Twenty-nine states and Washington, D.C. have legalized cannabis in some form. Eight states have legalized adult use/recreational use. Polls indicate that over 80% of Americans approve of legal access to medical cannabis and approximately 60% of Americans approve of full adult use legalization. Approximately 200 Million people live in states with legal cannabis of some form. The 2016 Legal Cannabis Market in the US was approximately $6.58 Billion (Medical is $4.7 Billion; and Adult/Recreational is $1.9 Billion). By 2025, the legal cannabis market in the US is projected to be approximately $24 Billion (13.2 Billion Medical and 10.9 Billion Adult Use/Recreational).6 2018-2020 are still the rapid grow years before the growth rate is expected to slow as the industry continues to mature. The charts below depict the expected trends:
As far as product trends go, you can see that flower is still the biggest seller at around 50% of the market in the 4 states shown below. As the markets mature, you see a shift away from flower products and into to the other major categories like edibles and concentrates. This is beneficial for companies operating in the market as they can sell higher margin products and for consumers as it encourages new entrants, product development, and lower prices. These developments occur due to new adult-use markets having their demand driven mostly by existing users, who are used to consuming flower only. As the markets mature, so do the tastes of consumers and products like vape pens and edibles are the go-to for new or inexperienced users. The second chart below shows how the various US adult-use markets have shifted between products on a quarterly basis.
According to Forbes, the global legal cannabis market could reach USD $31.4 Billion by 2021. The U.S. currently contributes to 90% of the global market sales but is projected to drop to around 57% by 2021. This is largely due to Canada’s recent nationwide legalization. Further contributing to this are countries in Latin America and Europe that are legalizing cannabis in some form for medical purposes. Below is a chart that looks at a breakdown of capital raises in the sector from 2016 to 2017. As you can see, deals in most sub-sectors saw growth with the most significant being in cultivation and retail. The strong deal flow in cultivation and retail has continued in 2018, and our recent investments have reflected these capital trends.
In June, we witnessed the first major country in the world to legalize recreational cannabis in Canada (Uruguay had proceeded Canada). There were many political advancements for cannabis in the US this quarter. More and more members of Congress are coming out in support of marijuana and the various bills trying to weave their way through the hurdles of US politics. As of right now it appears that cannabis will be a hot issue come the November elections. Outside of North America, the push continues to see legal medicinal markets open up, and more and more companies are entering the space of using cannabis to create a specific product or a cure to a specific problem.
This part of our report will cover the medical findings as well as financial results of the medical marijuana industry in the third quarter.
© PI Analytics, LLC 2018