December 20, 2019
The cannabis trends that shaped 2019
In 2019 Prohibition Partners identified five mega trends that were shaping the international cannabis industry.
Claire Birks -Senior Analyst
Alexandra Curley – Insights & Reports Director
Conor O’Brien – Industry and Data Analyst
Our five mega trends combine a host of other trends that have shaped the cannabis industry to date and will continue to influence the market over the coming years. By tracking and identifying the key trends occurring across the global cannabis marketplace, Prohibition Partners is quickly able to reach a critically defined understanding of the future course of this highly dynamic and rapidly evolving marketplace.
For 2020, Prohibition Partners has named Normalisation as its trend of the year but we also expect to see more developments based around the following trends:
The trends that shaped 2019
1. The Green Rush
Likened to the gold rush, cannabis represents a new commercial opportunity that will likely reach every corner of the globe. The Green Rush is not only a rush to secure the first-mover advantage, but is also a race for scale, size and eminence, as typically in any industry, a few large players will eventually dominate. This is not only being seen by the companies operating within this space, but also by governments who now recognise the latent potential of cannabis as a medicine as well as a source of state revenue.
For 2020: As the industry enters its first period of global economic instability, 2020 is likely to diminish the appeal of the industry to opportunistic and speculative investors. Companies will look inward, focusing on shoring up operations and profits. Mergers will remain limited but savvy investors will look to find opportunity in emerging sectors such as ancillary services, technology, biomedicine and brands.
2. CBD Ubiquity
CBD is an entirely new consumer product that has exploded into the global consumer marketplace across many categories and sectors. News of the product’s wide-ranging benefits is spreading fast, and consumers seem to be highly receptive to consuming it in a number of forms. Already, major players like Canopy Growth, Tilray and Cronos have invested hundreds of millions in new CBD ventures.
For 2020: We will see more and more industries across the board incorporating cannabidiol into their product ranges. This is likely to spill over into a greater array of food products, and food operators with clean eating and veganism are likely to be key conduits. Sports performance (including sports drinks) and recovery/injury products will also be a major category in development that will also pay greater attention to CBD; however, we may also see the entire sports drinks category shift its focus in favour of mental stimulation and nootropics (including CBD) rather than on simple physical exertion, as the drain on mental time and energy continues to be much higher than the physical demands of modern living. Household goods will also pick up on the trend, with CBD-based sleep aids an exciting new avenue for a whole host of product development.
3. Blurred Lines
When it comes to regulating cannabis, each country has its own legal framework, and no two countries have the same set of laws. Furthermore, the rate of change is unique to each jurisdiction. Inconsistency is, therefore, the name of the game, which makes it incredibly difficult to trade on a global basis and even harder to get hold of a legal prescription.
For 2020: We will continue to see Blurred Lines as a key feature of the cannabis industry in 2020, with the threat of seismic changes to CBD regulation both in the US and Europe already looming large for the new year.
4. Knowledge is Power
Hailed as a wonder drug and often marketed as a panacea, cannabis is a substance that appears to have significant potential in medicine. However, with a history mired by prohibition, cannabis is still widely seen as a ‘rogue treatment’, with a large section of medics, legislators and consumers remaining sceptical. Thus, despite considerable consumer buy-in and demand, the ‘establishment’ is proceeding with caution and demanding proof before proceeding.
For 2020: Cannabis will find a less controversial and a more secure place in the medical establishment, once robust, reliable data exists to support the claims about its medical benefits and, with so many trials now underway in key emerging markets such as the UK, Denmark and France, clarity will arrive in 2020 and beyond, unlocking access to patients within state healthcare systems.
5. Blueprint Markets
Over 40 countries have legalised medical cannabis, but only a number of states and regions have developed successful frameworks, with Canada, Israel, Germany, the Netherlands, Thailand and Australia being at the forefront. Only Canada, Uruguay and several US states have legalised adult-use cannabis. However, the world is watching and learning and will pick and choose what does and doesn’t work in these early adopter markets.
For 2020: Look out for full legalisation completion in Luxembourg, Mexico and Ecuador, and for the process to be initialised in Southeast Asia, where many conservative countries are starting to adapt to the changing global conversation. Colombia and Argentina will also look to initiate their own programmes, potentially spreading to Chile, Venezuela, Lesotho and Zimbabwe. Expect discussions for the UK and Germany to begin towards the end of 2020, with the domino effect sparking similar discussions around Europe. Florida, Arizona and New Jersey will also follow suit.
TRENDS FOR 2020
Public opinion is changing towards cannabis with consumers across the majority of G7 countries and beyond now favouring the legalisation of medical cannabis. In addition, forward-thinking legislators and lobbyists are beginning to consider the merits of full legalisation with levels of opposition declining rapidly. With such strong support for cannabis in certain key countries, further legalisation seems like a matter of when rather than if.
Cannabis products in the form of CBD are available in Wal-Mart, Tesco and even B&M and are the go-to cannabis product for many of the elderly. Although the issue of recreational cannabis will continue to divide opinion, when it comes to consumer products that are not designed to intoxicate, the barriers are already receding. Public opinion is forcing the lawmakers to catch up to the groundswell of consumer attitudes that consider cannabis as just another consumer product that should be open to the market.
2. Cutting Through the Red Tape
Throughout 2020, legislators and reformers will put forward amendments designed to relax barriers to access in order to deliver cannabis-based medicinal products to patients. There is becoming a widespread recognition that the current framework in many ‘legal’ markets such as Ireland, the UK and France is too limited. Too often, legislation has been forced through to satisfy public outcry or media scandals without a long-term plan in place. As a result, education and reform will continue to play a big role throughout 2020.
For 2020: We will see key tweaks in legislation that actually facilitate access and a functioning system that works for the people it was designed to benefit. Key reforms to watch include South Africa’s Health Products Regulatory Authority (SAHPRA) approval of a broader range of products in line with the new laws; the WHO/UN rescheduling of cannabis; the MORE Act; the SAFE Act (US); further amendments from NICE in the UK and the New Zealand referendum.
3. Bursting the Bubble
Rapidly emerging industries experience bubbles. Like the dot-com boom and the crypto-currency crash, cannabis stocks have seen a rapid decline over the last 12 months, dropping 70% in value with major layoffs and disappointing quarterly earnings becoming a consistent feature in 2019.
For 2020: The big cannabis producers will slow down their rate of global acquisitions and will instead shore up their domestic inventory. Many of the smaller players will bow out under the weight of high start-up costs as well as the squeeze on price that occurs in the wake of greater supply. Until company valuations are more realistic, deals are likely to fall through, and job losses will continue until a more streamlined industry emerges that can sustain the tremors mounting on the global economic stage.
4. The Crackdown
Following Germany’s decision to uphold new EU Novel Foods Regulations and the FDA’s announcement that CBD is potentially harmful we are beginning to see signs of a crackdown in regulation looming on the horizon. This could have massive consequences in the consumer marketplace, where the product is now very well established.
Online Searches for CBD (October 2017 – 2019)
(Source: Infegy Atlas/Prohibition Partners)
For 2020: A handful of players will likely emerge as the last remaining operators in the CBD market if regulation does force operators to apply for authorisation. 2020 will also reveal whether these announcements are simply a strategic display of threats or whether there is a genuine appetite among the regulators to finally put an end to the CBD ‘grey zone’.
5. Carbon Counting
With the planet’s health now elevated to emergency status, the subject of environmentalism and sustainability in cannabis is going to be a core source of discussion and innovation regarding cannabis. Hemp more than holds its own in this arena, needing low agricultural inputs like water and pesticides while providing useful raw material for textiles, construction and food. Other uses are on the horizon which could see hemp at the centre of agricultural climate solutions such as hemp for carbon capture, biofuel, building materials and concrete substitute. Cannabis cultivation methods are lagging far behind, with many indoor farms requiring huge water and electricity inputs.
For 2020: We will see cannabis cultivators turning to more renewable practices and utilising less intensive cultivation methods such as LED lighting and outdoor-grown cannabis, favouring growing regions with the right climate for fast and water-efficient growth cycles. In terms of processing, we will see greener extraction methods, in particular those that are solventless, including those that utilise sonic and ultrasonic waves. Reduction and recycling of cultivation waste will be critical to reducing the carbon footprint of the industry as will innovative packaging solutions, particularly in edibles that conform to regulation while delivering on sustainability demands.
2019 really was a year of two halves; the momentum that had been set in motion in the year prior shaped the first half, but in H2, reality lagged the market’s optimism and billions of dollars were wiped from the value of cannabis stocks.
Going into 2020 the cannabis industry is proceeding with caution, defined by lowering costs, improving yields and focusing on operations that generate immediate revenue opportunities. Efficiency is going to be the holy grail in 2020. The industry has learnt that the promise of legalisation and the delivery of a functioning commercial market are mutually exclusive. Surviving today will supersede securing domination in the future. However, there is still much to be done and learned and with tighter regulation and compliance looming large on the horizon in 2020, this is going to be a year where a more tightly regulated legal cannabis industry needs to find a way to hold its own against the prevailing black market presence.
2020 will also bring with it a greater understanding and acceptance of cannabis as both a medicine and a recreational product; both scientific discovery and social change will continue to advance the cannabis narrative further with the consumer landscape evolving to favour cannabis as a consumer product.
Prohibition Partners is widely recognised as the world’s leading provider of market intelligence, data-driven solutions and corporate strategy for the emerging cannabis industry. Our consultancy team works with investors, operators, regulators and Fortune 500 companies to help identify and execute opportunities. We advise on market entry strategy, data solutions, licensing, regulations and marketing across multiple jurisdictions. To learn more, get in touch at email@example.com
The cannabis trends that shaped 2019
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