
Looking ahead, the competitive landscape may change. As the infused product industry matures and businesses become more sophisticated, manufacturers that specialize in providing a premium product to a very narrow portion of the market may end up finding more success than those spread across multiple categories.
There’s evidence of that already. Mahatma Concentrates, a Denver-based extracts producer, has found success by focusing on high-potency, high-quality concentrates that appeal to experienced medical and recreational users.
In the traditional economy, meanwhile, many companies have come to understand that being a jack of all trades but master of none is often not a profitable business strategy.
Specialization, however, is not a sure bet going forward. As the largest businesses in the marijuana industry grow even bigger – a development already on display in Colorado’s retail market – the companies that are successful in multiple segments may become large and few in number as they snap up or squeeze out smaller rivals.
Eli McVey can be reached at firstname.lastname@example.org