(FinancialPress) —Sharing the co-title as the first state to legalize recreational marijuana with Washington, Colorado was the first state to cross $1 billion in annual sales, eclipsing that milestone last year as part of the $6.7 billion generated nationwide by the legal marijuana industry. Analyst predictions understandably vary given the nascent nature of the industry, but the common consensus is for hockey stick type growth. In one of the most recent reports, Hexa Research forecasts the U.S. medical cannabis market alone to reach $19.48 billion by 2024, fueled by a “favorable regulatory environment across numerous states including California and Colorado.”
Market analysts at New Frontier Data are seeing things on the same growth curve, forecasting earlier this year that the legal medical marijuana market will reach $13.3 billion in 2020 and the recreational market will jump from $2.6 billion (2016) to $11.2 billion by the same time.
Part of the industry growth is due to rising demand for cannabis testing services to ensure safe and standardized products are consistently offered to consumers. GreenWave Advisors estimates that the cannabis testing industry trends at approximately 3 percent of the overall market, equating to about $700 million by 2021. On that point, it’s arguable that this market segment could grow more quickly in the future as more stringent regulatory controls are implemented mandating separate testing for different products, such as individual plant batches, edibles, oils, etc., rather than merely a single test for a large harvest as was done in the past, if at all.
In the market segment of laboratory testing, EVIO, Inc. (OTCQB:SGBY) is methodically, yet expeditiously, establishing a presence in key U.S. states to build a leadership position with its accredited analytical testing services and scientific research for the regulated cannabis industry. Depending on which is the most efficient path to market, EVIO Labs takes different strategies to build its brand. In its home state, it already has brand recognition, but to build value, aligning with other major opportunities was, and is, critical.
Sometimes, as was the case in Massachusetts this July, EVIO swooped in and acquired Viridis Analytics MA, LLC, one of only a handful of operating cannabis testing labs in the state. In other cases, licensing is the most appropriate strategy. This was the tactic used to penetrate the Florida markets through a licensing deal that rebrands the lab of Kaycha Holdings under the EVIO Labs moniker. In California, EVIO plans to own all of its labs in what is undoubtedly the largest addressable cannabis market in the world now that recreational marijuana is becoming legal in 2018. There, the company is opening a hub lab in Costa Mesa to service its network of “spoke” locations.
On Thursday, EVIO muscled its way into the Colorado markets too, licensing its brand and cannabis technology to Phytatech CO, LLC. In business since 2014, Phytatech will now operate under the EVIO Labs brand. Since inception, Phytatech has used multiple licenses, building a customer base as a licensed medical testing provider and licensed retail testing provider servicing approved growers and manufacturers of infused products.
Robert Howland, the founder of Phytatech, sees the name change and partnership as protecting existing customer’s needs in the short-term while providing a great long-term benefit through expansion opportunities by adding “service offerings to help our clients improve the quality of their products to meet the continued growing demand of the industry.”
With the latest agreement, EVIO has positioned itself in select U.S. regions that likely will be responsible for the largest portion of the market growth in the coming years. New Frontier estimates the California markets will reach $6.46 billion by 2020, during which time the Massachusetts market will climb to $1.1 billion. Add in the more than $1.3 billion collected in Colorado in 2016, the $394 million in sales in Oregon last year and expectations for the Florida market to also exceed $1 billion by 2020 and it becomes plain to see why EVIO is targeting these specific markets first.
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