US CANNABIS TESTING SERVICES MARKET ANALYSIS

US Cannabis Testing Services Market Size and Trends

US cannabis testing services market is estimated to be valued at USD 1.81 Bn in 2024 and is expected to reach USD 4.12 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 12.5% from 2024 to 2031.

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Legalization of medical and recreational cannabis in several states can drive the market growth. Increased regulation requires testing for multiple parameters like potency, residual solvents, heavy metals, pesticides, mycotoxins, and others to ensure the safety and consistency of cannabis products. Various forms of cannabis like flower, concentrates and infused products require different test packages. Furthermore, regulatory standards for testing are also evolving with time, necessitating frequent testing. Several companies are investing in expansion of facility infrastructure and addition of testing equipment and services to meet the growing demand. Wider social acceptance and demand for new product forms will also require advanced testing techniques, driving the need for innovative service offerings in the market.

Market Driver – Growing cannabis production and consumption

Rapid legalization of both medical and recreational cannabis across the U.S. can drive the cannabis testing services market growth. As of 2022, 18 states have legalized recreational use of marijuana with adult-use sales topping US$ 3 billion in 2022. Medical cannabis is legal in 38 states and its demand rises each year. With this explosive expansion in production and consumption, safety testing of cannabis and cannabis products has become increasingly crucial. States are mandating stringent testing requirements to ensure products are free of toxins, pesticides and mold and accurately labelled regarding THC and CBD potency. This boosts demand for laboratories and testing services. Companies in the cannabis industry now require comprehensive safety and purity testing of flowers, edibles and concentrates prior to being sold in the legal market. Different states have varying requirements but most mandate multiple tests including microbial screening, residual solvent tests and heavy metal screening. Some states even require terpene or cannabinoid profiling. The need for reliable, consistent testing at scale offer opportunity for analytical testing labs. As the legal cannabis market continues extending into new states and the popularity of certain product categories like edibles and vapes increases, there will be increase in testing needs. The rapidly evolving industry is also giving rise to new testing categories such as tests for toxins like myclobutanil, which was not previously regulated but has now been found in some vapes.

Market Concentration and Competitive Landscape

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Innovation in cannabis testing techniques

Innovation in cannabis testing techniques can drive the U.S. cannabis testing services market growth. As the cannabis industry expand into new states with emerging medical and recreational marijuana programs, ensuring product safety and quality through rigorous testing has become increasingly important. Various new testing methodologies and technologies  allows more accurate and detailed potency and contaminant analysis than before. For example, new mass spectrometry techniques can detect residual solvents and pesticides down to parts-per-billion levels in cannabis extracts. Advanced microbiological testing methods leveraging DNA fingerprinting help labs identify microbes down to the strain level. These innovations lead to higher sensitivity and specificity in test results. As legal cannabis programs evolve to prioritize public health, regulatory compliance for testing become more stringent. More states now requires mandatory testing for the presence of heavy metals, mycotoxins, and other foreign materials beyond just potency and mold/yeast analysis. These also demand specific pass/fail limits be enforced. This drive cannabis businesses to rely more on professional third-party accredited labs to consistently evaluate products. The need for detailed certificate of analysis reporting and record keeping is also increasing to satisfy regulations. All of this contributes to greater testing demand and frequency per batch. According to the U.S. Food and Drug Administration in 2021, these saw a 20% increase in domestic hemp sample collections for pesticide residue testing compared to 2020.  The rapid growth and diversification of the cannabis marketplace into new product categories like edibles, topicals, and vaporizers can stimulate more comprehensive multifaceted testing requirements. Especially as these product types pose different health risks requiring distinct analytical procedures. Out-of-state distribution channels are expanding rapidly too, necessitating uniform testing standards across a multi-state industry. Both trends will sustain long-term market expansion for cannabis testing services to safeguard consumers and build consumer confidence.

Key Takeaways from Analyst:

As more states legalize cannabis for medical and recreational use, there will increase in  need for rigorous and standardized product testing. Lack of uniform testing standards leads to inconsistent product quality and safety issues. The introduction of strict regulations requiring mandatory testing certification across all legal cannabis products can boost demand for testing services. The Northwest region, consisting of states like Washington and Oregon which were among the early legalizers, currently dominates the US cannabis testing services market. As more populous states like California, Florida and New York establish full legalization programs, testing lab capacity on the East and West coasts will need to scale rapidly to meet demand. Labs in these high growth regions will have the opportunity to capture market share as local producers look to third party certification. While regulatory tailwinds and a growing addressable market of licensed cannabis producers offer opportunities, testing companies may face initial restraints from limited labs and qualified workforce. Standardizing testing methodologies and establishing accreditation procedures will require time and resources. As the market matures, testing is expected to become a necessary cost of doing business to ensure product safeness and consistency for consumers.

Market Challenges: High cost of cannabis testing

The high cost of cannabis testing can hamper the US cannabis testing services market growth. Cannabis testing involves various methodologies like potency testing, residual solvent testing, heavy metal testing, microbiological testing, pesticide testing, and others to ensure the product safety and quality. Each of these testing methodologies requires expensive analytical instruments like GC, LC-MS/MS, ICP-MS and others. The laboratories require well-trained analytical chemists and technicians to perform these analyses. This makes the overall cannabis testing cost per sample to be in the range of US$ 150-250 depending on the number of tests and compound classes screened in a sample. Such high testing costs put additional financial pressure on cannabis businesses who are already dealing with other operational expenses like cultivation, processing, inventory management, marketing etc. Particularly for small scale cultivators and manufacturers, the high testing costs can significantly cut into their margins and affect their cash flows negatively. According to a survey by US National Cannabis Industry Association in 2021, about 56% of small businesses in the cannabis sector find high compliance costs including testing to be the biggest challenge for their operations. This acts as a deterrent for them to get quality and safety certifications which are otherwise necessary as per the regulations of the legal cannabis market. High cannabis testing costs also hinder innovation in the sector. Many craft cultivators and manufacturers who wish to develop new product categories and formulate innovative extracts/edibles are hesitant to invest in research and trials due to the recurring testing costs involved.

Market Opportunities: Expansion of cannabis legalization to more states

The expansion of cannabis legalization to more U.S. states provides a major growth opportunity for cannabis testing services market growth. As more states move towards legalizing medical and recreational cannabis, there will be rising need for stringent quality control and safety testing of cannabis products. Testing of cannabis for factors like potency, contaminants and cannabinoid profile is a mandatory requirement in the majority of states that have legalized medical or adult use of cannabis. However, the lack of federal regulations and oversight has led to inconsistencies in testing protocols and standards across different states. As the number of legal cannabis programs increase, achieving national standards for testing different types of cannabis products will become critically important for building consumer trust and a well-regulated industry. This boosts demand for accredited cannabis testing laboratories and associated services. Several new states that legalized cannabis in recent years like New Mexico, New Jersey and Virginia have witnessed increases in the number of licensed testing facilities to keep up with the rapid growth of the local cannabis industry. According to the data published by the US National Conference of State Legislatures in July 2022, a total of 38 states, DC and four US territories now have legalized medical marijuana programs. With several additional states considering adult use legalization bills, the need for standardized safety and potency testing is expected to rise exponentially over the next 3-5 years.

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By Service Type - Ensuring product quality boosts demand for potency testing

In terms of service type, potency testing segment is expected to contribute the highest market share of 25% in 2024, owing to its importance in quality control. Cannabis products are complex, with multiple active compounds that determine potency and therapeutic effects. Growers and manufacturers need accurate potency data to ensure consistency across batches and geographic regions. Mislabeled potency poses risks like inaccurate dosing for patients or potentially over-intoxicating recreational consumers. Reliable potency testing provide brands credibility with regulators and customers by verifying labeled contents match actual contents. It also aids R&D of new strains by objectively evaluating cannabinoid and terpene profiles. As the industry scales up operations to meet rising demand, large-scale enterprises rely on potency testing to maintain standards across dispersed production facilities. The requirements and applications for potency testing have expanded dramatically as the cannabis industry matures.

By Product Type - Technological advances drives analytical instruments segment

In terms of product type, analytical instruments segment is expected to contribute highest market share of 35% in 2024, owing to rapid enhancements expanding their application scope. Cannabis testing requires sophisticated instruments capable of sensitive, specific quantitation of multiple active components present in low concentrations. Laboratories rely on tools like gas and liquid chromatographs coupled with mass spectrometers for this task. However, technological progress consistently delivers cheaper, faster, and more user-friendly instruments able to handle larger sample volumes. This allows laboratories to take on more testing assignments to meet rising demand. Miniaturization of instruments has notably expanded on-site and mobile testing capabilities. Artificial intelligence and machine learning now assist with complex data analysis tasks. Self-calibrating instruments reduce downtime from maintenance. Refinements in sample preparation steps further streamline workflows. Such advances, coupled with lower costs of ownership, make analytical solutions an ever more essential lab infrastructure element.

By End User - Regulatory requirements drive reliance on cannabis drug manufacturers

In terms of end user, cannabis drug manufacturers segment is expected to contribute the highest market share of 40.1% in 2024, owing to their central role in the legal cannabis supply chain. Manufacturers producing cannabis-infused edibles, extracts, tinctures and other derivative products for consumers require extensive testing to ensure safety and accuracy of dosing. Unlike cultivators who focus on planted crops, manufacturers work extensively with processed cannabis inputs that could harbor more issues affecting consumers if not properly evaluated. Most jurisdictions with legal medical or recreational industries mandate manufacturers submit samples from every production run or batch for regulatory clearance before distribution. Such regulations aim to prevent public health crises from contaminated merchandise reaching shelves. While smaller scale makers may conduct some testing in-house, large cannabis product companies rely primarily on external commercial labs for their rigor and impartiality. As medicalization and deregulation induce more consumers to widely adopt manufactured product forms, dependence on third-party laboratories only grows within this strategic end user segment.

Market Report Scope

US Cannabis Testing Services Industry News

• In January 2024,Smithers has relocated its Cannabis Testing Services division to a new, state-of-the-art laboratory in Darien, Illinois. This move, situated outside of Chicago, reflects Smithers' commitment to the cannabis industry by improving client proximity, optimizing sampling routes, and investing in advanced technology.
• In December 2022, SC Labsis expanding into Southern California with a new 12,000+ square foot lab in Van Nuys, Los Angeles. The facility will provide both R&D and compliance testing for cannabis, including potency, pesticides, heavy metals, residual solvents, microbials, water activity, and more. This expansion aims to enhance testing capacity and resources for customers south of Santa Barbara.
• In August 2022, ACS Laboratory, a Florida-based cannabis testing company, introduced its own national hemp compliance testing panel. This panel is designed to test hemp samples for a comprehensive range of substances, including 18 cannabinoids, 105 pesticides, 24 heavy metals, 55 potential residual solvents, 17 different microorganisms, and all required mycotoxins, with detection capabilities down to parts per billion. It also assesses moisture content, water activity, and terpenes.
• In July 2022, Green Scientific Labs unveiled new technology for cannabis testing. This innovation includes custom-designed software specifically developed for the cannabis industry.
• In March 2021, PerkinElmer introduced the industry's first Certified Reference Material (CRM) reagent and consumable kit, designed to streamline cannabis pesticide testing workflows. These products facilitate more efficient analysis of cannabis products using testing instruments.

*Definition: US cannabis testing services provide laboratories and testing facilities for cannabis producers and retailers in legal states. These test cannabis and cannabis-derived products for numerous quality parameters including potency, contaminants, heavy metals and pesticides to ensure product safety and compliance with state regulations. Their services help producers create consistent and high-quality products while protecting consumers from contaminated or mislabeled cannabis goods in the complex regulated US cannabis industry.

Market Segmentation

• Service Type Insights (Revenue, USD Bn, 2019 - 2031)
• • Potency Testing
  • Residual Solvent Testing
  • Mycotoxin Testing
  • Microbial Testing
  • Genetic Testing
  • Heavy Metal Testing
  • Pesticide Screening
  • Others
•  Product Type Insights (Revenue, USD Bn, 2019 - 2031)
• • Analytical Instruments
  • Chromatography
  • Spectroscopy
  • Consumables Testing Software & Services
  • Breathe Analyzer
•  End User Insights (Revenue, USD Bn, 2019 - 2031)
• • Cannabis Drug Manufacturers
  • Cannabis Cultivators/Growers
  • Research Institutes & Labs
  • Others
• Key Players Insights
  • Anresco
  • SC Labs, Inc
  • CW Analytical Laboratories
  • Digipath, Inc
  • EVIO, Inc
  • Eurofins Scientific
  • Pure Analytics LLC
  • Green Scientific Labs
  • Steep Hills, Inc
  • PharmLabs
  • Agilent Technologies Inc.
  • Shimadzu Scientific Instruments
  • Restek Corporation
  • PerkinElmer Inc.
  • Danaher Corporation
  • Accelerated Technology Laboratories Inc.
  • Steep Hill Halent Laboratories Inc.
  • Digipath Inc.
  • Sartorius AG