03/10/2019

Most people, when they think about the whole “cannabis food” category, tend to think in terms of edible treats such as brownies, tasty baked goods, and “space cakes.” But the reality is that the whole cannabis food category is now much wider than that, including everything from artisanal pizza to the sort of upscale cuisine one might expect to find in a fine dining establishment in the nation’s top metropolitan regions. As a result, some research organizations are now suggesting that the whole edible cannabis category might be a $4 billion market opportunity globally by the year 2022.

In April 2019, ArcView Research generated headlines and mainstream media coverage with an extraordinarily bullish growth projection for the cannabis market. Overall, the cannabis market is set to be a $32 billion opportunity by the year 2022, with edibles accounting for anywhere from 10-15% of that total. That market share for edibles is only set to grow in the coming years, as the pace of recreational cannabis legalization accelerates. Right now, recreational cannabis use is legal in 11 U.S. states and the District of Columbia, or about 20% of the nation. If you don’t happen to live in a state like California, Nevada, Colorado or Washington, chances are that you haven’t yet run across mainstream cannabis-infused products on your trip to the local coffee shop or restaurant. But that day is coming soon.

In places like California, the whole cannabis food category is exploding. Case in point: the city of West Hollywood recently handed out 8 cannabis consumption licenses (out of nearly 300 potential applicants), and the first-ever dedicated cannabis restaurant and cafe (Lowell Cafe) is set to open in late 2019. Lowell Cafe is now marketing itself as the “first full-service restaurant and lounge to offer farm-to-table cannabis and cuisine.” It’s a heady moment for the whole cannabis food category, and proof that cannabis food really is going mainstream.

Until now, the ability to consume cannabis on restaurant and cafe menus - even in states where recreational cannabis use has been legalized - has been somewhat spotty. In order to get around local rules and prohibitions, as well as to avoid potential liability under federal drug laws, restaurateurs and foodies have largely preferred to offer cannabis food products from vendors and suppliers, rather than coming up with their own dishes and culinary creations. Or, in other cases, they are hosting underground supper clubs in rotating venues.

The cannabis food category is big - and getting much bigger sooner than anyone initially expected. The cannabis food category includes everything from butter, syrups, and oils (usually added to dishes in order to enhance their overall appeal) to artisanal baked goods, chocolates and tasty treats.

And don’t forget - the whole cannabis food category also includes beverages. In fact, at the recent Cannabis Drinks Expo in San Francisco, the big topic of discussion was the extraordinary growth and momentum happening around cannabis-infused beverages. This includes a whole new generation of non-alcoholic drinks and cocktails that are, instead, enhanced with cannabis. Consumers are embracing these drinks for a variety of reasons, including the fact that they provide a new way to enjoy any type of social occasion without the need to consume alcohol. Depending on the strain of cannabis used, the potency and the dosage, these drinks can be used for anything from sleep and relaxation to increased energy and feelings of euphoria.  There are cannabis-infused sparkling beverages, energy drinks, teas, and coffees. If you can drink it, you can add cannabis to it, and that is really widening the scope of the mainstream consumer appeal for cannabis-infused drinks.

In order to appreciate the full range, scope, and diversity of the cannabis food category, it’s important to understand how and why some of the world’s foremost mega-brands (including Coca-Cola) are active in the space now. One strategy of note for accessing the market is simply for a major brand to partner with a smaller player in the cannabis category. When you combine top-shelf R&D with market-leading distribution and branding, the result can be astounding. By way of example, consider the recent linkups between Tilray and Anheuser-Busch InBev and between Canopy Growth Corp. and Constellation Brands.

There are also plenty of start-ups and market innovators worthy of note, including Evergreen Organix (named “Best Edible” in Nevada), Tilray, Koios, and HEXO. Since cannabis legalization has been taking place on a state-by-state basis rather than a federal basis, it’s often the case that cannabis food brands are regional, rather than national, in scope. But that could be changing now that big consumer goods companies are poking around the sector, looking for hot new investment opportunities. Until recreational cannabis use is recognized at the federal level, though, it might still be a few years before we see the development of a truly national cannabis food brand.

Going forward, cannabis food innovators still need to solve a mix of different problems and issues before growth truly explodes off the chart. One of these issues is the need for precision dosing technology. For now, the effects of using a certain cannabis-infused beverage can vary widely. The reason is physiological rather than psychological: cannabis is fat-soluble rather than water-soluble, meaning it is absorbed by the body’s fat. Thus, depending on the body type of the person using the cannabis product, a certain food item might take hours to be ingested, while for others, the effects might be much more similar to those of alcohol.

For now, just about everyone agrees that the future of cannabis food (both edibles and beverages) is very bright. If edible cannabis comes close to the 25-35% compound annual growth rates predicted by some market analysts, it could become a very attractive option not just for consumers, but also for investors. We’ve reached a heady time for the cannabis food market, in which nearly three-quarters of all chefs recently surveyed by the National Restaurant Federation and American Culinary Foundation say that cannabis-infused and CBD-infused dishes is now one of the hottest food trends of 2019. Just wait until recreational cannabis use becomes legal in Canada and the first cannabis restaurants open in California later in 2019. That’s when the whole cannabis food category could be set to explode.