North American marijuana sales grew by an unprecedented 30% in 2016 to $6.7 billion as the legal market expands in the U.S. and Canada, according to a new report by Arcview Market Research.
UNITED STATES – North American sales are projected to top $20.2 billion by 2021 assuming a compound annual growth rate of 25%. The report includes Canada for the first time as it moves towards implementing legal adult use marijuana.
To put this in perspective, this industry growth is larger and faster than even the dot-com era. During that time, GDP grew at a blistering pace of 22%. Thirty percent is an astounding number especially when you consider that the industry is in early stages.
Arcview’s new editor-in-chief Tom Adams said, “The only consumer industry categories I’ve seen reach $5 billion in annual spending and then post anything like 25% compound annual growth in the next five years are cable television (19%) in the 1990′s and the broadband internet (29%) in the 2000′s.”
ArcView’s analysis uses data provided by BDS Analytics that has access to millions of individual consumer transactions from dispensary partners. “One of the biggest stories was the alternative forms of ingestion,” said ArcView Chief Executive Officer Troy Dayton. “Concentrates and edibles are becoming customer favorites versus traditional smoking.”
Even though the market is putting up huge sales numbers, there is still a great deal of uncertainty that comes with the new administration’s approach towards legalization. Dayton believes that President-elect Donald Trump has been consistently in favor of states rights when it comes to legalization. “It’s one of the few things he has been consistent on,” he said. Dayton also believes that even if Trump backed away from adult use, he would still favor medical marijuana.
The proposed attorney general Jeff Sessions is a confirmed critic of legalization, but Dayton believes that marijuana will be a low priority for the new administration. In any event, the group is reviewing and preparing for a more aggressive stance toward marijuana from the federal government should that happen.
Even with this cloud of uncertainty, Dayton is bullish for the market. He said investment dollars are pouring into California, Florida, Massachusetts and Nevada. “Twenty-one percent of the total U.S. population now live in legal adult use markets,” said Dayton. He also noted that Colorado, Washington and Oregon saw their sales jump 62% through September of 2016 over 2015.
Investors are predominantly interested in investing in new technology within the industry like testing technologies and new growing technologies. Retail also remains attractive as new brands vie to win market share. Dayton also said there is a great deal of interest in Canada. That country’s market is smaller than the U.S., but without the overhang of government conflict, it is a good indicator for which businesses could be replicated and thrive in the U.S.
Arcview has helped its investors place $91 million with 135 companies since 2013 and primarily focuses on private companies. The industry with its legalization risks does not attract institutional investors in the same amount that other sectors do. “You will not find another multi-billion dollar market growing at a 25% compound annual growth rate anywhere in the world that is not already filled with multi-national companies and institutional investors,” said Troy Dayton, Chief Executive Officer of Arcview Market Research. “That’s part of what makes the cannabis industry such a unique opportunity for investors and entrepreneurs.”
Arcview’s full 200-page report will be available in February.
Marijuana used medicinally
Medical cannabis, or medical marijuana, can refer to the use of cannabis and its cannabinoids to treat disease or improve symptoms; however, there is no single agreed upon definition. The use of cannabis as a medicine has not been rigorously scientifically tested, often due to production restrictions and other governmental regulations. There is limited evidence suggesting cannabis can be used to reduce nausea and vomiting during chemotherapy, to improve appetite in people with HIV/AIDS, and to treat chronic pain and muscle spasms. Its use for other medical applications, however, is insufficient for conclusions about safety or efficacy.
Short-term use increases the risk of both minor and major adverse effects. Common side effects include dizziness, feeling tired, vomiting, and hallucinations. Long-term effects of cannabis are not clear. Concerns include memory and cognition problems, risk of addiction, schizophrenia in young people, and the risk of children taking it by accident.
The Cannabis plant has a history of medicinal use dating back thousands of years across many cultures. Its current use is controversial. The American Medical Association, the Minnesota Medical Association, the American Society of Addiction Medicine, and other medical organizations have issued statements opposing its use for medicinal purposes. The American Academy of Pediatrics states that while cannabinoids may have potential as therapy for a number of medical conditions, they do not recommend it until more research is done. They, along with the American Medical Association and the Minnesota Medical Association, call for moving cannabis out of DEA Schedule I to facilitate this research.
Medical cannabis can be administered using a variety of methods, including liquid tinctures, vaporizing or smoking dried buds, eating cannabis edibles, taking capsules, using lozenges, dermal patches or oral/dermal sprays. Synthetic cannabinoids are available as prescription drugs in some countries; examples include: dronabinol and nabilone. Recreational use of cannabis is illegal in most parts of the world, but the medical use of cannabis is legal in certain countries, including Austria, Canada, Czech Republic, Finland, Germany, Israel, Italy, the Netherlands (where it is also legal recreationally), Portugal and Spain. Australia is currently in the process of passing a law which would allow the use of marijuana for medical and scientific purposes. In the United States, federal law outlaws all cannabis use, while 25 states and the District of Columbia no longer prosecute individuals for the possession or sale of medical marijuana, as long as the individuals are in compliance with the state’s medical marijuana sale regulations. However, an appeals court ruled in January 2014 that a 2007 Ninth Circuit ruling remains binding in relation to the ongoing illegality, in federal legislative terms, of Californian cannabis dispensaries, reaffirming the impact of the federal Controlled Substances Act.