US CANNABIS TESTING SERVICES MARKET ANALYSIS

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.