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State of the Cannabis Industry April 20, 2018

This article was originally written for Viridian Sciences, developers of cannabis seed-to-sale and ERP software. The original article can be found here: State of the Cannabis Industry April 20, 2018

Cannabis consumers and businesses have a lot to rejoice this 420 celebratory weekend. Some historic changes are afoot, not just in Washington and around the country, but all across the globe.

Let’s take a look at the state of the cannabis industry in 2018.

[You can download an Infographic Version of this here.]

The State Of the Market

Sales of marijuana in North America are growing faster than experts predicted. A report from Arcview Market Research released at the beginning of December 2017 claimed that retail cannabis was on track to jump 33% over 2016’s totals to hit $10 billion.

Troy Dayton, CEO of cannabis analytics firm The Arcview Group has said, “Aside from cryptocurrency, there is simply no other industry changing as rapidly or as unevenly as the cannabis sector.”

Arcview says it expects the legal cannabis market to reach sales of $24.5 billion by 2021.

Additionally, a report issued by Cowen and Company claims that U.S. nationwide sales are expected to exceed $75 billion by 2030, “a figure comparable to the sales of soft drinks in 2017.”

Among other findings, the report revealed:

  • California’s medical market is already as big as the total markets in Colorado, Washington, and Oregon combined.

  • Nevada retailers generated more than $27 million in the first month of adult-use sales, according to the Nevada Department of Taxation.

  • Investment money continues to pour into the cannabis business.

According to a report from New York-based cannabis financial advisory firm Viridian Capital Advisors, by the end of November 2017, marijuana companies worldwide had raised approximately $2.7 billion in capital in 2017, almost three times the amount raised in the entirety of 2016. The staggering figure is indicative of investor optimism in the industry as more U.S. states adopt legal marijuana.

The Hemp/CBD Market Is Exploding

Currently, hemp production in the U.S. is exploding. Hemp production more than doubled in 2017 and appears to be on course to top $1 billion this year. Furthermore, it’s expected to grow to $1.7 billion by 2020. According to cannabis data and analytics firm New Frontier Data, hemp production totaled 25,541 acres (10,336 hectares) in 2017.

US’ First Exchange-Traded Fund (ETF) Launches

ETFMG, Alternative Agroscience ETF, recently became the first U.S. traded fund dedicated to investing in marijuana cultivators and distributors. The potential for a marijuana ETF is huge. Individual investors have been clamoring for a good way to get in on the exploding cannabis market.

Horizons Marijuana Life Sciences ETF (HMMJ), another ETF that recently launched, trades on the Toronto Stock Exchange. The Horizons ETF has already built up more than $200 million in assets.

Tobacco and Alcohol Want In

Both the tobacco and the alcohol industries—two other highly regulated adult markets—are eyeing their potential entry into the cannabiz, not just for vertical growth, but also to stop losses.

Cigarette smoking has seen a decline in recent years, some portion of which experts attribute to legal cannabis. And alcohol sales are flagging in states with legal cannabis. In fact, in the tourist town of Aspen, Colorado, cannabis sales surpassed alcohol sales—a first in this country (and probably not the last).

Marijuana is sapping tobacco and alcohol sales in two ways. First, they’re taking market share away as cigarette smokers and drinkers choose to forgo those products in favor of cannabis. Second, cannabis has been shown to provide an effective treatment for helping smokers and alcoholics kick the habit.

A 10-year-long joint study undertaken by two US universities and one in Lima, Peru has shown an overall 15 percent reduction in monthly wine sales in US counties where marijuana has been legalized. When the results are broken up by alcohol type, wine showed an average of 16.2 percent decrease in sales, while beer dropped 13.8 percent after marijuana was legalized.

Another study which took place in 2016 showed beer sales falling in states with recreational marijuana programs. This study, performed by the New York-based research firm Cowen & Company, found that sales of larger domestic producers had "collectively underperformed" over the past two years in Colorado, Oregon, and Washington.

Here are some examples of tobacco and alcohol companies moving in on the cannabiz:

  • Imperial Brand, formerly Imperial Tobacco, made some changes to their board of directors last year, appointing the chairman of PharmaCielo, a Canadian supplier of cannabis oil extracts.

  • Alliance One International Inc. (NYSE:AOI), recently announced the acquisition of a 75 percent equity position in Canadian-licensed producer Island Garden Inc. and an 80 percent stake in another licensed producer, Goldleaf Pharm Inc. The company is also an investor in a North Carolina hemp company.

  • Philip Morris International of Switzerland bought a patent on non-GMO strains of cannabis which are endowed with higher levels of terpenes (the sticky oils that give cannabis its distinct flavors and aromas).

  • Constellation Brands, the U.S. distributor of Corona beer, announced it was buying a 9.9% stake in Canada’s largest MMJ concern, Canopy Growth, for just under US$200 million.

Continue reading: State of the Cannabis Industry, April 20, 2018

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