reaching new highs:

Australia’s cannabis industry

If you aren’t already, then it’s high time you get clued up on the controversial cannabis legalisation and innovation that’s taking place around the globe right now.

It’s a trend that shows no signs of slowing: Governments are relaxing cannabis-related legislation. Consumer mindsets are shifting. Manufacturers are investing in research to support claims of the plant’s many benefits.

Has the booming cannabis market got you green with envy? Are you wondering how your business can get involved, or what all the hype is about? Fear not! We’ve got you covered with a PLAYful deep dive into the Australian and US cannabis markets, key future opportunities, plus some tips for leveraging the trend today.

MARIJUANA 101: Cannabis lingo, made easy.

THC: Tetrahydrocannabinol is the chemical in marijuana that gets you high.

Marijuana vs. Hemp: Both are types of cannabis. Hemp is generally cultivated with very low levels of THC.

CBD: Cannabidiol is a non-intoxicating compound that can be derived from hemp or marijuana.

“...cannabis, a plant with an ancient history, is a $20.1 billion dollar legal industry worldwide and is expected to more than double in size over the next five years.”– Smart Company

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state of PLAY: the Australian cannabis market.

“The passage of this legislation is an Australian first… It will work to reduce the harm of drugs in our community by reducing the stigma of drug use

and encouraging people to seek help without fear of arrest.”

– Michael Pettersson, Labor Party Lawmaker

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Cannabis laws have historically been very strict in Australia. Although the use of medicinal cannabis for patients with chronic illness was given the green light by the government in 2016, recreational use has always remained punishable by law - until just recently.

Following the lead of countries like Canada and the US, in September 2019 the ACT became the first state to legalise the recreational possession and cultivation of marijuana.

Hemp products, on the other hand, have been legal to produce and sell in Australia for a couple of years. Their popularity continues to go from strength to strength. As the adoption of hemp spreads across a wide range of industries, you can now find hemp

food products, wellness solutions, and even fabrics sold in mainstream stores, countrywide.

As demand for both everyday hemp products and medicinal marijuana booms, the evidence is mounting in favour of legalising cannabis and cannabidiol (CBD) across Australia.

“In 2017 the Food Standards Australia and New Zealand (FSANZ) approved the sale of low-THC hemp foods, opening the floodgates for what could be a multi-million dollar industry in just a few years.”– The Medium

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Almost half (45 percent) of our online community, Shopper Social, agree that marijuana should be legalised in Australia. Their reasoning? Cannabis relieves pain and provides relaxation as well as helping to regulate and prevent disease and treat depression.

You’ve probably heard a lot about CBD lately; it’s certainly having a moment. CBD oil has been found to relieve pain and inflammation, reduce anxiety and depression, assist with sleep and even alleviate cancer-related symptoms, amongst other impressive benefits. The best bit (for those not so keen on the cannabis highs and lows)? CBD isn’t psychoactive, so it doesn’t produce the same mind-altering effects as marijuana.

When we spoke to our Shopper Social community about the topic, we found that most Aussies (61 percent) will purchase CBD if it is legalised. However, only a quarter of people will not purchase any cannabidiol-based products.

One thing is for sure: although slow on the uptake, the Australian cannabis industry is set to expand alongside the global trajectory of exponential growth.

45%agree that marijuana should be legalised.

On Shopper Social,

61%will purchase CBD if

it is legalised.

On Shopper Social,

“Cannabis entrepreneurs are cropping up all over the place in Australia as early movers get ready to cash in on what could become a $1.2 billion industry over the next 10 years, according to figures put together by prohibition partners last year.”– Smart Company

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the US and international cannabis markets.

“...62% of Americans believe the use of marijuana should be legalised. This is double what it was in 2000 (31%), and five times what it was in 1969 (12%).”– Investopedia

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The United States was next to make a PLAY. Cannabis has now been legalised for recreational use in 11 US states and for medical purposes across 33 states. Colorado and Washington made the first move but the biggest market, perhaps unsurprisingly, is California.

The growing interest in cannabis in the US is perhaps not surprising when considered in the context of its reported health benefits. Health and wellness is the fastest growing market in the US. Cannabis-related products are quickly becoming viable options to replace many pharmaceutical drugs, tying into the shift towards preventative, alternative and plant-based medicines.

CBD products can now be sold

throughout the US and this has sparked a global CBD buzz. Products such as skin-care creams, balms, dietary products, supplements, bath bombs and even dog treats have been flooding the US market - a wellness industry that is predicted to be worth almost USD$22 billion by 2022. In fact, “CBD gummies” was the third-most searched food-related term on Google in the US last year.

According to Bloomberg, investors are now pouring money into huge CBD-extraction facilities and processing plants in the US, preparing for the day that Coca-Cola, P&G and other consumer goods giants get on board the cannabis train; the day that cannabis truly goes mainstream.

A few steps ahead of Australia, the global cannabis movement made some serious strides in 2018. Canada blazed the trail as the first industrialised country in the world to legalise recreational marijuana, second only to Uruguay in the worldwide race.

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the future of cannabis in Australia.

“Legalising marijuana would boost the public coffers to the tune of $3.5 billion, according to a

costing of the Greens’ recently proposed marijuana legalisation policy. This includes direct taxes and reduced law enforcement spending, as well as an

influx of “marijuana tourists”, ready targets for fancy cannabis package deals.”

– Sydney Morning Herald

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Although some worry about an increase in cannabis use, particularly as a “gateway drug”, many say that legalising cannabis-related products would benefit Australia, from businesses and consumers, right through to government.

The relaxing of local cannabis laws will open a raft of opportunities across a wide range of industries. We can expect echoes of US trends such as hemp-based fashion items and CBD-infused beauty products.

Once cannabis products go mainstream locally, Australia can make its mark as a premium product supplier in the global marketplace, too.

“Beauty and fashion brands are hitching a ride on the skyrocketing cannabis bandwagon – an industry that is predicted to be worth $63 billion within five years…. Estimates peg the hemp industry to sit at $3 million by the year 2023, which hardly puts a dent in America’s $150 million hemp industry. Though given Australia’s population size, $3 million isn’t anything to snark at either.”– Australian Financial Review

“In Australia, we see the emergence of “craft growers” delivering high end, premium brands that gain rapid market share. Although the majority of brands will come from the North American markets, Australia has a history of producing premium grade exports (fruit, wine, etc.) and we see this history as repeating itself in this new commodity.”– Business Insider Australia

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And while we wait for the legalisation of cannabis in Australia, why not leverage the existing hemp trend to help your brand “go green”?

Industrial hemp production requires little to no pesticides, produces oxygen, doesn’t contribute to topsoil erosion and can even replace environmentally harmful products. It is a great way for businesses to up the ante when it comes to developing sustainability-focused initiatives.

“The other big opportunity is composite materials, such as biodegradable plastic… We have contacted LEGO and they’ve informed us they want a biodegradable product… Companies have to solve their environmental problems and greenhouse emissions, and hemp is the solution.”– Charles Covess, CEO of Textile and Composite Industries Australia

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how can you leverage the trend?

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So, cannabis is set to disrupt the Australian consumer landscape and we bet you’re wondering how you can get involved (as a business, of course!).

1. Joint ventures (no pun intended).Want to dip your toe in the water? Joint ventures can be a good place to start in order to minimise risk.

As the industry develops and matures, it is already increasingly difficult for budding entrepreneurs to compete with big businesses, due to cost and complexity. This has already led to consolidation in market.

For example, beer giant ABInBev (owner of the Budweiser brand), has already put $50 million into a joint venture with the cannabis company Tilray to research weed-infused beverages, something that Coca-Cola has also reportedly toyed with.

2. Entry-level products.While many consumers are still a little green to the idea, focusing on palatable low-dose products, such as infused edibles, beverages and vapes, can help bring new consumers into the cannabis space. Cannabis beverages are set to be a $600 million business in the US by 2022 and Australia is likely to follow the trend.

“Successful cannabis offerings will need to have an acceptable taste, accurate dosage levels, a predictable time of onset, and sufficiently long shelf life. A product’s image may also play a role in its acceptance, especially if it is used in social settings.”– SP Global

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3. Innovation.The future involves extracting concentrates from cannabis plants using nanotechnology and water-soluble oils to create consumer products that can be absorbed directly into the bloodstream, rather than smoked.

Products such as cannabis-infused skin lotions, bath soaks, essential oils and pet balms (yep, you read that right!) can produce fast and effective results for digestive issues, anxiety or inflammation.

4. More functional wellness, less flower power.

A good first step into the cannabis-related product market could be a move into everyday wellness products, marketed towards women and families. This can include anything from functional food and luxury beauty right through to natural health products.

“The trends are pointing away from flower. Although still a very big component of the marketing (60-70% of the market), the fastest-growing segments of the market are oils and edibles, which will continue to grow very quickly. If you take a look at the marketplace, you see less “stoner-type branded products.” The cannabis industry is headed into a branded, functional product direction with edibles and oils.”– Andrew Glashow, President, COO, and Director of Cannabis Life Sciences

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5. Beyond CBD.CBD products are where it’s at right now, from Baby Boomers who use these products to treat chronic medical conditions to young people looking to optimise their sleep or skincare routines. Research supporting the health benefits of CBD products is growing, and this makes it a more viable option for large brands.

However, moving forward, it’s likely the debate around the “entourage effect” will also gain traction.

This means that by producing broad-spectrum CBD products (rather than CBD isolate), you’ll be able to maximise the potency of your offering and generate more powerful results for consumers (hello, glowing reviews!). Be sure to focus on purity by including third-party testing and prioritising clean extraction processes to help minimise toxins and pesticide exposure.

“...CBD’s unique balancing properties are believed to be much more powerful when all the different components of the cannabis plant are together, working synergistically. The end result, as the science goes, is greater than what any one of those components can help us achieve alone.”– Mind Body Green

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An important point to remember, as with any hot trend, is to get to know your consumers inside and out. Many brands that follow “the next big thing” end up falling at the first hurdle, as everyone races to grab a piece of the pie. Do your research and have a solid understanding of consumer needs to ensure you’re hitting the spot for consumers.

A final question to consider: Would you like to be part of a future where your brand is key component of consumers’ healthy daily routines?

“...consumers will have a pick-me-up cannabis beverage when they wake up, jump in the shower using cannabis

toiletries, take a cannabis supplement with lunch, consume cannabis sports nutrition after the gym, head out in the evening for a non-alcoholic THC drink and go to bed at the end of the day with a THC or CBD sleeping aid.”– Euromonitor for CStore Decisions

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over to you

So, for now, we’ll THC-you later! If your business is considering entering the cannabis product space anytime soon then remember, our PLAYful team can use our in-house sensory facility, consumer and shopper research to:

> Understand and identify opportunity areas in the market.

> Refine your product and pack.> Establish likely shopper and

consumer behaviours.

For more information visit www.playmr.com.au.

You can catch us on 02 8097 0200 or hello@playmr.com.au anytime.

Now, consider this report your green light – and go!

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