When it comes to cannabis investments, there are usually two main categories to consider: ancillary, and non-ancillary (plant-touching). The main reason for this division between the two is the risk.
Ancillary vs. Plant-Touching
Plant-touching cannabis companies are directly involved with the production, cultivation, manufacturing or processing of marijuana products. Ancillary cannabis companies don’t actually touch the plant, but still, stand to benefit from the cannabis industry’s growth.
If you’ve ever heard the age-old maxim to sell shovels in a gold rush, then the same school of thought could be applied to investments in the cannabis industry.
While so many companies all around the globe are fighting tooth and nail to become the biggest cannabis producer in the world, other companies are quietly fighting over the huge opportunity to service and supply plant-touching companies with everything that they need to function.
A couple examples of ancillary services include security, media, and marketing. If the ancillary side of the cannabis industry doesn’t sound like it has the same growth potential that the plant-touching side does, you’ve got it backward.
Ancillary Industry to be 2.5x Cultivation Market
In a 2016 report, Deloitte estimated that the size of the ancillary cannabis industry would be approximately 2.5 times the size of the actual cannabis cultivation market.
Despite coming from Deloitte, many marijuana investors still wonder why will the ancillary side of the legal marijuana industry be so much bigger than the plant-touching side.
Really?!
The fact of the matter is, that most cannabis consumers already consume cannabis. Whether they’re doing it legally or illegally, they’re already doing it. Despite the fact that cannabis consumers are already plentiful and have been for a while, black market dealers and cultivators haven’t been paying laboratories to test their products for consumer safety.
Given how much money stands to be made in the marijuana industry, it should come as no surprise that these cannabis companies have big budgets alongside their grandiose goals.
By legalizing cannabis itself, companies performing already-legal services like security and marketing benefit from the new business. Hence, why the ancillary cannabis industry might become 2.5 times the size of the actual cannabis industry.
Publicly Traded Ancillary Cannabis Stocks
When looking for ancillary companies to invest in investors might become overwhelmed, so let’s take a look at a few below:
Security and Compliance: Helix TCS, Inc. (OTC:HLIX)
“Helix TCS is the Premier Provider of Integrated Operating Environment Solutions for the Legal Cannabis Industry.” Helix TCS has several holdings that help service the ancillary cannabis industry, including the mult-state compliance giant BioTrackTHC, Cannabase, the oldest and largest wholesale platform in the cannabis industry, and its cannabis security firm.
Testing and Labs: Digipath Inc. (OTC:DIGP)
“Digipath, Inc., is a cannabis data company and independent cannabis testing firm that supports the cannabis industry’s best practices for reliable testing, data acquisition and analysis.” Digipath Inc. owns and operates Digipath Labs in multiple states in the U.S., Digipath Labs screens medicinal cannabis for its quality, potency, and cannabinoid and terpenoid profiles, as well as potentially harmful contaminants.
Media and Events: Lift & Co. Corp. (TSXV:LIFT)
Lift & Co. was “designed to be an online meeting place to share experiences, read industry news and discover strains.” It is also one of Canada’s first website’s for product reviews that “helped people find the right products for their needs.”
Conclusion
These are just three of the MANY opportunities available to investors looking for a play on the ancillary side of cannabis. As the industry grows, there will inevitably be more and more companies that go public, it is up to you (or your financial advisor) to decide where to place your bets. As the green rush continues, some companies will rise to the top while others inevitably fall to the wayside.
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