Stephen Murphy – Group Managing Director
The Global Cannabis Report is the first detailed report, led by industry experts, to analyse current developments in the global cannabis sectors and provide individual industry forecasts across the continental markets: Africa, Asia, Europe, Latin America, North America, and Oceania. The report comes at an interesting time in the cannabis market as investments in the market and the value of cannabis stocks have declined.
However, despite a lack of investor confidence, due in part to the overvaluation of cannabis companies and a lack of revenue growth in 2019, the report demonstrates that the fundamental value and growth of the market remain strong.
Propelled onwards by the increasing number of countries considering cannabis reform, and the penetration of cannabis products into new consumer product markets, the first-of-its-kind global report expects the worldwide cannabis market to reach new heights by 2024.
Europe and North America – The Heavyweights
While the United States and Canada are currently home to nine of the top ten largest cannabis firms by market cap, the European market will grow at a significantly faster rate over the next five years.
Prohibition Partners’ proprietary market-sizing model predicts that the European market will be worth US$39.1 billion by 2024, driven strongly by its medicinal cannabis market, which will account for 57% of the value.
Despite being less populous, the more mature North American market is expected to continue advancing patient access programmes, with the total market value expected to be worth up to US$37.9 billion by the same time.
The North American market is also expected to cement itself as the global leader in recreational cannabis. One of the major future issues for the North American market will be the continued existence of its illicit cannabis market. In Canada, where recreational cannabis was unilaterally legalised in 2017, the illicit market continues to thrive by offering a cheaper alternative to legal cannabis products, which are affected by supply shortages and higher production costs.
Latin America and Africa are Ripe for Investment
In order to satisfy the demand for cannabis products and reduce production costs, international producers are looking further afield for cultivation opportunities.
As the report demonstrates, foreign governments are beginning to develop policies designed to attract international investment. In Colombia, for example, the Ministry of Justice and Law has introduced a commitment to respond to all licence applications within 30 working days, and the Colombian National Council of Narcotic Drugs has authorised a cultivation limit of 40.5 tonnes of cannabis for 2019, in order to accommodate as many cannabis companies as possible.
For many of these countries, foreign investment makes it possible to set up large cultivation and processing facilities that could not have been put in place with local involvement alone. Lower than average industrial wages and a lack of access to loans or sponsorship can be prohibitive to domestic companies when considering the high costs associated with licensing and facility development. The report notes that in Lesotho a cultivation licence is priced at US$37,000, and in South Africa the cost of setting up a fully functioning facility can be as high as US$460,000.
Asia and Oceania Herald in Major Cannabis Reforms
In Asia, the report identifies a ‘domino effect’, where the attitudes in many countries are being influenced by new legislative decisions implemented by their neighbours.
In December of 2018, Thailand became the first country in Southeast Asia to approve the use of medical cannabis, and has since implemented a number of patient access projects and public education programmes. It also brought in the ‘Two-Thirds Rule’, a policy creatively designed to nurture indigenous involvement in the sector by requiring businesses seeking licences to ensure that at least two thirds of their investors and board of directors are Thai citizens.
Since Thailand moved to legalise cannabis, similar cannabis reform efforts in the Philippines, South Korea, Japan, Guam, Malaysia and in some provinces of India and China have gathered mainstream support.
A continuation of this ‘domino effect’ will see Asia become the third largest global market for cannabis, with a total market value of US$12.5 billion, of which medicinal cannabis will account for US$10.7 billion.
In Oceania, similar advances in cannabis reform are expected, with New Zealand conducting a cannabis referendum alongside its next general election, and the Australian Capital Territory considering recreational cannabis legalisation in 2020. Despite these expected policy changes, the market size in Oceania will remain relatively small – around US$2.7 billion – due mostly to its small population compared with other market segments.
Global Product Trends
The Global Cannabis Report also examines wider product trends that are being seen throughout the cannabis sector. Across the board, next-generation cannabis products, such as edibles, topicals and extracts, are becoming mainstream. This is largely down to celebrity endorsement, which in turn also normalises the wider cannabis market.
The report also notes that it is mostly independent start-ups that have benefited from the growth of new consumer products, as the hazy legal status of the industry has deterred many large consumer goods companies from getting involved. As the market progresses, big tobacco, pharma and CPG companies are expected to make moves, as exemplified by deals from Constellation Brands, Altria, Novartis and Anheuser-Busch, to name but a few.
The recent approval of numerous pharmaceutical cannabis products by governing bodies in the US and the EU also represents a major turning point for the cannabis sector. Previously thought to be relatively low-revenue, companies that have been able to corner segments of the cannabis pharmaceuticals market in multiple regions look set to generate major sales figures. As research progresses and informs the list of conditions for which medical cannabis may be prescribed, the patient base will expand, and so too will the revenue potential of the sector.
To learn more about the current global cannabis sector, and its future potential, download our latest report: The Global Cannabis Report.
