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Published by: Alain Le Clere on 13-Jan-20
 
top-5-cannabis-predictions-for-2020

Making predictions about the new year is always more fun than recapping the prior one. And, while making new year’s predictions is more of a parlor trick than a serious pursuit, 2020 is clearly poised to be a historic and consequential year for cannabis. I have been traveling abroad this past week with my family, including a trip to Amsterdam, the unofficial capital of cannabis. I used the time off and change of scenery to give some consideration to what awaits us in 2020. In short, I predict that it will be a year of significant transformation, particularly for hemp and cannabidiol (CBD). top_5_cannabis_orediction_for_2020 Here are my top 5 predictions for 2020: 1. CBD will go mainstream. This may seem like a strange or outdated prediction since, by any reasonable standard, CBD was wildly popular in 2019. In fact, the term “CBD” was one of the most popular Google search queries of the year. By the Google metric, CBD in 2019 was more popular than The Beatles and, depending on the month, even more popular than Taylor Swift. It was significantly more popular than “THC” or “marijuana”. Everyone’s mother seems to be using CBD and several mainstream grocers have started carrying it. CBD is popular, but its current popularity is only the proverbial tip of the iceberg. It will become more popular in 2020. I base my prediction on the concept of “crossing the chasm”, articulated in the book of the same name by Geoffrey Moore. (I am indebted to my friend, John King, CTO at Global Widget, for introducing me to this concept and book.) Crossing the chasm (CtC) is worth its own article. For our purposes, I will summarize it by saying that CtC is a theory of disruptive innovation focused on on the specifics of marketing high tech products during the early start up period. According to the CtC theory, there is a chasm between early adopters of a product (in our case, CBD) and the early majority. (See image, below.) The most difficult step in a product’s emergence is making the transition between sales to the early adopters and sales to the early majority. This difficult step results in a “chasm” that is best represented as a temporary dip in sales growth. For products that successfully cross the chasm their early majority and late majority sales figures are significantly greater than the sales figures during the early adopter stage. Diffusion of Innovation: 'The Chasm' and 'The Tipping Point' Once the 'The Tipping Point' has been reached, the marketing of high-tech and innovative products requires a leap across 'The Chasm.' If successful, product sales will increase dramatically after reaching the 'Tipping Point.' If not, the product will most likely not reach the mainstream consumer. SOURCE: Adapted from Roger's Diffusion of Innovation (1962), Moore's Crossing the Chasm (2002) and Gladwell's The Tipping Point (2000) Image obtained from ResearchGate. I agree with John King that we are now at “The Chasm” for CBD. (Did you notice the sluggish 4th quarter sales for CBD that unexpectedly came in the immediate wake of rapid growth following enactment of the 2018 Farm Bill?) Assuming that is the case, CBD’s popular ascent has only just begun. Most of its sales have been to early adopters. Can you imagine what the CBD market will look like once it is firmly adopted by the majority? According to Statista, CBD sales figures in 2022 will be almost twice those of 2019. This growth will be very good for companies that are prepared to cross the chasm. But, it will likely be the death of companies that are not prepared. A significant factor in a company’s ability to survive the chasm-crossing is whether or not it adopts the standards required of other consumer products, most notably track and trace and good manufacturing practices (GMP). 2. Track and trace and GMP will finally become the norm. Aside from the unfortunate use of snake-oil marketing techniques by many CBD companies, including claims that it cures everything from cancer to Alzheimer’s, the biggest complaint about the hemp/CBD industry has been its sloppy and unregulated production practices. To be fair, there are a lot of good and reputable hemp/CBD companies that are using proper production practices. And, the rollout of most any new health product that gains quick popularity faces similar issues. However, CBD is no longer a newbie product and 2020 will be the year that the CBD industry grows up. Despite the FDA’s failure to provide meaningful leadership, many states and industry participants now require CBD products to be fully traceable through the supply-chain (“seed to sale”) and that CBD products be produced and manufactured using GMP. Of course, the fact that the FDA has taken the position that CBD may not be used as a food ingredient or marketed as a dietary supplement has complicated this issue. However, the FDA’s stance has not eliminated the need for hemp and CBD companies to adhere to the same rules that govern production of other consumer products. This encompasses a whole host of issues, from pesticide use to batch testing to shelf stability studies to proper labeling to recalls, all of which are worthy topics for articles of their own. My point is that in 2020 CBD will become part of the wider group of consumer products, including the production standards that govern them. Companies that fail to incorporate these standards will fail. 3. We will see the emergence and availability of other cannabinoids on the market. While tetrahydrocannabinol (THC) and CBD are the undisputed “King” and “Queen” of cannabinoids, there is a royal court of many lesser-known cannabinoids that will begin making their appearance on the market this year. Of the dozens of cannabinoids produced by the cannabis plant, the two that are poised to make the most headway in 2020 are cannabigerol (CBG) and cannabinol (CBN). These cannabinoids are very different from each other, so it is difficult to predict which one will make the biggest impact. I believe CBG will take the initial lead in 2020, but that CBN will be bigger in the long run. CBG. As the precursor cannabinoid, CBG is the “mother” of all cannabinoids. In some respects, it is similar to CBD in that it appears to offer a number of health benefits and is non-psychoactive. This similarity may both help and harm its chances of achieving popular success. On the one hand, its similarity to CBD will likely help it gain easy acceptance, at least with the average consumer. On the other hand, the fact that it doesn’t make you “feel” anything may diminish interest in its use, particularly since it is currently much more expensive than CBD. (This will change, though not in 2020.) CBG’s biggest boost will come from an unintended effect of the USDA’s interim final rule, namely, the requirement that “total THC” in a hemp plant not exceed 0.3%. For reasons that I have discussed here, here, and here, the total THC requirement will likely cause a dramatic increase in the failure rates of hemp crops and reduce the number of strains that can be grown. Since CBG is generally formed prior to THC in the cannabis plant, many producers believe that growing CBG rich strains will insulate them from the total THC effect. In other words, it is widely believed that hemp containing high concentrations of CBG can be grown without much concern about pre-harvest THC concentrations spiking. This may or may not prove to be true. However, it is likely that 2020 will see a significant number of CBG strains being grown and a consequent surge of CBG on the market in late 2020 and early 2021. This will create a volatile market, but that’s an issue for another article. The point is that many hemp producers will pivot to CBG rich strains due to the total THC rule. CBN. In many respects, CBN is the opposite of CBG. Generally speaking, it is the product of a degradation of other cannabinoids. Additionally, it has the very noticeable psychoactive effect of promoting sleep. CBN’s sleep inducing effects make it poised to be the “next big thing” in cannabis. The sleep industry is predicted to generate over seventy-nine billion dollars in sales revenue by 2023. Despite these lofty figures, many of the medications and supplements commonly used as sleep aids are less than satisfactory. Most are not totally effective at promoting sleep and many have negative side effects. It appears that CBN is both effective and has few, if any, negative side effects. (I have personally used CBN and can attest that it works well as a sleep aid.) In this respect, CBN may be a major market disruptor. Additionally, CBN differs from CBG in that it is difficult, if not impossible, to grow a CBN-rich strain of cannabis. Until recently, this inability for a producer to cultivate strains with meaningful quantities of CBN has been a major hindrance to its marketability. However, technologies exist that allow for the conversion of other cannabinoids, including CBD and THC, to CBN. These technologies have yet to be deployed at scale. That is likely to change. This change will create a whole new set of legal issues (for instance, is CBN that is created from hemp-derived THC a controlled substance and/or subject to the federal Analogue Act?) For our purposes, I predict that CBN will see a slow start in 2020 but will eventually gain widespread public acceptance and support. It is plausible that in five years it will be one of the most widely used sleep aids in the USA, if not the world. 4. An international cannabis market will finally emerge. I regularly receive inquiries about importing and exporting cannabis products to and from the USA. Of course, doing either with marijuana or marijuana-derived compounds is strictly illegal since marijuana and its derivatives are Schedule 1 controlled substances. However, with respect to hemp and hemp-derived compounds, both are lawful to import and export under certain circumstances and we are helping more and more companies do so. With a couple of notable exceptions, the world outside of the USA has been slow to adopt market-friendly reforms for the production, sale, and use of hemp and hemp compounds, including CBD. That stance is rapidly changing. While an analysis of non-USA regulations, such as Europe’s Novel Food laws, Thailand’s restrictions on importing hemp, Uruguay’s IRCCA rules regarding cannabis, or South Africa’s Medicines and Related Substances Act, is well beyond the scope of this article, it is clear that many countries are about to experience a major cannabis revival. Depending on the course charted by Congress and US federal agencies, the international revival may very well leave the USA behind. But, at least in 2020, we will see the USA take the lead in exporting hemp and CBD to an ever increasing array of countries. The primary trick is to identify which countries are best suited to importing hemp products and navigating their rapidly evolving laws and regulations. 5. We will see the first wave of cannabis insolvencies and bankruptcies. I agree with my friend and colleague, Vince Sliwoski, that we can expect to see a wave of bankruptcy filings and insolvency proceedings by cannabis companies in 2020. As a board certified bankruptcy specialist who has filed thousands of bankruptcy cases and helped numerous companies restructure their debts, I can say with some degree of certainty that there are a number of novel legal issues regarding a bankruptcy filing by a cannabis company. The most notable issue is that, since marijuana is a federally illegal substance, a company involved in the marijuana industry is currently barred from seeking bankruptcy protection. That may change. In the meantime, since hemp is federally lawful there is no barrier to a hemp/CBD company seeking bankruptcy protection. Perhaps the biggest issue is the fact that most debt incurred by cannabis companies has been by private and non-institutional lenders since banks have mostly been unwilling to loan money to hemp companies. This will create a unique dynamic mostly unseen by bankruptcy courts, which are used to dealing with companies that are indebted to institutional creditors. Regardless of the dynamics, many cannabis companies will be unable to compete in 2020 and forced to seek protection under federal bankruptcy and/or state insolvency and receivership laws. Although a wave of bankruptcy filings will likely be perceived as a setback by the media and unsophisticated observers, it will actually be evidence of a maturing market. Any stable industry can count on an annual attrition rate and bankruptcy filings. No matter what ends up happening in 2020, we can be certain that it will be an exciting and tumultuous year for cannabis. Do not hesitate to contact us if you need help navigating this rapidly changing legal landscape. Happy New Year! January 2, 2020

 
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Rod Kight is an international cannabis and hemp attorney. He speaks at cannabis conferences across the country, drafts and presents cannabis legislation to foreign governments, is regularly quoted on cannabis matters in the media, and maintains the Kight on Cannabis legal blog, where he discusses legal issues affecting the cannabis industry. You can contact him here. Thank you for this article : https://cannabusiness.law/top-5-cannabis-predictions-for-2020/ To know more about the CDB go here now : http://alainleclere.site/ Connect to our other blog : https://alainleclere.org/2020/01/13/top-5-cannabis-predictions-for-2020/

 

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