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- These countries are expected to account for virtually all of the legal marijuana sold globally in five years
Marijuana is one of the fastest growing industries on the planet.
Legal weed sales have more than tripled between 2014 and 2018, and
they’re on track to roughly quadruple between the $10.9 billion
generated in licensed cannabis stores 2018 and the projected $40.6 billion in worldwide licensed store sales
by 2024. That’s according to the 2019 “State of the Legal Cannabis
Markets†report released earlier this year by Arcview Market Research
and BDS Analytics.
Yet, what you might find intriguing about this rapid growth is that
it’ll wind up being attributed to just a select few countries. Even
though more than three dozen countries around the world have legalized
medical marijuana, five countries are forecast by Arcview and BDS to
account for $38.2 billion of this aforementioned $40.6 billion in
licensed-store sales by 2024. Note, licensed-store sales doesn’t include
general retailers selling cannabidiol (CBD) products, or
cannabinoid-based drug developers selling pot-derived pharmaceuticals.
1. United States: $30.1 billion in cannabis spending by 2024
As should be no surprise, the U.S. projects as the leading marijuana
market in the world by sales in 2024. In fact, the $30.1 billion in
licensed-store revenue should comprise almost three-quarters of global
licensed sales. According to Arcview and BDS, $9 billion of these sales
are expected to come from the medical side of the equation, up from $4
billion in 2018, with the remaining $21.1 billion derived from
recreational marijuana, up from $5.9 billion last year.
The thing about the U.S. is that cannabis stocks can still thrive even if the federal government doesn’t change its classification of marijuana
from Schedule I. As long as Congress and the president continue to
respect the right of states to make their own choices on cannabis, the
industry could have plenty of runway.
One of the fastest early stage growers looks to be multistate dispensary operator Cresco Labs (OTC:CRLBF).
Cresco, which holds the licenses to more than four dozen retail
locations in 11 states, made a bold move in April when it announced an
all-stock deal to acquire Origin House (OTC:ORHOF).
Origin House is one of only a few companies to hold a cannabis
distribution license in California, the state responsible for a quarter
of all U.S. marijuana spending by 2024. Thus, Cresco Labs’ purchase of
Origin House will give it access to more than 500 Californian
dispensaries, and over 700 nationwide. Cresco and its vertically
integrated peers appear well-positioned to take advantage of this huge
growth opportunity.
2. Canada: $5.18 billion by 2024
Despite being the first industrialized country in the world
to legalize recreational weed, Canada looks to take a distant second to
the United States by 2024 in terms of sales. Arcview and BDS are
projecting that $4.8 billion in sales will come from the recreational
market by then, with the remainder made up of medical cannabis sales.
It’s not uncommon for the medical industry to get cannibalized when
adult-use marijuana is legalized, because it means patients no longer
have to wait for a doctor’s approval and prescription to buy weed.
There’s a lot of competition in Canada right now, so it’s still unclear which company will be Canada’s kingpin. However, Aurora Cannabis (NYSE:ACB) is a relatively good bet to be near the top of the pack solely based on its production potential.
Aurora is already leaps and bounds ahead of its next-closest
competitors with an annual run-rate output of 150,000 kilos as of the
end of March, and plans to be producing at least 625,000 kilos on a
run-rate basis by the end of June 2020. With most of this production
located in Canada, and the company sporting a number of large-scale grow
farms, Aurora Cannabis should be able to take advantage of economies of
scale to drive down its growing costs per gram.
Of course, the real near-term excitement revolves around the upcoming launch of derivative products
(e.g,, edibles, vapes, topicals, concentrates, and infused beverages)
by mid-December. Derivatives have much better margins and pricing power
than dried cannabis flower, which is why Aurora Cannabis and its peers
have been busy beefing up their product offerings over the past year in
preparation for this upcoming launch date.
3. Germany: $1.35 billion by 2024
Even though Arcview and BDS are not expecting Germany to legalize
recreational cannabis, the company’s highly permissive stance toward
medical marijuana, and the fact that health insurers cover medical weed
in the country, should allow sales to soar from $79 million in 2018 to
$1.35 billion by 2024.
Interestingly enough, Canadian cannabis stocks were actually big-time
winners of the German cultivation licensing process. Both Aurora
Cannabis and Aphria (NYSE:APHA) were awarded licenses to grow cannabis in Germany.
For its part, Aphria plans to have an 8,000-square-meter facility in
Germany that’ll begin supplying the country with medical marijuana in
the early part of 2020. In addition to growing cannabis, Aphria
introduced CannRelief in Germany, which is a CBD-based nutraceutical and
cosmetics product line.
As for Aurora Cannabis, its approval to construct a growing facility
will allow the company to supply the German market with 4,000 kilos of
marijuana over four years, with shipments expected to commence October
2020. Of course, this production capacity is liable to be bumped up if
patient demand merits it.
4. Mexico: $1.02 billion by 2024
Arguably one of the oddest “legality†situations concerning marijuana
right now is with Mexico. The nation’s Supreme Court has ruled five
times since 2015 that imposing a ban on recreational cannabis is
unconstitutional. That’s important, because when Mexico’s Supreme Court
reaches five similar decisions on an issue, it becomes the standard throughout the country.
Or, in layman’s terms, the Supreme Court has essentially affirmed the
legality of recreational marijuana and is simply waiting for lawmakers
in the country to hash out the details.
According to Arcview and BDS, Mexico will have legalized adult-use
cannabis by 2024, although the ramp-up of legal sales could be slow. By
2024, recreational weed sales are only expected total $582 million, with
an additional $441 million in medical spending, for a combined $1.02
billion. Mexico’s considerably larger population than Canada makes for
an attractive market opportunity, but it’s unclear how well legal
industries will fare with the noted presence of illicit producers.
One company that hasn’t been shy about its push into Mexico is Medical Marijuana, Inc. (OTC:MJNA), the very first publicly listed pot stock. Southern California-based Medical Marijuana was the first company to import CBD-rich oils
into Mexico in 2016, giving it a head start on building important
relationships with the country’s medical community. You’ll note that
even with recreational legalization likely on the horizon, medical
spending should continue to grow in Mexico. That gives Medical Marijuana
and its RSHO-X hemp oil a real shot to continue penetrating the
Mexico’s medical cannabis market.
5. United Kingdom: $546.9 million by 2024
Although it may not be on track to tip the scales at $1 billion in
sales by 2024, the U.K. is poised to be one of the fastest growing
countries in the world based on cannabis spending. After only $9.9
million in medical spending last year, Britain is forecast for almost
$547 million in medical marijuana revenue by 2024, representing a
compound annual growth rate of 95.2%.
This sudden push to legalize and normalize medical pot use in the U.K. can be partially attributed to the success of GW Pharmaceuticals (NASDAQ:GWPH), the cannabinoid-based drug developer that had the U.S. Food and Drug Administration approve the very first cannabis-derived drug last year.
GW Pharmaceuticals’ CBD-based oral solution known as Epidiolex dazzled
in late-stage studies and wound up reducing seizure frequency for
patients with two rare forms of childhood-onset epilepsy by 30% to 40%.
Additionally, GW Pharmaceuticals’ Sativex, an oromucosal spray
containing both CBD and tetrahydrocannabinol (THC), is approved in more
than a dozen markets in Europe (but not the U.S.).
Britain’s citizens and its government have seen what the U.K.-based
GW Pharmaceuticals can do with cannabinoids, and its government has been
open to the possibility of expanding access to marijuana-based products
for medical patients.
Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends Origin House. The Motley Fool has a disclosure policy.
SOURCE: https://www.fool.com/investing/2019/09/08/5-countries-with-the-highest-cannabis-spending-by.aspx
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