Cannabis Regulations, Testing, and Market Trends in 2023 and Beyond

Meeting Cannabis Regulations & Testing Demand with a Laboratory Information Management System (LIMS) for Cannabis
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The U.S. cannabis testing market was valued at $1.5 billion in 2021 and is expected to reach a value of $4 billion by 2030, growing at a CAGR of 10.5%. North America enjoys market dominance in cannabis testing and is closely followed by Europe. 

Cannabis testing has evolved significantly over the last four years as more countries have moved to legalize cannabis for both medical and recreational purposes. As the laws on cannabis shift to become more adaptive to legal cannabis, the regulations governing the regulated industry become even more stringent. The growth in the industry plus the strict regulations has increased the demand for cannabis testing; an industry whose value is currently past the $billion mark. 

Cannabis Testing Industry: 3 Broad Categories

Cannabis testing is divided into three broad categories: products, services, and laboratory software. The services category had the largest dominance in the market in 2019 and its growth has been fuelled by the increasing number of states that have legalized cannabis. Stringent regulatory requirements aimed at ensuring consumer safety have also propelled the growth of the service sector in cannabis testing. Cannabis testing includes six different kinds of tests: cannabinoids, terpenes, heavy metals, pesticides, mycotoxins, and residual solvents. All these elements must be analyzed and captured in the certificate of analysis (CoA). Of all the services, potency testing dominated the segment in 2019 and is expected to maintain segment leadership as more states move to legalize cannabis. 

The products segment includes analytical instruments and consumables used in testing and is likely to grow commensurately with the services segment. 

The laboratory software segment includes Laboratory Information Management Systems (LIMS) for cannabis testing labs used for managing data, automating processes, and meeting stringent state and local regulatory guidelines. The laboratory software segment is growing at a fast pace. This is propelled by the increase in the number of laboratories that offer testing services and the increasing adoption of LIMS in cannabis testing laboratories. 

Cannabis testing technology can be broadly categorized as either chromatography or spectroscopy methods. The spectroscopy segment has been growing fast due to a myriad of benefits it offers, including cost efficiency, high throughput, and real-time analysis. The spectroscopy segment is projected to have a value of $1.2 billion by 2030. 

The Impact of COVID-19 on the Cannabis Testing Industry

The world at large is yet to recover from the economic recession that was orchestrated by the COVID-19 pandemic. Fortunately, for the cannabis industry, the economic impact has not been as severe as in some other industries. The industry has witnessed an influx of investors and has managed to maintain positive growth despite the prevailing economic situation. 

Primary Growth Drivers For the Cannabis Testing Market

The cannabis testing industry has maintained a steady growth rate since 2019. Here are the key drivers fueling the growth of the industry: 

1. An increasing number of states have legalized cannabis for both medical and recreational use

In the U.S., 37 states plus the District of Columbia have legalized cannabis for medical use. Dozens of countries across Europe, Australia, Asia, and Africa have also legalized medical cannabis. In all these geographical locations, cannabis testing is mandatory, making this a key driver for the growth of the cannabis testing industry.

2. An increasing number of laboratories that test cannabis

With the increasing legalization of cannabis in the U.S. and several other parts of the globe, there is an increasing demand for cannabis testing laboratories. As cannabis becomes more mainstream, laboratories have become increasingly comfortable with adding cannabis to their testing repertoire. This has also made cannabis testing cheaper, and consequently, more accessible to growers that produce cannabis.

Restraints For Cannabis Testing

Cannabis testing is still in its infancy and there have been a couple of teething challenges that need to be addressed if the industry is to grow as expected. They include the following:

1. Lack of testing standardization

The cannabis testing industry suffers from a lack of standardization in testing procedures. While the USDA’s Final Rule outlines certain standards to govern hemp testing, the laws for cannabis testing vary from state to state and from one country to another. Lack of cohesion in testing standards is likely to hamper the growth of the industry.

2. High costs involved in setting up a cannabis testing laboratory

Setting up a cannabis testing laboratory can be quite costly at the start and this may discourage laboratories from venturing into the industry. However, once up and running, the operational costs are minimal, and hence profits can be achieved in a short time. 

Cannabis Testing Opportunities in Emerging Markets

For a long time, the cannabis testing market has been dominated by North America and Europe. However, new markets in Latin America, the Middle East, and Africa are emerging. There has been a strong push for regulated medical cannabis markets in these regions that are likely to boost demand for cannabis testing and, in turn, increase the value of the global cannabis testing market.

How Does a Laboratory Information Management System for Cannabis Support The Growing Testing Demand?

With the cannabis testing industry gunning for the $4 billion mark, there’s likely to be a huge spike in demand for testing services. Laboratories will be forced to rely on automation to handle the copious amounts of samples and data coming their way, both from customers as well as regulatory authorities. 

A Laboratory Information Management System for cannabis receives data from multiple instruments, processes it, makes interpretations, and disseminates the output through various reports. A configurable LIMS for cannabis allows laboratories to make specifications based on the state requirements and flag out-of-specification test results. A LIMS for cannabis also helps manage corrective and preventive actions to avoid regulatory pitfalls. Furthermore, it enables laboratories to manage staff training, records, standard operating procedures (SOPs), analytical equipment, thereby enabling laboratories to comply with the ISO 17025 requirements

There is likely to be a high adoption of LIMS to help laboratories meet the increased demand for cannabis testing in 2023 and beyond.

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