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Put Some Weed on It: Intro to the Topical Cannabis Market
The topical cannabis market provides a crossover hit, appealing to consumers well beyond the typical cannabis demographics.
The topical cannabis market offers treatments such as balms, lotions and skin oils that appeal to a non-traditional class of cannabis consumer and drive rapid growth in the pain relief and cannabis-based skin care industries.
The legal cannabis industry has grown well past the bong and the joint. The North American public have long since accepted the idea of medical cannabis and have even wrapped their minds around the concept that cannabis doesn’t need to get you high. That latter idea is what’s fueling market segments like the topical cannabis product market.
Both seasoned cannabis users and people who would never have touched the stuff a few years ago are now exploring cannabis topicals for a variety of applications, including relief from physical ailments or as part of a skin care routine. As the most accessible point of entry to the cannabis market for the non-traditional consumer, the cannabis topicals market has huge potential for sustained growth. The broader industry is losing its stigma, and these products will soon become just another thing that you and your elderly aunt pick up at the local pharmacy.
Topical cannabis treatments tend to take a back seat in the cannabis plant conversation, but it would be a mistake to overlook this market segment when talking about current and potential market size. The global market for topical cannabis products hit $349.1 million in 2017 and is projected to grow at a compound annual growth rate of 37.2 percent up to 2024. This means that the topicals market is growing at a slightly faster rate than the broader industry, continually taking up more market share. Driving that growth is an aging population and a corresponding proliferation of skin diseases and ailments.
How topicals work
People have been using cannabis topically for nearly as long as people have been using cannabis at all. A large part of the appeal of topicals in particular is due to the way they provide fast release to very localized sources of pain. When inhaled or eaten, cannabinoids make their way into the bloodstream, where they eventually come into contact with CB1 receptors in the brain and brainstem and CB2 receptors throughout the body, providing a more or less evenly distributed effect. Topicals — excluding transdermal topicals — work differently. When a cannabis balm or lotion is applied to an affected area, the cannabinoids do not reach the bloodstream and interact only with the cannabinoid receptors in skin within the area of application, providing a greater degree of precision to the targeted area for quicker relief that doesn’t affect the rest of the body.
Like most cannabis products, topicals are made from a wide range of differing cannabis strains bred and grown for optimal effectiveness for specific conditions and ailments. Most formulations on the market today rely on formulas that only use cannabidiol (CBD), as these are easier to sell in a wider range of markets under current laws, particularly those that allow industrial hemp, a robust source of CBD oil.
There are, however, a few tetrahydrocannabinol (THC) topicals on the market that can provide a range of benefits beyond what CBD alone can offer. While research on the specific topical benefits of each is limited, anecdotal evidence generally supports THC topicals as the most effective treatment for neuropathic pain and chronic pain conditions, while CBD is effective for general pain killing and muscle relaxing.
There’s a reason topicals have very quietly become one of the most popular cannabis market segments. Even with formulations that include high amounts of THC, cannabis taken topically will not induce much of the psychoactive high typically associated with cannabis. This fact alone is enough to get many users who remain uncomfortable with the idea of medicinal cannabis to give it a serious look. Users of topical cannabis tend to report quick and highly effective pain treatment. This effectiveness and lack of side effects has made cannabis topicals popular not only for arthritic pain and other serious sources of pain and inflammation but also for simple things like post-workout soreness. Cannabis topicals have also proven to be effective for skin care, keeping skin looking and feeling healthy due to many of the same properties that make cannabis effective for inflammation.
Cannabis topicals are an even better proposition for producers. Cannabis is relatively inexpensive to produce and adds a great deal of value to skin care and other infused products, so the margins on these can be extremely high. In 2016, Marijuana Business Daily estimated the profit margins for infused cannabis products, including edibles, to be around 32 percent. Demand for topicals is also coming from a far broader market than other cannabis products, so companies focusing on topicals are seeing the benefit of appealing to a large and underserved market niche.
Topical cannabis market participants
Matica Enterprises (CSE:MMJ,FWB:39N,OTCQB:MMJFF) is one of the cannabis companies honing in on the medical cannabis topicals market. Matica formed a partnership with Quebec-based health and personal care research company Yunify Natural Technologies in 2018 by acquiring a 40 percent interest in the company. Through this partnership, Matica is working to develop proprietary time-released topical creams among other cannabis products for the pain management market.
Seeing the unique opportunities presented by the cannabis topicals market, some of the biggest names in the cannabis industry are getting involved. Aurora Cannabis (TSX:ACB) is offering topical medical cannabis creams through its Cannimed subsidiary. In 2018, Aurora also acquired MedReleaf, the first Canadian licensed producer to offer topical cannabis products. Non-cannabis-specializing companies are getting in on the game as well, with the likes of major cosmetics brand Sephora partnering with licensed producers to offer cannabis-infused beauty and skin care products.
We’re quickly reaching a point where the inclusion of CBD and other cannabinoids in common health and wellness products will seem no more abnormal than aloe vera or D vitamins. The topical cannabis market is reaching out well beyond the typical cannabis demographics for crossover success. Cannabis producers, as well as skin care and other health product companies, are able to take this trend and turn it into high-value, high-margin products.
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