The Biggest Catalysts for a $500 Billion Cannabis Market
Controversial or not, the cannabis story has become the hottest story of 2019.
In fact, it’s already created sizable wealth for smart in investors.
And that’s not likely to change any time soon.
We’ve already seen countless catalyst for cannabis stocks.
Over the next decade, spending on worldwide cannabis could reach $57 billion by 2027, according to Arcview Market Research and BDS Analytics. One of the largest groups of buyers, they note, will be in North America, where sales are expected to reach $47.3 billion in 10 years.
Analysts at Cowen note the U.S. cannabis market could rocket to $16 billion by 2025.
Even analysts at Piper Jaffray say we could be looking at a global market value of between $250 billion to $500 billion a year.
Analysts at Jefferies says the industry could reach $130 billion by 2029.
“This assumes full U.S. federal legalization, full recreational and medical legalization across Europe, full medical and recreational legalization across Lat Am, and cannabis disruption of a number of other industries,” noted the analysts, as quoted by Yahoo Finance. “Industries at risk of disruption are pharma, alcohol, health and wellness, pet care and smoking cessation.”
And unless you have been living under a rock this probably doesn't shock you.
To date, Canada legalized its use.
More U.S. states gave the green light for medicinal and/or recreational use. Corporate America quickly woke up to the opportunity. Better, cannabis is just beginning to transform multi-billion-dollar industries, including alcohol, health and wellness, cigarettes, and the retail industry.
DSW for example, has been running tests in its stores with CBD, announcing plans to expand such products to nearly 100 stores. Neiman Marcus is pushing ahead with CBD sales at some of its stores and online. Simon Property Group is partnering with Green Growth Brands to open 108 stores in its malls just in 2019. Barney’s will launch “The High End.”
CVS will now carry a line of CBD products in eight states, including California, Illinois, and Colorado. In fact, the drug chain will now sell CBD creams, sprays, and lotions in those states. “We are carrying hemp-derived CBD products in select states to help meet consumer demand for alternative care options,” said CVS Health Spokesperson, Mike DeAngelis.
Even more incredible, a greater number of people are now using cannabis.
In fact, nearly 7% of Americans currently use CBD, according to Cowen & Co. analysts.
According to Cowen’s January 2019 consumer survey of 2,500 adults, 6.9% of respondents are using CBD at the moment. “This initial response piqued our interest considerably, as it was much higher than we would have suspected,” they said, as quoted by the Press Herald.
By 2025, Cowen & Co. analysts believe CBD use will grow to 10% of Americans, which implies a potential $16 billion market opportunity.
In short, the cannabis boom has only just begun. Other big catalysts include:
2019 Catalyst No. 1 – The STATES Act
Named STATES, or Strengthening the Tenth Amendment Through Entrusting States, it would amend the Controlled Substance act to limit federal interference in state matters such as this. “This is just giving them a level playing field. Respecting the rights of states – it doesn’t force a state to do anything that it doesn’t want to do,” Rep. Earl Blumenauer told Rolling Stone.
Essentially, it would give each state the decision.
2019 Catalyst No. 3 – Globalization
Global spending on cannabis could reach $57 billion by 2027, according to Arcview Market Research and BDS Analytics.
In their report, “The Road Map to $57 Billion Worldwide Market,” analysts note that the South American market for example could grow from $125 million in 2018 to $776 million by 2027. They also note that Germany could become the leader in the European cannabis market, with Italy expected to see $1.2 billion cannabis sales by 2027.
Colombia is quickly emerging as a cannabis hot spot, for example.
The country is already on its way to capture as much as a fifth of a global market that could be worth $40 billion a year, according to Reuters.
“Colombia is wooing foreign investors, talking up its potential in the new era of peace as a resource-rich country with a business-friendly regulatory environment,” noted The Globe and Mail. “Colombia has the ideal climate for cannabis, with the evenly split 12 hours of light and dark each day that the plant prefers, a pool of low-cost labor and easily-transferable expertise and infrastructure from a large cut-flower export business.”
2019 Catalyst No. 3 – The U.S. Farm Bill
In recent months, President Trump signed into law, the U.S. Farm Bill -- an $867 billion farm bill that also had a vote of 386-47 in the House. The Senate approved it with a vote of 87-13.
The biggest benefit of the bill – it legalized the production, sale, and distribution of industrial hemp – a form of cannabis without the intoxicating properties. Congress will also remove hemp as a Schedule I drug under the Controlled Substances Act.
Cannabis has a strong future thanks to the U.S. Farm Bill.
In fact, farmers across the U.S. have been rushing for a piece of the hemp market ever since President Trump signed the Farm Bill into law last year. That legislation removed hemp from the government's controlled-drug category, triggering a surge in demand.
"There's a lot of excitement in the farming community because hemp is seen as a high-return crop. There are many farmers around the country who are struggling to make ends meet and they're looking for an alternative like hemp to boost revenue," said Eric Steenstra, president of VoteHemp, as quoted by The KXLY Broadcast Group.
Total sales for hemp-based products in the US were nearly $1.1 billion in 2018.
By 2022, sales are expected to more than double.
In short, this is a story smart investors should not avoid.