The Future of Cannabis Industry in 2025
Cannabis has come a long way from being a banned substance to being legalized in several states, people are finally recognizing cannabis for its medicinal value. Now, the cannabis industry is expecting an exponential rise in demand by 2025. If anything the cannabis market size is going to be bigger than the projections. Some estimates say the cannabis market is anticipated to reach 66.3 billion by 2025.
This market is big-money and is attracting big fish. The cannabis industry grew by 10.9 billion in 2018 alone, as reported by a combined study conducted by Arcview Market Research and BDS Analytics. Just four years earlier, this figure was USD 3.4 billion. This is astounding growth and should be recognized by any savvy investor.
Well, the figures mentioned above are remarkable not only because it is a big leap for any industry, but also because the United States federal government still recognizes cannabis as a schedule 1 substance. Being a Schedule 1 substance entails that a drug is considered highly potential of qualifying as abuse and has no significant medicinal properties. This is obviously not true, cannabis should not be considered one of the most dangerous drugs. Comparing cannabis to heroin and cocaine is crazy.
Even though cannabis is not federally legal in the US, the right of the individual states to decide its legality has rendered it quite accessible in 33 states. While not all of them have legalized cannabis for non-medical consumption, 11 states have allowed its consumption by adults for recreation.
The US Cannabis Sales Prediction in 2025
Now that the legal cannabis is here you can bet that big businesses are going to try and find a way to get a piece of the market. Wall Street estimates show that the cannabis market in the US is the most widespread and flourishing market in the world, contributing to over a third of global cannabis sales in the current decade. If this doesn’t leave you astounded, its projected growth in the coming five years certainly will. According to recent reports published by the data analytics provider Nielsen, the cannabis industry in the US will rise five-fold from what it currently is. That is – the cannabis sales in the US will grow from USD 8-10 billion to USD 41 billion by the year 2025.
One possible reason behind this astonishing rise in the cannabis industry could be its varied applications; since there is more to them than just dried flowers. Cannabis can be used in hundreds of different products such as edibles, beverages, vapes, topicals, and concentrates. Its derivatives, including tetrahydrocannabinol (THC), cannabidiol (CBD), or hemp oil can be obtained from the plants as well. While THC is the element that contains psychoactive cannabinoid, that is known to get the users “high”; CBD does not. Many medical professionals and scientists are conducting studies to verify the perceived medicinal benefits of CBD.
Even though the portfolio of cannabis is widespread, the report by Neilson suggests that in 2014, 77% of the products sold in Colorado and Washington were dried flowers. However, In Nevada and California in 2018, the cannabis products being sold were quite varied 48% dried flower, the remainder sales comprised 19% of vape pens, 11% of edibles, and 22% of other derivatives. However in 2019 there was the counterfeit THC carts that were getting people sick so people may stop buying them increasing dry flower sales.
Invest In Cannabis Stocks
Cannabis businesses are going to grow. Do you ever wish that you could have invested in Microsoft or Apple when they first launched? Well this could be your opportunity to invest in a start up and make millions off of your small investment. Cannabis stocks are poised for gains in the coming years.
Cannabis is taking farm to table very seriously. Cannabis farms are creating ecommerce businesses where they control everything. This could be a very profitable venture if done correctly. Running a business like this is going to be difficult however. You are going to need to be an expert in dozens of different fields. You will have to manage your land and farm the cannabis yourself, process the cannabis and then sell your products through retail outlets in the states that have legalized cannabis. Out of the hundreds of producers, perhaps the luckiest/skilled is the Curaleaf Holdings (OTC: CURLF) which could be destined to make enormous gains with the increased market foothold of cannabis. This is because they are in the process of acquiring the Cura partners’ Select brands along with other privately owned dispensary operator Grassroots, which will make them the topmost multistate operator with the highest number of operational retail outlets in the country (well over 70). Also, the company will be able to obtain the second-highest number of cannabis retail licenses. Now, if you are looking for a stock of a company with over USD 1 billion turnover, Curaleaf is the one for you.
All being said, accessing cash is an omnipresent challenge in the US, especially when it comes to cannabis stocks. This is the reason why the Cannabis real Estate Investment Trust (REIT) Innovative Industrial properties (NYSW: IIPR) is another company likely to benefit from the success of the cannabis industry. They have acquired 30 properties in 12 states as a REIT and are now using these plots to rent them out to cannabis growers and processors. On average, the lease length is 16 years along with the return yield of 14.5%. This shows that the Innovative Industrial Properties will recover its investments in the coming five years, with the ability to pass an annual rental increase to its tenants.
Not Every Company or Industry will Prosper from Legalization
Since we saw that some companies are poised to experience an exponential rise in profits, you should not assume that every business associated with cannabis is going to be successful. The traditional “vice” industries, for instance, tobacco and alcohol, might face the loss of sales and buyers as the market goes “green” with cannabis. Now, the surveys suggest that as many as 41% of tobacco smokers will switch to cannabis. Apart from that, 1 in every five beer drinkers says that they might also prefer the cannabis products over store-bought beer. This will result in a cut down on the money they spent on alcohol.
The shift of consumers from tobacco and alcohol are the evident reasons why Molson Coors Brewing’s (NYSE: TAP), a cannabis-infused beverage, and HEXO’s joint venture- Truss is trying to reignite the spark that it has lost. Over the past decade, Molson Coors is already witnessing its sales and market value heading on the downward path. Now that they are prepared to put Truss on sale in Canada, it is quite likely to build a customer base in the US in the near future too.
In addition to the tobacco and alcohol producers, the smaller multistate operators in the US are quite likely to prosper, which might come as a shock to many. Many people may think that big companies will prosper but large companies are less nimble. In 2018, according to Nielson’s report, the states of Nevada, Colorado, Washington, and California had alone seen the establishment of 1,650 cannabis brands. This number becomes all the more surprising when you compare it with the number just four years ago in 2014, which was just 166 brands. Also, it took the brands just one year to double up in number from 2017 to 2018.
Now that the completion is so fierce, only the brands with enough capital to stand out from the crowd will be able to curb their competitors and grow. Other, sadly, will have to settle for moderately declining sales before their market share is taken over by a bigger brand.
In brief, even though the cannabis industry will grow and expand with legalization, not every company will benefit from its expansion. Many smaller ventures can, for their survival, resort to integrating operations with those of bigger brands though.
Worldwide Effects of Legalization of Cannabis
Across the world, countries are legalizing the consumption of cannabis, either for medicinal purposes or recreational reasons. That being said, a majority of them have imposed stringent regulations on the distribution of cannabis and require the patients to follow a proper procedure before they are provided products based on cannabis. Even after complying with the strict laws related to the sales of cannabis in the global market, the legal market is anticipated to reach the value of 66.3 billion in worth by the end of the year 2025. These projections are from a report from Grand View Research, Inc. The astonishing rate at which it will grow is CAGR 23.9%. However, the cannabis industry in the European markets might not be able to hop on the same growth train as that of the US and Canada because of the strict restrictions on the production and sales of cannabis. But, Germany, Australia, Colombia, Poland, Israel and Uruguay are some countries which show a promising future for the industry. Other countries such as New Zealand, and South Africa, are considering legalization too, which will certainly help in the expansion of the industry. UK and Thailand, too, are in the process of creating a legal structure for the production and sales of cannabis, giving it another region to establish ‘roots’ in the upcoming years. When people cannot buy cannabis legally they resort to the black market. When governments see the money that they are losing out on from taxation they are more likely to take steps to legalize cannabis.
Market Segmentation of Cannabis
In the coming years, according to Grand View Research, the market will be segmented, the different type of products, their applications, and the regions they will be legal in 2025. While we are aware of the two types of cannabis which will be legal in 2025. I believe that the medical and recreational markets will merge into one as people become more familiarized with it. The concentration of different derivatives in the cannabis is also a major determining factor when it comes to segmenting the market, we will see if CBD continues to grow in market share. In the coming years, THC dominant cannabis is expected to rule the landscape due to their antispasmodic, anti-nausea, antibacterial, anticancer, anti-anxiety, and anti-inflammatory properties. Globally, the countries that have legalized cannabis, or will have legalized cannabis by 2025, including the United States, the Netherlands, Germany, Canada, Italy, Croatia, Poland, Czech Republic, Mexico, Australia, Uruguay, Chile, Argentina, Israel, Colombia, and Switzerland.
Legal Status of Cannabis in the US
In the end, the cannabis industry is all set to take over the market even before it’s completely legalized, which makes its potential quite evident. Therefore, there is little doubt about its potential as a market leader amongst recreational substances in 2025.