TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

The cannabis industry has made major highlights over the last few years due to developments made in producing cannabinoid drugs. And as more U.S. States continue to embrace medical cannabis, analysts are already showing a great optimism going forward. Research reports already indicate that the U.S. medical cannabis market will grow at a CAGR of 13.6% between 2018 and 2022 to a value of $10 billion.

This growth will be boosted by the increasing number of startups that are investing in medical cannabis. In addition, recent cannabinoid drug approvals in the U.S. like GW Pharma’s (GWPH) Epidiolex are also expected to entice more players to join the market. Therefore, it is clear to see why most investors would be very optimistic about investing in medical cannabis in the coming years.

However, that is not the only segment of the cannabis industry that has shown promising prospects over the last few years. Industrial hemp, whose fiber has several industrial applications has been gaining traction in the market over the last couple of years. According to recent market research reports, the global industrial hemp market is expected to hit a market value of $10.6 billion by 2025.

This growth will be driven by major developments in the textile industry where hemp is expected to experience a CAGR of about 17%. Hemp fibers have a “strong, hypo-allergic, and UV light resistant characteristics,” and these are some of the many reasons why textile manufacturers have embraced them as an alternative raw material to common fibers.

Industrial hemp is also expected to benefit from the growing demand for the crop oil in personal hygiene products, which include soap, shampoo, body lotions, and hair care products. On the other hand, growth in North America will be driven by a rising demand in the automotive industry for manufacturing panels as an alternative to fiberglass.

These levels of expected growth rates and heightened demand show why this segment of the cannabis industry has witnessed a flurry of companies joining the market. As a result, research reports suggest the increasing number of players in the market could lead to an oversupply in the manufacturing sector, thereby affecting prices. This is expected to be one of the minor drawbacks in the industrial hemp market as the overall cannabis market continues to experience impressive growths across all segments.

Challenges facing the cannabis market

In medical cannabis, companies engage in long exploratory research studies before finally launching a product. They are then required to go through various approval processes before their products can finally hit the market.Despite such long and taxing procedures, medical cannabis continues to highlight some of the major breakthroughs in the cannabis industry. This section of the industry has gained legalization in 30 states in the U.S. so far while most countries across the world have also embraced it. Nonetheless, mainstream drug manufacturers are still a major threat to medical cannabis growth prospects because of the stigma the market receives from various regulatory bodies and market experts.

On the other hand, companies operating in the industrial hemp market tend to face fewer bottlenecks, with shorter research periods needed to develop products and gain approvals from relevant authorities. However, in terms of general legalization, a lot is still pending in many countries and this is a huge challenge.

For instance, in the U.S. hemp is yet to gain as many legal statuses as has medical cannabis. Industrial hemp for commercial production is only legal in 17 US states while a further 18 states have legalized hemp for research purposes only. This explains why its projected market value through 2025 of about $10 billion only equates to that of medical cannabis in the U.S. three years earlier in the time frame.

Nonetheless, while such research reports provide a snapshot guidance as to where the cannabis industry is at and is heading, a lot could change in the next few years especially if more cannabinoid products receive FDA approvals in the U.S., and from other regulatory bodies around the world.

Furthermore, unlike medical cannabis, very few companies operating in industrial hemp have managed to go public, particularly via the OTC markets led by the likes of Hemp Inc. (OTCMKTS: HEMP) and the Canadian-based Global Hemp Group (CNSX: GHG). This makes the market relatively harder for some investors to gain access thereby threatening to curtail the current growth. 

Conclusion

In summary, medical cannabis will continue to be the main highlight in the cannabis market purely based on the market size and industry projections. However, industrial hemp appears to be gaining traction and given the fewer bottlenecks involved in launching a product to the market growth prospects are becoming more realistic by the day.