Stephen Murphy – Group Managing Director
In the 18 months since Prohibition Partners published the first edition of The Oceania Cannabis Report, much has changed for the regional cannabis industry. Two additional territories – the Australian Capital Territory (ACT) and Guam, a US island territory – have moved to legalise recreational cannabis use. New Zealand, the third most populous country in the region, also announced its intention to hold a referendum on legalising recreational cannabis.
The Oceania Cannabis Report: Second Edition provides a detailed overview of the developments being seen within Australia, New Zealand and the surrounding island nations, and analyses the companies leading the way in the evolving market. The report also identifies a number of major trends that are unfolding in the region, and looks at how these trends might shape the local cannabis market moving forwards.
Key cannabis trends in the region
Medical cannabis is largely legal across New Zealand and Australian territories, illegal across Melanesia, while policies vary throughout Polynesia and Micronesia. So far, the most transformative legislative decisions on cannabis in the region have emanated from the smaller nations and states, with the ACT, Guam, and the Northern Mariana Islands all legalising recreational cannabis use since 2018.
On the whole, the largest nation in the region, Australia, has been slow to join with the momentum of the adult-use cannabis reform movement. However, the larger nations have invested heavily in medical cannabis and scientific research, with Australia recently committing US$2 million of federal funds to support research on the use of cannabis in alleviating cancer symptoms. The New Zealand-based medical cannabis company CannaSouth also secured government funding to support two of its neuropathic pain and drug discovery programmes.
This behaviour follows a much larger international trend, which Prohibition Partners calls ‘Knowledge Is Power’. With a history marred by global prohibition, ‘establishment’ figures are still cautious about making dramatic legislative changes despite considerable consumer buy-in and demand. Instead, there is a preference to advance research and to demand scientific verification of the drug’s safety and efficacy first.
Another Prohibition Partners’ trend that has been observed in the region is that of ‘Blueprint Markets’ – where legalisation advocates suggest looking to the mature systems in the world as a roadmap to developing a new, improved system on a domestic level.
This is well illustrated in the debate surrounding the New Zealand cannabis legalisation referendum, which is due to take place in September of this year. Drug policy expert Eric Costen has suggested that in Canada, many of the indigenous First Nations peoples ‘don’t feel the regulated model that was chosen fits their needs, or enables them to easily participate in the economic development opportunities that legalisation presents’, and advises that Māori ‘should be central in designing the regulatory model for legal cannabis’ in New Zealand to avoid these same failings.
The indigenous populations of Australia and New Zealand have been disproportionately affected by local drug prohibition policies, owing to a combination of social inequity, poverty and cultural use. Efforts are now being made to encourage participation from these indigenous peoples in the emerging cannabis space. For example, New Zealand regulators recently hosted a workshop series for Māori stakeholders providing information on the various government programmes and support initiatives available to their businesses.
How will the cannabis market cope under external stressors?
Australia and New Zealand have been faced with immense challenges in recent months – with harsh bushfires claiming over 11 million hectares of land across Australia, killing at least 33 people. Now, as the bushfire season rumbles to a close, the region finds itself dealing with the unprecedented coronavirus (COVID-19) pandemic.
The Australian bushfires caused huge damage to the Australian economy, with the total economic impact estimated to exceed US$2.9 billion. With the country holding ambitions to become a major player in the global cannabis industry, there is hope that the success of the national cannabis sector could help to counteract the economic cost of the fires. However, Prohibition Partners cautions that this industry must hold close its social responsibility by engaging positively with communities affected by this disaster, and by being mindful of their water consumption and environmental impact. With the Australian cannabis industry still in its relative infancy, the sector has the opportunities to set the mould for what a flourishing, environmentally-conscious industry could look like in modern Australia.
Concerning the COVID-19 pandemic, so far there has been a double-digit fall in cannabis stock prices for businesses listed on the Australian Stock Exchange; however, there have yet to be any reports of significant disruption to the supply and production lines that uphold the local cannabis industry.
More widely, consumers report that they are likely to increase their personal cannabis consumption in the short-term in light of COVID-19, which seems consistent with the record-breaking sales being recorded in several North American and European markets. Additionally, the potential of a dynamic legal cannabis industry to provide recession-proof jobs and taxes could prove to be a turning point for cannabis legalisation in a post-coronavirus world, and a catalyst to continued reform in Australia and New Zealand.
Oceania cannabis industry poised for growth
Prohibition Partners anticipates that the regional cannabis industry will experience intense growth over the coming years, reaching a total market value of US$1.55 billion by the year 2024. Currently, the market worth is estimated to reach US$54.1 million in 2020.
Australia is projected to make up the majority of the market share in the region, with the total legal cannabis market value expected to be upwards of US$1.23 billion by 2024. This reflects not only progress in terms of legislation, but also the nation’s larger population and higher household disposable income compared with the surrounding islands.
New Zealand is expected to enjoy significant growth following the implementation of its Medical Cannabis Scheme, which began earlier this month. Assuming the 2020 referendum elects to allow the legalisation of recreational cannabis, New Zealand’s cannabis market is projected to reach a value of US$276.4 million by 2024; with the recreational and medicinal cannabis markets in the country worth US$179.9 million and US$96.5 million respectively.
While the domestic market around Australia and New Zealand is somewhat capped by the region’s population, overseas exports represent an opportunity for the region to significantly increase its value and establish a strong presence in the global market. Furthermore, a fall in reliance on imported products should see more domestic revenue being generated by the industry than there has been so far to date. These economic opportunities are expected to encourage other states and nations in the region to advance their own cannabis reform measures.
To learn more about the cannabis sector and its future potential in Australia, New Zealand and the surrounding nations, download The Oceania Cannabis Report: Second Edition here.
