As more states and countries vote for legalized marijuana sales, the cannabis industry is now becoming a force to be reckoned with and even speculatively invested in.
Just a few years ago, cannabis was still viewed in many places as an illegal drug surrounded by some controversy which couldn’t be taken too seriously. Yet as more states and countries vote for legalized marijuana sales, the cannabis industry is now becoming a force to be reckoned with and even speculatively invested in. Of course it’s no secret that there has always been the unofficial trading of cannabis, but with so much illegality this was always happening behind closed doors and in secret.
Now cannabis trading is coming out of the shadows in many places, and many are looking forward to what they hope will be the next big wave of trading opportunity. “Everybody is running toward this as the next entrepreneurial wave – the green rush,” Robert Frichtel, CEO of Advanced Cannabis Solutions, told Bloomberg Businessweek in a January 2014 interview.
This normalization of cannabis is something that many people have been pushing for and expecting, whilst others are still resisting it as a danger to health and society. Putting aside the ethical arguments for a moment, this article will focus on the history and development of the way cannabis is being traded and what we can expect for the future of the cannabis market.
A Huge Market
A recent report from a leading investment and research company found that legal US cannabis sales increased by 17% in 2015, to $5.4 billion. The forecast is that in 2017 the growth will be 25%, to reach $6.7 billion in the US alone. Considering the first recreational dispensaries have only been open for two years, these numbers are huge. The market research company ArcView has predicted that by 2020 the legal annual sales of cannabis in the US will have reached $21.8 billion.
If this prediction comes true, then it will most likely put the size of this market ahead of the National Football League in less than a decade of trading! In a recent interview, ArcView CEO Troy Dayton said “I think that we are going to see in 2017 this next wave of investors, the next wave of business operators, and people who’ve sort of been watching or dipping their toe in, really starting to swing for the fences and take it really seriously.”
Most of the legal marijuana sales in the US are coming from well-established medical pot markets in states like California, but recreational sales are increasing and will contribute a great deal to the market in the coming years. In Oregon legal sales have begun, and after just 11 months of legal trading, Colorado has already seen a rapid growth in sales. There has also been a growth in edibles, which are more expensive for the consumer and bring greater profits to the market per sale.
Taking all of these things into account, and looking realistically at which states might follow suit in terms of changes to the law, ArcView projects that by 2020 over half of the cannabis market will be for adult recreational use, equating to a growth of over 1150% over four years. If these numbers are even close, and there are no compelling reasons to suspect otherwise, then it’s no wonder that many serious investors are watching this market closely and expecting a lot of action over the next few years.
Positive Signs for the Legal Cannabis Market
Inevitably it is laws which bring about the biggest changes, but as laws change this is also accompanied by groundswells of shifting public and professional opinions and attitudes. The full legalization in Colorado and Washington was a watershed event for many business professionals, and it hasn’t taken long for many high level lawyers, accountants, advertising executives etc. to jump on the bandwagon.
Now it’s legally safe in these regions, the financial opportunities are inevitably bringing professional endorsements and greater regulation of the market. Quality control is improving fast, and there is a rapid standardization of manufacturing processes and systems. This professionalization of the industry is causing much faster growth and acceptance within these states. Other states, industries and investors are naturally watching with interest. The alcohol and tobacco companies are certainly watching, feeling both threatened and inspired by this emerging giant.
Barry Peek is a good example of a New York lawyer who is ahead of the curve. Peek runs a successful firm of 65 lawyers, and has observed the changing societal attitudes with interest. With a few colleagues he studied the changing laws around the subject of medical marijuana, and attended a few conferences. “We are advising clients on how to maneuver through those regulations” says Peek.
“…if there’s a company that needs to get into the business, we can handle corporate issues, tax issues, land-use issues, whatever they need.” These kinds of developments are now commonplace where legalization has occurred, and it seems inevitable that more states and countries will follow their lead.
The Future of the Cannabis Market
As has already been suggested, the cannabis market appears to be headed in just one direction – quickly upwards. Apart from the existing states and countries where it has been legalized for medical use, recreational use, or both, there is a likelihood that many other regions will also relax their laws. So many people in the business and finance world have been waiting to see how things develop, and as big investors increase then this will of course drive the market up. The firm Founders Fund, which was founded by billionaire Peter Thiel, has already reportedly invested $75 million in the cannabis industry. It is beginning to look as if nothing could slow this market down, but there is something else to consider.
One thing which may slow the market down is the fact that cannabis is so easy to grow, and that as laws are relaxed then those wishing to use it may find more opportunities to legally grow their own. It will be very interesting to see how the struggle to regulate and control the flow of money within this market develops, as this is bound to influence people in every part of the market from users through to professional growers, retailers and market traders.
Indeed, this is perhaps a big reason why legalization and regulation has taken so long to begin. As with any emerging market, there will always be uncertainty, so it would be unwise for most people to throw life savings into an investment without thoroughly analyzing it. However, the cannabis market is definitely one to watch closely, and the future is exciting for people who are willing to take some risk and get involved at this point in time.
In the meantime this is all good news for supporters and users of cannabis who have been dealing with marginalization and stigmatization for many years. It seems likely that this will still exist in some ways, and there will always be differences of opinion on any subject, but it is certainly becoming easier for cannabis users to ‘come out.’ As it becomes more accepted in various parts of the world and the cannabis market takes shape, many people who have been pushing for legalization are finally seeing the fulfillment of their hopes.