by Eric Vengroff, Financial Analyst, Cannabis Daily.today

Many investors are discovering that as the cannabis market continues to expand and gain both credibility and legitimacy, it is also vast and diverse. As you go about figuring out which producers are best-equipped to capitalize on the sales and distribution of dried bud, and at what cost, keep an eye on other segments of the cannabis market that will provide much of the needed infrastructure and support in various aspects of the business. According to High Times, cannabis lab testing for potency, purity and detailed information totaled $866 million (US) in 2016. They expect this market to more than double by 2021. Liquid and gas-chromatography machines—as well as the cost of hiring skilled and workers to run them, can cost tens if not hundreds of thousands of dollars to acquire and maintain. That’s one heck of a lot of ‘green’.

For instance:

• Cultivation – as the science of growing cannabis matures and issues such as yield management, moisture control, fertilization, lighting, mold, pest control, and cleanliness become major costs at scale, look for companies that produce the instruments and equipment needed to monitor and control the agricultural aspects of cannabis;

• Production – extraction equipment, pumps, evaporators, filters, heaters. Think high school science lab, but on a vast, industrial scale;

• Potency testing – as consumption of cannabis-based products moves into the mainstream quality control issues will abound. Gone are the days of Cheech and Chong featuring phoney advertising [on vinyl, no less] that they have “badass weed”. Consumers are increasingly expected to discern, and in fact demand, information on the source, purity and content of the product consumed. “Farm-to-table” level information will eventually apply to this aspect of our lives too, as consumers at all levels of distribution will want to know concentrations of cannabinoids, terpenes and foreign content;

• Genetic services – along with the move to increased knowledge and quality control, identification and diagnostics for strain identification and breeding, matching strains to individual needs and requests, particularly in the medical marijuana space, is widely expected to be demanded, if not mandatory. What companies are equipped to provide the necessary products, people and support?

• Safety screening -the American Lung Association states that there are approximately 600 ingredients in cigarettes and when burned at least 69 carcinogenic chemicals, including lead, cadmium and toluene are produced -no warnings or lists of ingredients are provided. That, for some reason, has not seemed to greatly concern millions of cigarette smokers. Nevertheless, in this information age, it is expected that more and more cannabis consumers will want to everything, if not as much as possible, about the products they’re ingesting;

• Public policy enforcement – who’s high behind the wheel and may constitute a danger, and who isn’t? Those standards haven’t been formally established and approved in all areas yet, but you can bet that there are many enterprises looking to have their equipment and methods adopted as the gold standard. Government orders may await the winners;

Here are some of the companies that are engaged in the testing and diagnostics areas:

Cannabix Technologies (http://www.cannabixtechnologies.com) (CSE: BLO, US OTC: BLOZF, Frankfurt: 8CT:FRA) is based in Vancouver, B.C. They are developing tools for law enforcement and the workplace to detect THC in breath.

Digipath Labs (https://digipath.com) provides pharmaceutical-grade analysis and testing to the cannabis industry, as well as compliance testing to maintain standardized, consistent product.

Northern Vine Laboratories – recently a 53% stake in this business was sold to Emerald Health Therapeutics Inc. ( TSX VENTURE : EMH ) ( OTCQX : EMHTF ) to form a joint venture.

Steep Hill (https://www.steephill.com) -after raising $2M last August, with a follow-up offering for another $2M for their major expansion in the California market, they are poised to dominate in this space.

Emerald Scientific (https://emeraldscientific.com) -privately held, with estimated revenues, of approximately $7M, this company has recently won accolades for their diagnostic testing and gear.

The information and opinions presented here are that of the analyst and do not represent the thoughts and opinions of this website. The analyst does not own or represent any of the companies listed in this article, and receives no compensation from any party mentioned in this article. Readers are urged to do their own research and due diligence and should seek advice from an independent financial advisor before making any financial investment.