2020 was a tumultuous and turbulent year for the global cannabis markets. The global pandemic changed perceptions for business and governments in all sectors and the evolution of what is “essential services” illuminated clearly the growing social upheaval of both the criminality and efficacy of cannabis products. 2020 brought progress to the global cannabis opportunity, but also setbacks, as early successful markets like Israel grappled with the challenges of international imports and international bodies reconsidered old perceptions.
Innovation and the greater “canna-business” model also came under new scrutiny as the early public companies in Canada and Internationally began to strengthen their position on intellectual property. Patents, legal challenges and a renewed push to differentiate became the focus of most of the larger global operators. The early green rush of public cannabis companies began to lose their luster (and share price) and a series of the founding CEOs and early leadership teams were replaced with an eye towards the true profitability of the sector, not the promise of one. Consolidation and entrancement from the early entrants have led to the expansion and distributed growth of smaller, craft and innovative business models in all markets. These new entrants are growing from within the structure of the early licences but are building craft models to compete in their local jurisdictions.
Some of key milestones from the last year include;
So, what trends will impact global cannabis 2021?
The estimated US Market is expected to reach $41.5 Billion in sales by 2025 according to New Frontier Data’s data modeling from November 2020. This expectation predicts a combined 21% compound annual growth rate (CAGR) primarily driven by expanded adult usage in all legal jurisdictions. International cannabis markets in Europe and Latin America have settled expectations somewhat due in part to access during the pandemic, but virtually all legal markets expect over 20% compound growth for the next five years.
As the pandemic loosens its grip on global commerce, governments from all nations will be considering how to increase tax revenue and in many cases cannabis will seem a viable pathway to increase government tax recovery. In states like New York and New Jersey cannabis reform will provide a new revenue source through broader legalization. However, unlike starting a new industry, strong viable networks of black and grey market products supplied through California, Canada and others have established pricing and distribution. Moving consumers will require more than legislation, fair taxation, transparency and safety of cannabis products will be the focus of 2021.
With multiple studies ongoing in Canada, Australia and Europe, the narrow, but long held belief that cannabis has no therapeutic efficacy will slowly strip away. This research will also provide clinical information on the full spectrum of cannabinoids beyond THC and CBD will open multiple product streams for producers, manufacturers and retailers.
With a full shift towards the Democratic Party control of US politics for at least the next two years several cannabis related reforms will be enacted. Even without full US legalization we should expect to see cannabis removed from a schedule 1 narcotic (no longer considered the same as heroin or LSD), the completion of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act and the Secure and Fair Enforcement (SAFE) Banking Act of 2019. With this reform more standardized rules on banking, credit and investment will be able to flow into the US market, providing access to research and innovation.
With this US reform will come a renewed push for interstate and international commerce providing both increased investment and opportunity to Multi-State Operators (MSO) and larger international cannabis companies.
Consumer buying trends in adult use cannabis have been evolving quickly with access to new delivery methods. Often called “cannabis 2.0” products, cannabis derivatives including edibles, vapes, creams, beverages and others have seen predominate growth in Canada and the established US markets in Oregon, California, Colorado and Washington. As with any product category new international markets adoption of legal adult use will further the innovation in this sector. 3.0 cannabis products which are tailored, refined and provide formulations that better control the rapid onset and offset of cannabis effects now represent the next evolution in established markets and brands that gain early market share represent the most prominent market opportunity.
With innovation and IP providing the blueprint for growth of the largest and smallest companies in the sector, it will be the control, enforcement and traceability of that IP that will determine cannabis success in 2021. New technology like blockchain, molecular tracking, genetic phenotyping and machine learning will enter the market in new and exciting ways to both build the foundation for a profitable sector and push back the illicit market.
Overall cannabis in 2021 should prepare for a long and bumpy ride.
About the author – Jason Warnock is a cannabis advisor for Applied DNA Sciences. He is a strategic thinker specializing in international market development, brand advocacy and integrated communications. Jason has worked with high-profile brands for more than 20 years to articulate sustainable, resonant campaigns in architecture and design, energy and the cannabis market. He has spent his career as a marketing and business-consulting lead, building companies and brands while working on M&As through his advisory practice.