While initially overshadowed by the Canadian market which managed to enjoy federal legalization not seen down south, it’s easy to forget that the potential U.S. market for cannabis is drastically larger than its northern cousin.
While Canada’s population is around 40 million, America is close to ten times that figure, with many states such as California and Florida rivaling Canada in and of themselves in total market size.
The main advantage Canada has is that most U.S.-based companies end up listing on Canadian exchanges. However, new research has gone on to predict that the U.S.-specific cannabis market will explode, thanks in no small part to increased CBD demand from hemp.
Despite the fact that a significant portion of cannabis products are still illegal under U.S. federal law, with the FDA remaining hesitant about cannabis-derived compounds like CBD, the market is still expected to explode in the coming years across all sectors.
According to research from data analytics company Nielson, total sales in the U.S. in 2018 reached around $8 billion, including the sales of hemp-derived CBD.
That figure also came from just 11 U.S. states and Washington, D.C. Now that newer recreational markets such as Illinois and Michigan are opening up for business in 2020 alongside other potential states such as Arizona still remaining in play, current estimates are that cannabis sales in the U.S. will skyrocket to $42 billion by 2025.
The report goes on to warn that legalized cannabis won’t be a benefit to every industry, and in many ways, represents a significant threat to well-established markets in other sectors. Drinkers of alcoholic beverages, for example, are one market segment that is liable to switch from buying drinks to using more weed instead, which could be a major threat to brewers around the world.
As such, it’s not surprising that so many of these companies have been pursuing partnerships in the cannabis world, such as Molson Coors with HEXO Corp (TSE: HEXO) and Constellation Brands with Canopy Growth Corp (NYSE: CGC).
“It’s more important than ever to prepare your brands and products for the demands of cannabis-interested consumers before the gates open to even broader assortment, distribution and messaging. For marijuana-based cannabis sold in licensed dispensaries in the handful of legalized recreational use states, the market has moved swiftly,” read a guest article from Nielson which was published on New Cannabis Ventures. “In just four years, the face of legalized recreational marijuana has changed dynamically. We forecast much of the same in the hemp-derived CBD sector, which is now invading mainstream retail and grabbing headlines along the way.”
The report goes on to mention that while mergers and acquisitions in the cannabis space have increased drastically, it hasn’t been able to mitigate the explosion in the number of brands operating in the marketplace right now.
Back in 2014, there were around 166 marijuana brands in two legalized states in the U.S. Compared to 2018, there are over 2,600 brands across four legalized states, an almost 16 times increase.
It might not be surprising to those who are already aware of the cannabis explosion that’s still to come, but investors looking for aggressive returns would find a suitable match in the marijuana industry.
