Oils and Extracts Will Dominate Cannabis Industry
Oils and Extracts Will Dominate Cannabis Industry By Nick Giambruno for Casey Research
TDC Note – This makes perfect sense as the oils and extracts wouldn’t necessarily include the THC (the component that gets you high) but allows for all the medicinal properties to shine. This is of great interest to me as I believe their are major healing properties in this plant the same would be found in turmeric, ginger and garlic.
The cannabis industry is changing…
What it takes to become successful as a cannabis company in 2019 is very different from what made the first wave of marijuana companies popular with investors.
As you’ll see, it’s a different set of skills. And few companies will be able to compete successfully in this new space.
But those that do stand to win big… as do investors in those companies.
And today, I’m going to show you why – and where to look for them…
The New Wave of Cannabis Investing
Just about anyone can grow a marijuana plant on his back porch. A quick Google search will teach you how.
So from a practical standpoint, the barrier to entry to producing dried cannabis is low.
It is called “weed” for a reason after all.
Now, the cannabis industry is maturing. And it’s more important than ever to be selective about the kinds of companies you own.
You only want companies in your portfolio that have a sustainable, competitive advantage. And as we head into 2020, that means companies involved in cannabis oils and extracts.
Major Change Equals Huge Opportunity
More and more medical products use cannabis oil these days. These products need standardized doses. And they need consistent quality.
It’s not easy to produce cannabis oil with consistent quality. It takes a lot of money and know-how. (That goes for both the technology and the chemical processes the technology is based on.)
Today, the market for oil-based products (like edibles) is larger than the market for dried flowers.
This explains why the cannabis industry is moving in the direction of oils and other extracts.
This is a major change in the market. And it presents a huge opportunity for smart speculators.
But before we get to that, you should understand why the industry is changing…
From a Specialized Niche to the Core of the Cannabis Industry
Cannabis oil companies have rich margins and high returns on capital.
Even early-stage companies focused on extracts boast margins comparable to those of large-scale dry cannabis producers.
Here’s a quick example: In 2018, dried cannabis flower cost, on average, about $7.50 per gram. It costs about $1.80 to grow it, so the gross margin is about 76%.
For oils, the margin was about 84%. And for edibles containing them, the margin was about 92%, according to cannabis research and media firm Grizzle.