How Big is the Cannabis Industry?
April 20th, 2017
Policy, Top News
The cannabis industry is shaping up to be hugely expansive as unprecedented legality and accessibility on the state level open the door to major opportunities for cannabis sales and businesses, both recreationally and medicinally.
Some analysts estimate that the legal cannabis industry in the United States will grow to $50 billion by 2026 — eight times the size it is now — as more and more users in the illicit market opt to patron lawful marijuana sellers, as well as more patients seek medical cannabis as alternative pain and treatment management.
Impact of the Rise of the Cannabis Industry on Big Business
How, exactly, this boom will affect businesses remains to be seen partly because of federal restrictions on the drug, as well as its unprecedented nature, but the prospective financial implications are sizable.
Currently, the cannabis industry is largely comprised of small startup businesses. The plant’s lack of federal legality has likely caused bigger companies to stay away from it as a viable product until full, country-wide access becomes a reality.
That said, should the federal government lift their limitations, it could mean huge opportunities for big tobacco companies. Analysts predict tobacco businesses will be able to increase their revenue, on average, by 20% due to cannabis sales, and that these tobacco companies will make up one-fifth of the industry by 2036.
Alcoholic beverage-makers, on the other hand, should be concerned if they have no plans to join in on the cannabis boom. In the past five years, alcohol consumption, particularly among men, has notably declined while cannabis use has risen. Moreover, the population of people who drink and take cannabis has increased while people who take cannabis but don’t drink has decreased.
Regardless of which companies can expect to profit from cannabis industry growth, we’re likely to see industry changes on an unprecedented scale.
How the United States’ Cannabis Industry Compares to Canada
For those aiming to make more accurate predictions about the U.S. cannabis industry’s future, some insight can be gleaned from the way our northern neighbor is responding to marijuana’s increased legality.
Canada’s decision to legalize marijuana recreationally across the country has led some analysts to predict the market to soon be worth close to $22.6 billion.
Approximately $8.7 billion of that is estimated to come from the plant’s retail market, while marijuana products and services — like growers, testing labs, and lighting and security systems — are expected to bring in the rest. And that $22.6 billion number might reach even greater heights after factoring in taxation, fees for licensing, and tourists seeking a cannabis-infused experience.
Implications for the Future
Despite the cannabis industry’s apparent vast economic potential, what the future holds will depend on the United States’ willingness to legalize the drug on a federal level.
Prior to the most recent presidential election, stocks were being traded with an optimistic bent toward the presumption that an increasing number of states will vote yes on legalization. And, this optimism isn’t without basis given the recent Gallup Poll which showed American support for legalization to be 60% (up from 35% in 2005).
That said, since President Trump took office, the future of the cannabis industry is more unclear. In part because of his wishy-washy stance on the matter and in part because of Attorney General Jeff Sessions’ vehement opposition to cannabis use. In fact, Jeff Sessions at one point has even gone so far as to say, “good people don’t smoke marijuana.”
Still, with an increasing majority of Americans supporting federal legalization of cannabis and mounting evidence as to cannabis’ effectiveness in relieving myriad illnesses, it’s not unreasonable for investors and consumers to bet on the future of the cannabis industry to be promising, regardless of the current administration’s beliefs.
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