Canada / Analyst Insights
North American Green Rush: One of the Fastest-Growing Industries

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by Kelsey Oliver Analyst
Mar 27 2018

The growing acceptance of medical and recreational marijuana is expected to bring the cannabis industry to new highs in 2018. Revenue for both the Medical and Recreational Marijuana Growing industry in the US and the Medical and Recreational Marijuana Stores in the US is projected to rise at annualized rates of 31.2% and 33.0%, respectively, over the five years to 2018, making cannabis one of the fastest-growing industries in the United States. Nonetheless, countries such as Canada have made even greater strides toward nationwide marijuana legalization, while the United States has left the issue to state voters each midterm election. Thus, until federal legalization, the market’s full potential remains to be seen.

Canada on the rise        

Whereas the United States has languidly moved toward decriminalization on a state-by-state basis, Canada is set to open its recreational cannabis market this summer, becoming the second country in the world to do so. Medical marijuana has been legal in Canada since 2013, following the passage of the Access to Cannabis for Medical Purposes Regulations (ACMPR) bill. Since then, Canada has positioned itself as a global leader in medical marijuana exports, with Canada-based Aurora Cannabis Inc.’s German unit Pedanios recently winning a contract bid to supply medical marijuana to the Italian government after its Ministry of Defense sought external suppliers to meet heightened demand. Canada’s lucrative medical marijuana business has also caught the eye of Big Pharma; Sandoz Canada Inc., a division of Swiss pharmaceutical giant Novartis AG, announced that the company signed a binding agreement with Tilray, a British Columbia-based medical marijuana company. The Sandoz-Tilray strategic partnership signals Big Pharma’s first foray into the medical cannabis market, with more partnerships like this expected in the years to come.

marijuana revenue chart

Green Rush

Indeed, with the legal market for recreational cannabis in Canada opening this summer, and US midterm elections in November, the North American legal cannabis market is preparing for what many are calling the “green rush.” As Canada legalizes recreational cannabis and scales up the country’s potential to be a global leader in medical marijuana exports, many Canadian companies are also expected to position themselves to enter the US medical and recreational markets after federal legalization. Investment has already flooded the cannabis industry over the past five years, by way of public equity on the Canadian stock exchange, venture capital and private equity firms, suggesting investor confidence in the future legality of cannabis markets across North America.

Most recently, Toronto-based Cronos Group Inc. became the first marijuana company to be listed on a US stock exchange in late February, representing a milestone for the industry and paving the way for institutional investment in cannabis in the United States. Several cannabis companies have already been listed on the Canadian stock exchange for years; however, NASDAQ’s decision to list Cronos Group suggests more marijuana companies will likely participate in the US stock exchange moving forward. As impediments to capital financing are slowly chipped away, and an increasing number of states add legalization to their ballots, the medical and recreational marijuana growing and retailing industries are expected to benefit.

Future for the United States

Currently, 29 states and the District of Columbia have legalized medical marijuana, while recreational use is legalized in nine states. With November’s forthcoming midterm elections, 2018 is poised to be one of the most active years to date. Many states are already prefiling bills for legalization: at least 10 are considering adding marijuana legalization to their ballots. What’s more, many of these measures are expected to pass. Four out of five states legalized marijuana during the 2016 elections, and no state rescinded legalization measures in 2017. Additionally, a recent Gallup survey suggests 64.0% of Americans support legalizing recreational cannabis and 89.0% support the legalization of medical marijuana, indicating that many states will likely pass a second wave of legalization measures this fall. As marijuana is steadily legalized, IBISWorld forecasts annualized revenue growth of more than 20.0% for both cannabis growers and retailers over the next five years. Furthermore, a rapid influx of new companies is expected moving forward. Over the five years to 2023, the number of companies participating in marijuana growing and retail industries is projected to rise at annualized rates of 19.3% and 20.0%, respectively.

marijuana canva

Additionally, there will likely be an explosion of specialized companies that service these industries, including delivery services, tech startups and point-of-sale equipment. However, as these cannabis-related industries experience explosive growth and flood the market with new products and services, only the strong are expected to survive. In 2017, the total number of marijuana products on the market soared to nearly 20,000 as companies rushed to capitalize on the cannabis craze. The increasingly competitive market has favored the rise of branded products, edibles, concentrates and oils, according to BDS Analytics. As demand for cannabis products soars, large-scale cultivation, production and delivery systems will be required. As a result, the next five years are expected to be defined by the increased involvement of large corporations and heavy merger and acquisition activity, posing a threat to the long-term viability of small businesses.

Edited by Sean Egan. Designed by Miranda Romano.