A new report from Arcview Market Research and BDS Analytics says that the medical marijuana market will drop to only 41% in 2018 as the California, Nevada and Canada adult-use markets explode. Medical marijuana accounted for 71% of the legal market in 2017, making the pace of the decline dramatic. The State of Legal Marijuana Markets 6th Edition also predicts that the medical component of worldwide legal sales will plunge to just 35% by 2022 due to the growth of recreational sales in those three markets, along with new states like Maine and Massachusetts.
Consumer spending in cannabis markets is expected to triple to $32 billion by 2022 for a 27.5 compound annual growth rate (CAGR). The report notes that U.S. sales alone will grow to $23.4 billion by 2022. It seems Americans are the most excited about adult use marijuana as the paper says that it is largely a U.S. phenomenon. The rest of the world appears to be content to stick with just medical marijuana.
Uruguay and Switzerland allow for sales of recreational cannabis, but the Swiss limit it to pre-rolls with up to 1% THC. Germany recently opened to medical sales in 2017, which was a big leap for Europe but won’t move the needle in global sales.
Another area that the report highlights as changing is the decline in flower’s total sales in relation to the market. The report says that vape sales have grown 86% from 2016 to 2017 followed by live resin which has grown 80%. Oils have grown by 40% “California’s extract market, where the vape subsector comprises 71% of all concentrate sales makes high-quality vapes a hot opportunity for companies looking to enter the market.”
Investing in cannabis has changed too. “Despite a pullback since 2018 began, the top four Canadian LP’s were valued at a total of C$10 billion at the end of April, about twice our 2022 forecast for consumer spending in the entire Canadian market.” The report also pointed out the softening stance by the stock exchanges in the U.S. Initially the exchanges wouldn’t allow any plant touching companies to list, but now Cronos Group (CRON) from Canada is on the NASDAQ and Canopy Growth (CGC) is on the New York Stock Exchange.
The cannabis friendly Canadian Securities Exchange lists about $5 billion in cannabis-related companies out of a total of C$9 billion in market cap for 354 companies. 23 of those companies are U.S. based. The report also noted that while some investors continue to avoid plant touching companies to stick with ancillary investments, Constellation Brands (STZ) jumped in with its 10% stake in Canopy Growth.
The report says that despite movements from other countries like Germany, North America will continue to lead the way in legal cannabis spending. South America is also building its programs as Uruguay takes big steps forward as the first federally legal adult-use market. While many believe legalization will only mean an upside to the industry, the report cautions that strict regulations keep the black market intact. It also predicts that prices will fall and that the availability in attractive retail environments will expand.