Alex Khourdaji – Analyst
February 8th, 2020
In 2020, the US saw further states legalising adult-use cannabis, Canada rolling out innovative Cannabis 2.0 products and COVID-19 accelerating North American sales of adult-use cannabis products. As 2021 commences and the North American cannabis industry continues to show promising developments, Prohibition Partners launches The North American Cannabis Report: Second Edition which provides a deep-dive on the current state of the cannabis industry in the US and Canada.
North American legal sales of cannabis are estimated to reach US$39.1 billion by 2025, with adult-use cannabis sales reflecting a growth rate of 144% between 2020 and 2025. The projected is primarily fuelled by the introduction of US states legalising adult-use cannabis sales, product innovation in the Cannabis 2.0 segment and the increase of North American cannabis consumption. Prohibition Partners expects medical cannabis sales to show little growth in the coming years as existing medical cannabis programmes are highly regulated, controlling patient and supplier access. The majority of the medical cannabis segment’s future growth is due to the expectation that more US states will adopt medical cannabis programmes.
The US 2020 elections was an exciting development for the North American cannabis industry. The US voted democratic presidential nominees Joe Biden and Kamala Harris into the White House. Both members who have been vocal regarding federal cannabis reform. Alongside a democratic win, all cannabis ballots in Arizona, Mississippi, Montana, New Jersey and South Dakota passed reflecting overwhelming support for cannabis legalisation in the nation. Financial contributions to cannabis legalisation ballots reached US$30.5 million outshining opposing contributions which only garnered US$1.9 million. Following the election outcomes, public cannabis companies’ stocks saw large surges and state cannabis regulators formed a national group known as The Cannabis Regulators Association (CANNRA).
As of November 2020, 36 states and three territories have adopted or approved comprehensive medical cannabis programmes, and 15 states have approved adult-use cannabis sales in the US. It is expected that the momentum for the legalisation of adult-use cannabis will continue in the following years with lawmakers in New York, Pennsylvania, Connecticut and New Mexico already pushing for state reform.
The sentiment of federal cannabis reform gained strong momentum in 2020 with the vote for the Marijuana Opportunity Reinvestment and Expungement (MORE) Act passing in the House of Representatives in December 2020. The bill seeks to decriminalise and remove cannabis from the Controlled Substances Act and establish programmes for communities impacted by the ‘War on Drugs’. Latest surveys suggest the MORE Act has majority support from Democrat (70%) and Republican (53%) voters, highlighting the tipping point for federal cannabis reform.
In the light of the MORE Act and the momentum for social change for those impacted by the ‘War on Drugs’, the implementation of social equity programmes (SEPs) in the cannabis industry gained much attention in 2020. SEPs seek to integrate communities of colour and those affected by cannabis criminalisation into the legal sector through access to capital and other initiatives. Only a handful of states including Illinois, Michigan, Washington and Oregon, have implemented impactful social equity programmes that help disadvantaged community members enter and operate in the cannabis industry. Although these programmes are a step in the right direction, many advocates believe there is still a lot more that needs to be done as smaller operators compete against socially advantaged winners.
Prohibition Partners estimates that Canadian retail cannabis sales in 2020 reached US$1.8 billion, with adult-use sales estimated at US$1.5 billion and medical cannabis at US$260 million. We project that total cannabis sales will reach US$3.2b by 2025. It is estimated that in 2020, 1.4 million people in Canada consumed legal adult-use cannabis products with the number projected to surpass illicit market users between 2022 and 2023. By 2025, we predict the number of adult-use cannabis users in Canada to reach 3.4 million.
In late 2019 and early 2020, Canada saw the rollout of new Cannabis 2.0 products. Before its launch, stakeholders and experts believed the rollout would ignite a wave of growth in the industry as 2.0 products held more substantial margins than traditional cannabis flower and could attract new customers to the market. As the launch of these products began, provincial disparities, restrictive product regulations, and technical product difficulties hindered expected sales projections. However, as the market started to overcome supply and technical issues, sales for Cannabis 2.0 products began to flourish and are expected to be the fastest-growing industry segment.
The COVID-19 pandemic has left a considerable mark on the world economy as lockdown restrictions continue to cause uncertainty in a plethora of industries. The North American cannabis industry was no exemption as cannabis operators, including Aurora and Canopy Growth faced layoffs and closed facilities. Although cannabis operators were affected by COVID-19, adult and medical cannabis sales soared in the legal US states and Canada. As many bars and restaurants were closed due to lockdown restrictions, and cannabis businesses were deemed essential, consumers reached to cannabis to manage their lockdown related anxiety and boredom. The shift from alcohol to cannabis as an adult vice increased the sales for cannabis and led to record highs on a monthly basis.
Prohibition Partners North American Report: Second Edition takes a deep dive on the current social, economic, regulatory and health trends including:
- US 2020 Elections
- The Rise of SPAC’s
- The 2019/2020 Vaping Crises
- Federal Cannabis Reform
- Social Equity Programmes
- Canada’s Cannabis 2.0 Roll-Out
The North American report also includes sales forecasts of medical and adult-use cannabis in the US and Canada.