Indopedia All Things Marijuana
The cannabis industry is plowing full steam ahead despite political opposition, reaching nearly $9.5 billion in consumer spending worldwide last year, $8.5 billion of that generated in the US, according to a new report from Arcview Market Research and BDS Analytics.
And, this year for the first time, adult use is expected to outpace medical use.
The report, “The State of Legal Marijuana Markets,” released Tuesday, June 5, 2018, might be viewed as an affirmative referendum on cannabis use.
Politicians who supported adult use cannabis at one time had to worry about losing voters in doing so. No longer.
“I think the votes are in,” said Tom Adams, managing director and principal analyst of BDS Analytics. “Really, the political risk now lies with the prohibitionists’ side, which is at risk of losing votes. That’s a real turning of the tables. That’s why you are seeing this flood of people changing their views.”
Adams, one of the authors of the report, pointed as evidence for his statement to an about-face on cannabis from prominent Republicans over the past year, including former Speaker of the House John Boehner, Utah Sen. Orrin Hatch, Colorado Sen. Cory Gardner and North Carolina Sen. Thom Tillis.
The report chalks up a large share, 31 percent, of US growth to the five states that had adult-use retail stores operating by the end of 2017 —Colorado, Washington, Oregon, Alaska, and Nevada.
The report also offers a bright forward-looking assessment of the cannabis market.
Recreational sales that began in California at the start of 2018 increased the number of adults legally able to purchase adult-use cannabis products globally by nearly threefold from 17 million to 47 million in the legalized states. That headcount will jump to more than 75 million later in 2018 with the anticipated addition of Canada to the ranks of markets where cannabis can be sold to all adults, the report notes.
The report shows that Oregon leads the nation for adults reporting they consumed cannabis over the past six months (35 percent), followed by Washington (31 percent), Colorado (25 percent) and California (23 percent).
The report highlights adult-use as the key driver of consumer spending worldwide by 2022, tripling the figure to $32 billion, while US spending alone is expected to $23.4 billion.
Adult-use appears to be outpacing medical use, a milestone that wasn’t expected to occur for at least another year.
The medical portion of the market is expected to drop to 41 percent in 2018 as the Nevada, California, and Canada recreational markets explode, the report stated.
By 2022, the medical component of worldwide legal sales will shrink to just 35 percent due to continued substantial growth in those three markets, plus the launch of new adult-use markets already approved in Maine and Massachusetts, as well as those expected to launch during the forecast period.
That’s not to say medical sales are faltering, they’re just becoming a smaller percentage of the overall market, Adams said.
The threshold of adult-use surpassing medical marijuana was expected to be reached in 2019, according to the 2017 forecast.
“We’ve moved up by a year which we think adult spending surpasses medical,” he said. “We’ve now got that in the forecast model for 2018.”
The report shows continued growth in the medical cannabis market as numerous states line up to allow medical marijuana. “Overseas will be almost entirely medical for years to come,” Adams added.
Legal cannabis will likely remain predominantly medical-use worldwide until the end of the 2022 forecast period, with medical cannabis patient numbers outside of North America expected to skyrocket from 7 percent in 2017 to 44 percent by 2022.
Germany’s authorizing of medical-use sales in 2017 represents “an enormous step forward for the worldwide legal cannabis market,” the report states. “To date, only a handful of countries have authorized a few thousand patients each to be treated for very narrow lists of conditions with very limited numbers of pharmaceuticals — often synthetics.”
The report notes that, in addition to sales, cannabis investment is on its way up.
The cannabis market saw its first $5 billion company this past year when Canadian licensed producer Canopy Growth reached that capitalization at the end of 2017, in which it also generated $54 million in revenue.
In the US, public equity markets have generally been closed to plant-touching cannabis companies, but that is changing.
“There are now hundreds of private equity funds, family offices, and high-net-worth individuals replacing the friends-and-family investors of just a few years back, and they have made available several billion dollars in seed and expansion funding to both plant-touching and ancillary companies in the hopes of a big payoff when federal prohibition ends,” the report stated.
David Rheins, founder and executive director of the Marijuana Business Association, sees the report as a clear signal that legal cannabis has gone mainstream, and that the path has been cleared for “big marijuana” to take over.
“Mom-and-pop entrepreneurs, motivated by an equal mix of activism and opportunity, are quickly being displaced, or subsumed, by big corporate entities who are finally off the sidelines and making serious investments for the first time,” Rheins said. “Big Marijuana is here to stay.”
Adams said the rapid growth of the cannabis market is because it’s unlike other new product categories, such as the Internet, cable television, or organic foods — all of which had to prove to consumers why the product was useful and what it could do for them.
“Cannabis, on the other hand, has just been quietly an illicit product for 50 years, getting the consumer educated and making the appeal clear,” he said.
Gallup reported last year that a record 64 percent of Americans believe cannabis should be legalized, and for the first time in Gallup’s nearly 50 years of polling, a majority of Republicans agreed.
Such polling, the change in direction from Republicans such as Boehner, Hatch, Gardner, and Tillis, a marketplace that continues to exceed expectations, all points to one inevitability, Adams believes.
The time will soon come for cannabis to taken off the list of Schedule I drugs in the Controlled Substances Act.
“The legalization is coming. That’s the bottom line,” Adams said. “It’s pretty clear that this is the last gasps of the prohibitionists.”
