Proficiency Testing to Prove What’s in Store for the Cannabis Market
By Oliver Bennett, Special Contributor to New Frontier Data
At a time of rapid market evolution and the construction of regulatory frameworks after decades of prohibition, among the fundamental elements of Europe’s legal cannabis industry is its product-testing market. In a new and authoritative report, New Frontier Data reviews the state of the industry’s proficiency testing segment, including how it builds confidence both in public opinion and consumers’ purchasing decisions.
There are several drivers behind the progress of the testing industry. Once seen as an ancillary sector apart from the mainstream, testing is increasingly a central focus for any cannabis enterprise. As the industry matures, the need to quantify and standardise products across its various subsectors – e.g., medical cannabis, CBD, pet food or beauty products beyond favoured strains of recreational cannabis – begs demand for testing.
There are immediate and quantifiable commercial benefits from proper testing as manufacturers ensure product quality and safety. As outlined in a previous study, confidence in laboratory test results was a key factor influencing 77% of polled consumers’ purchases of CBD-infused products.
Especially for products intended for ingestion, public confidence is paramount. Those peddling premium novel food products such as cannabis-infused beverages or edibles will increasingly need to be able to vouch for and verify their extraction and purification methods. Such imperatives will not only demonstrate effectiveness and safety considerations, but will also help determine product pricing and brand valuations.
CBD was included in the European Union (EU)’s Novel Food Catalogue in January 2019, and has subsequently needed to satisfy extensive testing and authorization from food safety authorities before it can be marketed in food items throughout the EU’s member states. The U.K. maintains similar demands: “Validated potency testing and accurate labelling are therefore of utmost importance to build consumer trust.”
Public health is indivisible from long-term commercial viability. Specialized food and beverage companies, including some legacy companies coming into the CBD and cannabis sectors, are keen to escape any stigma attached to risky products – and will obviously seek to avoid any litigation that might ensue from faulty quality control or dosing instructions. Meanwhile, national legislative bodies want to keep consumers safe.
It has been estimated that Europe’s cannabis testing market will rise from EUR €360.7 million (USD $431.6 million) in 2019, to EUR €643.8 million (USD $770.3 million) with a 7.7% combined annual growth rate (CAGR) between 2020-2027. That forecast is predicated on the general upward trend in cannabis, citing each increasing government funding, a rise in R&D activities, and the importance of establishing stable and risk-free supply chains.
Testing will also help to shift long bogged-down consumer perceptions about cannabis’ longtime legal status as an illicit drug. It will also help the processes of branding and marketing, and enable strategic development of product lines. Testing could feed into legislation in the sector, and has direct implications for packaging as regulatory demands will require factors like THC and CBD content levels to be clearly labelled.
The European Parliament has called for a EU-wide policy for medical cannabis and scientific research – a directive that will help to boost testing investment. Within Europe, the cannabis testing market is taking broad cues from the more mature U.S. and Canadian markets, deploying technologies ranging from chromatography and spectroscopy, to consumables and software. As in the U.S., testing criteria will include potency testing, microbial analysis, solvent screening, heavy metal testing, pesticide screening, terpene profiling, and genetic testing. Of these, the potency testing aspect is expected to occupy the largest share of the market, and to grow at the fastest rate in the foreseeable future. As the cannabis industry expands, testing bodies will become segmented throughput testing labs, drug manufacturers, and research institutes. The fastest surge is expected to be in testing labs (both state-owned and private), which are liable to see strong growth.
On the American side of the Atlantic, too, the testing industry will look to make its own further strides; the North American industry has seen similarly positive forecasting. The Bureau of Cannabis Control began to issue licenses to testing laboratories in California in 2018, which heralded the end of the initial green wave, with quantifiable maturation of the industry marking the results. So it proceeds: Globally, the cannabis testing segment is expected to grow by 13.4% by 2025.
The epicentre of Europe’s standardised testing efforts looks to extend from the Netherlands, which enjoys established and strong agricultural and biotech sectors, a historic connection to both recreational and medical cannabis, and serves as a logistics hub for cannabis. As the testing market grows in Europe, it may well be that other countries will want to challenge the Dutch supremacy. Watch this space.