Thursday, June 1, 2017

Industrial Hemp Market

Other countries are interpreting the United States’ legalization of hemp and cannabis as a signal to the rest of the world to do the same. Canada is far ahead of the game, as they recently invested $1.3 billion into the medical cannabis industry in preparation for import/export and international commerce. Jamaica recently announced that they intend to move towards full legalization of cannabis as a potential economic solution. Uruguay has already legalized cannabis. Mexico is strongly considering it, with former President Vincente Fox spearheading the movement in the country. Around the world many other countries are watching and waiting to see how the experiment in Colorado and Washington turns out.

Once we reach the inevitable tipping point every country around the world will launch domestic and international hemp and cannabis industries to create jobs and generate tax revenue. More than 30 industrialized nations already produce legal hemp, with China being the number one producer and Canada number two.


The rapidly emerging hemp and cannabis industries are fragmented into a myriad of small boutique businesses and a few larger scale international operations. There is no collaboration or coordination amongst industry participants as there is no recognized industry organization that properly represents hemp and cannabis companies. 

As industries develop, more and more new players enter into the market in all sectors. The consolidation phase is already beginning. Weaker companies will go out of business or be acquired; stronger companies will flourish and acquire the weaker players. UCG has been identifying potential targets for acquisition in all sectors of the hemp and cannabis industries, seeking to acquire multiple targets in each sector and “roll them up” into one stronger, branded entity that will benefit from the economies of scale of a much larger group of related companies.

Market analysis:

The hemp and cannabis markets span across almost all sectors and industries; building materials, human and animal food, textiles, energy, industrial materials, medicine and more. In the 2013 Congressional Research Service report entitled “Hemp as an Agricultural Commodity," reported that the U.S. retail market for hemp is estimated to be $500 million. It is estimated that the United States imports 60% of hemp produced worldwide, which would indicate that the global hemp market is well over $800 million. The medical and recreational cannabis markets are estimated to be anywhere from $10 to $120 billion annually. With the changing legal nature of these products and industries, there is very little accurate or comprehensive data available.

Market Segmentation:

The industrial hemp market is very broad, spanning most sectors and industries. There are hemp products produced for almost every person on earth, from diapers, cosmetics, healthy foods and nutritional supplements, construction materials, and clothes for all ages and genders. The list is endless, with more than 25,000 products currently being produced from hemp and many more thousands to come. The potential is limitless.

The demographic for cannabis as a medicine spans from the very young to the elderly. Research is starting to report the many benefits of medical cannabis as a non-toxic medicine for use by both humans and animals. Many elderly people are discovering that medical cannabis provides relief without the toxic side effects of pharmaceuticals. Many parents of children with severe diseases are discovering that medical cannabis can provide relief for their young children. More and more states are passing laws to allow parents to seek this form of treatment legally and provide relief for they're suffering children.

The demographic for recreational cannabis is mostly in the 21-40 age group, but baby boomers who grew up in the sixties and seventies are also rediscovering cannabis. All demographics are still relatively small but growing rapidly as legislation continues to change in the United States and internationally.

Market Needs:

The hemp and cannabis markets must establish large scale marketing and educational programs to introduce these new products to mainstream consumers in order to expand demand while simultaneously expanding supply. A true “industry association” is desperately needed to coordinate the marketing of hemp across all of the companies in the industry that stand to benefit. The “Got Milk” campaign was financed by all members in the milk industry, the same needs to happen for hemp.

The development of the proper regulatory framework for commercialization of the industry has been slow, at best. Governments do not have sufficient financial resources or the knowledge base to develop standards for hemp or any other industry. Governments typically work with industry organizations to develop standards and regulations. This is particularly crippling in developing countries where governments have even less resources to develop a regulatory framework for the crop and its products.

Manufacturers must be sold on hemp as a superior sustainable biomass in order for the industry to grow to its full potential, and that hemp can move them towards a sustainable business model while, most importantly, reducing their costs and improving the quality of their products. It will be fairly easy to get farmers onboard if they are properly incentivized. Compared to traditional crops, hemp is more profitable and requires less input. Some manufacturers have already bought in, but they can’t get a consistent supply of quality hemp for full production runs. Mercedes and BMW have millions of cars on the road today that contain hemp parts, Hanes and International Paper are just two of the many Fortune 500 companies that already know that they want to use hemp in their products, if they can get a consistent supply.

To ensure stable growth of the worldwide market will require simultaneously ramping up supply and demand for what could potentially become a multibillion dollar market over the next 5 to 10 years.

Market Trends:  Focus on CBD

Since Dr. Sanjay Gupta’s documentary in 2013 on medical cannabis aired and he publicly apologized, in September 2013, momentum in this industry has picked up significantly. An increasing number of entrepreneurs are now inquiring about CBD and new business opportunities in the cannabis, and hemp industries. Everyone is trying to get out ahead of the steep growth curve the industry will soon experience.


There is a rapid expansion of the hemp food markets, with new players entering the market and seasoned companies growing at a strong pace. Some existing producers are looking for new sources of sustainable raw material and developing new product lines, with many start-ups looking to enter the market early.

The building industry and consumers are not yet aware of the merits of hemp as a building material. The environmental and economic benefits of hemp versus traditional building materials must be quantified and published. Once that information is available and marketed effectively, builders and building owners will transition to this more environmentally efficient and cost effective building technology.

Market Opportunity: pure growth and upside

Cannabis and hemp have been prohibited for more than 75 years. As a result, the majority of consumers around the world are unaware of the positive potential this plant holds. Consumers as a whole have been misinformed about cannabis and hemp. Once consumers are exposed to factual information through marketing and educational programs, most will recognize the benefits of these products and will become passionate consumers.

Exponential market growth is expected over the next 5-10 years in both the hemp and cannabis industries. The industrial global hemp market is currently estimated to be in the neighborhood of $800 million and will easily grow to be a several billion dollar market within 5 years with a sufficient expansion of supply.
Ramping up hemp and cannabis production will be a stimulus for many ancillary industries; testing, monitoring, packaging, distribution, logistics and marketing, to name a few. 

In addition the farm equipment industry will need to develop new specialized equipment, there will be a need for additional processing and manufacturing facilities, and many other ancillary economic benefits from the growth of the hemp and cannabis industries will occur. All of these industries in the periphery will benefit greatly, which will contribute to the overall global economy in a significant way.