Marijuana Business Magazine

Testing Testing labs will likely prove to be a major growth sector, pre- dicted Lindsay Robinson, the executive director of the California Cannabis Industry Association.That’s in part going to be out of necessity, since all California product must meet stringent testing requirements before going to market and the state had only about 20 operating labs as of mid-September. “That number is going to grow, and it’s going to have to grow,” Robinson said. Where to locate will be less of a problem for testing lab com- panies, but those starting labs will probably want to be fairly close to the cultivators they’ll be serving. And since dozens of cities and counties have already opted to formally allow labs to locate within their jurisdictions, the main obstacle for labs will likely be finding real estate. Ancillary Just as picks and shovels made the for- tunes of plenty of companies during the 19 th century Gold Rush, ancillary compa- nies in the cannabis industry will do well in California in coming years, too. “There’s so much money in ancillary businesses. When you look at compa- nies like WeedMaps or Leafly, those are companies that make $40 million or $50 million a year, some up to $100 million a year, and they don’t even touch the product,” Grant said. “It opens up a whole host of opportunities for busi- nesses to thrive.” That niche again runs the gamut, however, and depends on the company, the service and the market that a busi- ness wants to target. But some obvious needs that the California industry will have include packaging, security ser- vices, construction and labeling. ◆ Investing Throwing money into the marijuana industry won’t require a cer- tain location, given that checkbooks are portable. But the longstand- ing traditional axiom of sticking with ancillary cannabis companies is starting to head out the window, said Roy Bingham, the CEO of BDS Analytics, a data analytics firm in Boulder, Colorado. In the past, he and other industry insiders said, many investors chose to stick with non-plant-touching companies simply because of 280E, the federal tax code provision that shrinks the profit margins of cannabis retailers, growers and other plant-touching businesses. But that approach is changing as the industry grows and as more investors begin to look further down the road. “A lot of the money that’s going to be made is going to be made by brands in this industry,” Bingham said. “Over the next several years, brands will become worth billions of dollars.” Concentrates in particular, Bingham said, are a major growth niche and already represent about a quarter of the overall California market. He also said edibles and topicals will likely prove to be solid areas in which investors could look for promising companies. 100 • Marijuana Business Magazine • November / December 2017 C alifornia D reamin' Virgil Grant