While the U.S. cannabis market has expanded and matured over the last decade, there is still a long way to go to achieve a stabilized, fully regulated supply chain.

Supply and demand are still misaligned in compliance, cannabinoid type and final ingredient type, says Matthew Anderson, CEO of Vanguard Scientific, Aurora, OR. And growing consumer awareness around cannabis and its potential benefits will only increase the need for quality, consistent cannabinoid ingredients.

Though a lack of federal regulation and a patchwork of state regulations create difficulties from operational and safety standpoints, Anderson noted in his presentation on supply chain challenges for Cannabis Products Exchange, held virtually April 27-28, that opportunity exists for manufacturers and ingredient suppliers who can offer quality and consistency from the start.

“These supply chains are being developed ahead of regulatory enforcement, which is providing  competitive advantage as well as creating moats for other brands trying to enter the market,” he says. “That’s beginning to create brand loyalty through consistency as you see in early regulated markets.”

Continuing consumer education around different formats and their potential uses, and the relationship between minor cannabinoids and terpenes, is helping to drive product differentiation.

“While cannabinoids are being purchased by a holistic ecosystem, we’re starting to see use-case, cause-based, and in the medical or pharmaceutical environment, claim-based definitions of products making it to consumer awareness,” Anderson says.

Gummies continue to dominate the edibles space, but Anderson notes advancements in encapsulation methods have improved bioavailability and dissolvability, opening a door for beverages to become a leading market format. These improvements also allow beverage manufacturers to standardize doses and “evolve their use case and use per occasion conversations,” Anderson says.

Anderson also pointed to improvements in extraction and remediation that can help suppliers offer quality, cost-effective ingredients. Additionally, he noted supplier-enabled studies are advancing ingredient standards, both at the ingredient and finished product levels.

Standards for consistency and quality play a critical role in the co-manufacturing relationships, which are often essential for brand owners and multi-state operators. 

“As participants in traditional food and beverage and CPG, many of the listeners here have deployed third-party or contract manufacturing supply chain solutions and rely heavily on the consistency and the validation of those ingredient supply chains feeding the contract manufacturers. That is such an interesting benchmark and requirement to be developed in this industry. As you’re watching the supply chain become stable, there are points in the supply chain that have to be stabilized in order to provide that consistent product.”

Going forward, Anderson says a rescheduling of cannabinoids is needed to make full use of the cannabis plant. Furthermore, harmonizing ingredient standards across the U.S. and the world through ongoing legalization will strengthen the connection between the cannabis industry and traditional CPG, as well as provide consumers with safe, quality products.

“When you have atypical processes or methods for cultivation, you have atypical or inconsistent results,” he says. “Standardizations across the supply chain are the No. 1 most important piece in order to provide consistency to the final product.”

To view Anderson’s presentation or other Cannabis Product Exchange sessions on-demand, visit cpx21.com.

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