You could rightly say that the marijuana industry is growing like a weed. With the industry having generated less than $10 billion in global sales in 2017, the team of Arcview Market Research and BDS Analytics now expects global sales to more than triple to $31.3 billion by 2022. Certain investment banks on Wall Street are looking for even more aggressive long-term growth, with global sales expected to hit $75 billion by 2030, according to Cowen Group.

But as with any new industry, there's a process to maturation involved. This process saw marijuana stocks focused on capacity expansion during the first half of 2018, and more recently on consolidation. The next step, now that recreational weed is legal in Canada and expected to continue gaining legitimacy worldwide, is differentiation.

An up-close view of a premium cannabis plant flowering.

Image source: Getty Images.

The premium dried cannabis segment offers intrigue

There are a lot of ways pot stocks can differentiate themselves. For some, like OrganiGram Holdings, it's an out-of-the-way growing location with a three-tiered growing system. For others, like CannTrust Holdings, it's a focus on hydroponic growing methods rather than traditional soil. And for yet others, such as Tilray, it's a devotion to higher-margin medical marijuana patients, despite a burgeoning adult-use market in Canada.

Yet, one of the more under-the-radar differentiating factors that could pack some serious punch is the premium dried flower market. Whereas we often think of dried cannabis as some lump-sum product that consumers buy, we may be overlooking that there are varying grades of quality, as well as cannabinoid content (i.e., tetrahydrocannabinol [THC] and cannabidiol [CBD]), in dried flower. Whereas most dried flower will fall into a discount or standard segment, a much smaller percentage of production is targeted at the premium side of the market.

The premium dried flower market will feature product that has a substantially higher per-gram price -- a price that isn't likely to be subject to downward pressure or commoditization. This is also a market that more affluent consumers will frequent, meaning there's less chance of disruption should Canada's economic growth slow or contract. Ultimately, we're talking about a segment with generally high levels of product loyalty, as well as superior margins. And with superior margins typically comes healthy profits.

Right now there are three marijuana stocks vying for their piece of the premium market, with two of these three devoting essentially their entire production line to high-end flower.

A researcher in a white lab coat and gloves analyzing a sample of dried cannabis flower.

Image source: Getty Images.

Flowr Corp.

One of those two companies with a laser focus on premium flower output is British Columbia-based Flowr Corp. (NASDAQOTH:FLWPF).

Flowr's Kelowna campus is currently only producing at a run rate of about 5,000 kilos a year. However, grow room expansion that's ongoing will push peak production to about 60,000 kilos a year by 2021. This would probably place Flowr in perhaps the top 15 or 20 growers in the country by peak annual production. But it's not the quantity that matters here; it's the quality and efficiency.

Using genetics, Flowr's crop offers ultra-premium cannabis that'll cater to a very specific but motivated buyer in the marketplace. Plus, according to the company, yield from its Kelowna campus should range between 300 grams and 450 grams per square foot. This is meaningful because the average yield throughout the industry (for all types of cannabis, not just premium) is about 100 grams per square foot.

And Flowr isn't necessarily satisfied with these figures. It and Scotts Miracle-Gro -- yes, the same company that develops products to make your lawn look nice and improve crop yields for farmers -- are working together to further improve output and efficiency. Scotts Miracle-Gro, or should I say its subsidiary Hawthorne Gardening, is bringing its knowledge of hydroponics, soil, lighting, and nutrients to the partnership, while Flowr brings its knowledge of premium cannabis to the lab.

Production isn't everything, and Flowr may prove this point with juicy operating margins.

A person holding cannabis leaves in their cupped hands.

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The Supreme Cannabis Company

The other of the two companies focusing pretty much all of its production on the premium flower segment is Ontario-based Supreme Cannabis Company (NASDAQOTH:SPRWF).

Supreme Cannabis Company offers a number of the same traits as Flowr, with perhaps the exception of Flowr's absurdly high yield per square foot. Supreme Cannabis' lone grow facility, known as 7Acres, will feature 440,000 square feet of growing space and a projected annual output of approximately 50,000 kilos a year. That's close to 114 grams per square foot, or a bit above the industry average.

More importantly, Supreme Cannabis' production features a dried flower product that contains a higher concentration of THC than nearly all product currently on dispensary store shelves. THC is the cannabinoid that gets a user high. This higher potency will feature a premium price point and, almost certainly, a pretty loyal following willing to pay that higher price.

What'll be really interesting is if Supreme Cannabis can find a market for its premium flower outside of Canada. The company recently signed a letter of intent with Malta Enterprises, the economic development agency of Malta, to obtain a production license. Malta is uniquely situated to be a perfect stepping stone for export to various European countries. And since most of the EU has given the green light to medical marijuana, it's a logical jumping-off point for Supreme Cannabis to broaden its premium flower horizons. 

Clear labeled jars on a dispensary store counter that contain dried cannabis buds of various premium strains.

Image source: Getty Images.

Aurora Cannabis

The third and final company angling for a piece of the premium dried flower market is none other than Aurora Cannabis (NYSE:ACB), the grower that's expected to be at the head of the pack once at full capacity.

To be clear, most of Aurora's 700,000 kilos of estimated annual production will likely be of the standard variety. However, two acquisitions have put Aurora directly into the thick of the premium cannabis market.

The first came last year when Aurora acquired MedReleaf for about $2 billion in July. MedReleaf offered a broad spectrum of cannabis brands to consumers, but had introduced the world to AltaVie in early April. AltaVie is a premium brand that targeted consumers who didn't necessarily have a direct connection to cannabis culture, but preferred a higher-end product that was unlike the majority of dried flower available in Canada at the time. 

The second comes courtesy of Aurora's newly completed purchase of Whistler Medical Marijuana for a little north of $130 million. British Columbia-based Whistler Medical offers organic and premium brands, giving Aurora another opportunity to target this higher-margin niche. Although Whistler's Pemberton facility is only on track for a little over 5,000 kilos at peak capacity, Aurora believes its superior production methods could yield more than 15,000 kilos out of the site, with some additional expansion. 

If you're looking for prospective winners within the premium cannabis space, these three marijuana stocks are a great place to start your research.