Large indoor cannabis plant's cola bud.

Rory Savatgy

Why Cannabis Companies Can’t Afford to Ignore Data and Analytics

Legalization — and the infrastructure that follows it — enables the cannabis industry to embrace business intelligence that is already standard in other industries. This is the story so far for states that have legalized, and trends show that national legalization and the mainstream normalization of cannabis are quickly becoming a very real possibility.

With active marketplaces already up (or nearly underway) in Colorado, Washington, Oregon, and Alaska — as well as an upcoming adult-use vote in California and several other states this November — the cannabis industry is experiencing massive upheaval on its way to becoming a mainstream industry. Therefore, it must (and will) become as cutting-edge as any other if it is to carve out a niche for itself in the modern economy.

To that end, an entire subindustry of ancillary businesses is springing up. These are companies that provide assistance to cannabis market participants with regulatory compliance, general business practices, and data-based decision making. Many firms collect and analyze data on the new industry and provide this information to clients on a proprietary basis. This data allows industry participants to capture information efficiencies which are usually unavailable in illicit or medical markets. Often, companies providing this data are operated by individuals with experience in other, more mainstream markets.

Cannabis Benchmarks is one such company. Founded in early 2015 by CEO Jonathan Rubin, Cannabis Benchmarks is owned by New Leaf Data Services LLC and provides wholesale price information to those on the cultivation side of the industry. “We aim to be the Kelly Blue Book of wholesale cannabis,” Rubin said.

Although the company is performing well and expects to expand soon, he often speaks of his company in futuristic terms, with an eye to the continuing development of the cannabis industry. For example, the firm’s Professional level service — offered in partnership with GlobalView — is geared toward international commodity traders in the cannabis futures market (which doesn’t exist yet). Those that purchase the service will gain access to historical cannabis price data in a dashboard similar to Bloomberg Terminal, and can perform various analyses using data on climate, macroeconomic trends, utility prices, and more. Rubin hopes to establish a firm first-mover advantage with those interested in cannabis futures information before such a market even develops.

There are many other companies that supply similar or related ancillary services to the cannabis industry, including New Frontier, The ArcView Group, BDS Analytics, and a host of consulting firms which provide clients with custom consulting services.

New Frontier and ArcView are partners on the notable report “The State of Legal Marijuana Markets” — now in its 4th edition — and ArcView is a giant in industry fundraising and other activities. Their report on the potential for the California adult-use market has received extensive mainstream coverage.  New Frontier has also published reports on Oregon, California, Nevada, global markets, energy efficiency in the industry, cannabis investing, and cultivator revenues. This summer, New Frontier launched Equio, an online data platform that allows cannabis retailers to track inventory and sales, compare sales to regional averages, and keep up with trends in consumer strain preferences.

BDS Analytics offers a similar service with its GreenEdge platform (albeit with access to more transaction data) which is now free of cost for all members of the National Cannabis Industry Association. GreenEdge offers retailers detailed information about market trends, broken down into many categories of products, based on over 30 million transactions. BDS also recently launched a consumer research division. Most analytics firms currently are cultivator-oriented, but consumer research will become increasingly important and common as the industry develops and moves toward a brand-based market.

It is important to note that all of this is more or less standard in other industries. “What we’re doing already exists in every other industry,” says Roy Bingham, CEO of BDS Analytics. Legalization measures in other states will only feed into the industry’s upward cycle.

Already, many individuals from traditional industries are shifting to cannabis as a viable career alternative. Rubin and Bingham both have extensive experience in traditional industries. Rubin got into the cannabis analytics industry after he was unable to evaluate a company’s investment proforma due to a lack of wholesale price information. Bingham, with experience in mergers and acquisitions, is more direct about how he got involved: “Opportunity knocks.”

California will likely legalize adult-use cannabis this fall, based on polling that shows a majority of voters in favor of Proposition 64. If it does, a gigantic consumer market will open up and the state will become a keystone in the national and international fight to reform cannabis laws. Capital and labor will flow into the state, and there will be many more companies, investors, and traders in desperate need of business intelligence.

The only way is up.

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