The Cannabis Industry

The Cannabis Industry: A Trillion Dollar Market in the Making
 

Are you still in denial cannabis prohibition is ending?   

Legalization in Colorado, Washington, and Uruguay haven’t convinced you?  How about the flood of investment into the cannabis sector or the subsequent pop in marijuana stocks?   You are still not convinced?   How about the US Federal Government recently outlining new rules for the financial sector legitimizing the business of legal marijuana.   Or how about the high profile career moves by former Microsoft exec Jamen Shively and ex-DEA agent Patrick Moen to a marijuana investment firm?  Like it or not, the flood gates in cannabis have been opened upon North American society.  Still, the biggest argument for ending of prohibition is the massive market itself, the multi-billion dollar cannabis industry which exists and thrives in spite of prohibition and 40 years of the Drug War.  When you peel back the layers of the onion on the cannabis sector you find not one industry, but three very lucrative double digit high growth industries; hemp, medical marijuana, and recreational marijuana.

Hemp agriculture has the potential to be the biggest of the 3 cannabis market segments.   It is the smallest at $500M, but hemp provides healthier alternative food staples, hemp is resilient in textiles and clothing, and biodiesel produced from hemp could significantly reduce our dependence on fossil fuels.   HEMP is one of the fastest growing cannabis segments.  So much so that demand for hemp products from Americans has, Cylab, a Chinese Hemp grower, relocating its operations to Canada to more readily supply the US market.   Stemia, another Chinese hemp company is also looking to follow suit.   Hemp is one of the most versatile plants on the planet with close to 25,000 known uses.  If hemp enters into society in any meaningful way; hemp agriculture and the products made from hemp could eventually rival that of the recreational and medical marijuana industry segments.

Hemp agriculture may be big part of America’s future; the opportunity now is in the medical marijuana (MMJ) sector.  Like Hemp will help kick start a revolution in nutritional health and clean energy, MMJ is kick-starting a revolution in modern science and medicine surrounding cannabinoids and the endocannabinoid system.  Colorado MMJ sales hit $329M in fiscal 2013, up 50% from the prior year.  Colorado has a population of 5.2 million people.   If you average those numbers across the US population, the MMJ market has the potential to reach $20B with widespread MMJ legalization in the US.  

The $20B MMJ market is just raw medical marijuana sales and does not include pharmaceutical companies developing cannabinoid based drugs.   Developing a novel cannabinoid based drug that works on modern health epidemics is where the ‘Holy Grail’ in cannabis medicine lies.   MMJ works and many proponents say all you need is medical marijuana.  Science tends to have a way of tweaking nature to make it work even better.   Eventually most cannabinoid products will be produced by drug companies like GW Pharmaceuticals GWPH.  One of the most promising revelations in the last 5 years is that two of the biggest health epidemics of the 21^st century, the $125B cancer and $120B diabetes epidemics could be made manageable with cannabinoid therapy.

The granddaddy of cannabis is recreational marijuana.  Colorado legal recreational cannabis sales are projected between $600 and $700 million in the first year of legalization and expected to bring in tax revenue close to $70M.  These stats blow away even the most aggressive estimates drastically underestimating the popularity of recreational pot.  Colorado recreational marijuana sales indicate a potential market size in the US of $40 to $45B with widespread legalization in the US.  If Barak Obama declassified marijuana as a schedule 1 drug tomorrow. The USA would have created a $60B market overnight.   This is ultimately why you can’t stop legalization, the market is already there.

Hemp was one of the most commonly traded commodities in the 19^th century.  You couldn’t run a country without it.  In fact, The Declaration of Independence was signed on hemp.    Cannabinoid medicine has the potential to dominate the medical landscape over the next 10 to 20 years with diabetes and cancer at the forefront of cannabinoid medicine.  This is a combined $250B market.   Recreational pot is another massive half a trillion market potential across the globe as prohibition ends.  Between hemp, medical marijuana, and recreational pot; the cannabis industry’s future looks bright with not one but three high growth sectors promising to return cannabis once again to global prominence.


Christopher Skidmore

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