2020 CMR Forecast: Hemp & Cannabis Trends

By Glen Martin | Jan 21, 2021

Cannabis & Hemp

By most metrics, 2020 was a true annus horribilis: COVID-19, political unrest, and broad-based economic travails made it a year best put in the rear-view mirror. But the picture wasn't uniformly bleak, particularly for one industry: legal cannabis. The sanctioned weed business, in fact, is booming. Flower Co., a cannabis products delivery service headquartered in California's famed Emerald Triangle, reported a tenfold jump in business in 2020, a surge reflected across the entire industry.

Multiple states amended their marijuana laws in the past year to allow legal access. Currently, only six states -- Idaho, Wyoming, Kansas, Tennessee, Alabama, and South Carolina -- have maintained a total prohibition on cannabis. But even these holdouts should eventually allow at least medical use, and it's entirely possible that federal decriminalization will prove a hallmark of the Biden Administration.

That said, several trends are emerging for legal cannabis as we enter 2021:

Short supplies

Since legalization gained momentum, cannabis production has been in a boom-and-bust cycle. Prices for raw product were down in recent years as cultivation exploded to meet anticipated demand. Now the market has caught up -- and exceeded -- production. Moreover, last year's catastrophic wildfires in California and Oregon destroyed hundreds of farming operations and tainted tons of surviving crops with smoke, further tightening supplies. This could well be a long-term trend, as virtually all climate change models indicate a significant increase in the number and severity of Western wildfires in coming decades. Indoor grows are increasing as a response, but such operations take time and a good deal of capital to bring online. Expect ongoing cannabis shortfalls through this year and beyond.

More automation

Traditionally, cannabis flowers are hand-trimmed prior to sales. This practice still predominates, particularly for the high end of the market. But hand-trimming is time-consuming and expensive. Moreover, the growing demand for cannabis buds makes hand-trimming an increasingly untenable position over the long run. Processing machines were developed to speed preparation and reduce costs, but results were not always optimal: the end products suffered in comparison to hand-trimmed buds.

That's changing, however: processing technology finally is catching up with aspirations. The latest trimming machines such as the Mobius M108S produce well-manicured flowers at volume. New advances in milling technology are also driving costs down -- and profits up -- for extract and pre-rolled feedstocks.

Greater demand for extracts

Flowers -- buds in the trade -- are the signature products of the cannabis sector, and smoking or vaping remains the most popular means of ingestion. But sales of edible products are rocketing for a couple of reasons. First, many people want to avoid inhaling any burning substance. Second, a strong subsidiary market has developed for CBD products. Like THC, the chemical compound in marijuana that induces euphoria, CBD is a cannabinoid. But unlike THC, it has no intoxicating effects. It's in high demand, however, as a therapeutic agent; millions of Americans now employ CBD products for its reputed anti-inflammatory and anti-seizure properties.

Both THC-infused edibles and CBD products require cannabis extracts in quantity, and a robust manufacturing sector has developed to supply these feedstocks. "The growing adoption of CBD by consumers, combined with the consistency, variety and perceived safety of THC extract products, have all contributed to this growth," says Wes Reynolds, the CEO of Green Mill Supercritical, a Pennsylvania company that manufactures extracting machines. "We expect this growth to continue throughout the coming year."

Edible product standardization and expansion

Not long ago, cannabis aficionados were severely limited in edible options. There were brownies and cookies and -- well, brownies and cookies. Then came hard candies and gummies. Today, that list has expanded into a wide range of edible products, including high-end chocolates and beverages. Moreover, it's certain that 2021 will only see this trend accelerate.

One problem with early edibles was inconsistency. Some products had little effect; others would be far too strong. What was needed was extract technology that provided reliable quality control, thus ensuring uniformity across product categories and brands. Happily, that technology now exists and is being deployed rapidly, observes Alexey S. Peshkovsky, the co-founder and chief science officer of Miami-based Industrial Sonomechanics, a company that produces processing equipment for water-soluble cannabis nanoemulsions.

"In the past, [cannabis product] consumers complained that the experience was not as expected -- it may have been inconsistent in terms of onset time, intensity and duration," says Peshkovsky. "With today's technology, you can create a cannabis consumption experience much like enjoying a glass of wine -- you know how you'll feel and how long you'll feel the effects."

New strains

One hallmark of the legal cannabis trade has been a steady proliferation of new cultivars. This will continue for a simple reason: consumers demand it. For many cannabis enthusiasts, there is a sensuous pleasure to the investigation of different products that transcends the psychoactive effects. They want access to a wide variety of strains with different cannabidiol ratios, strengths, aromas and appearances.

"In the coming year, we anticipate more name brand recognition in the flower market and more of a demand for new and exclusive strains," says Dan Banks, the director of cultivation strategy at Lightshade, a chain of cannabis dispensaries in Colorado. "We expect consumer demand for rare and exclusive cultivars to grow exponentially in 2021."