As the legalization of recreational cannabis expands across the U.S., many things are beginning to shift in U.S. markets when it comes to the cannabis industry. The U.S. has become the largest cannabis market, making up 90% of the $9.5 billion trade in sectors like medicine, construction, retail, tourism, software, and technology.
With companies like Canopy Growth, Cronos Group, Origin House, Marimed, and Auxly performing exceedingly well, it's no wonder why many investors are looking for opportunities to ride the wave of the Cannabis market as more changes take place.
To stay transparent, by no means is this a cheat sheet about investing in specific stocks. This guide will highlight the various ways in which cannabis industries are growing to inform investing opportunities in the future.
Reason #1 Increase in Legislation for Cannabis is Driving the Market
In early December of 2020, the house of Representatives unanimously passed a bill that decriminalizes the use of marijuana on a federal level. Good news- right? Although Congress passed legislation at the national level, every state is free to mandate its laws locally. The mandates include use - medical or recreational, distribution and possession.
As of April 2021, the use of marijuana is legal in all but five states, including Alabama, South Dakota, Wyoming, Nebraska, Indiana, and Idaho. While some states have only approved the use of medical marijuana, it's only a matter of time before we see more states support it for recreational use.
Legalizing cannabis has changed many consumers’ motives for using Cannabis. The plant has shown to be effective when used as a pain killer, anti-inflammatory, anti-seizure, sleep aid, and antidepressant medicine among elderly populations. According to a 2020 research letter in JAMA Internal Medicine
, the use of marijuana has doubled among people 65 and older in recent years. Florida, which has the highest population of senior citizens, has experienced an unexpected response, leading to a thriving market in CBD products among this population.
Governments, both local and oversea's who have been early adopters in the approval of legislation for Cannabis have seen economic growth in doing so as well. In Nevada, a study group performed by an RCG Economics
and Marijuana Policy Group concluded that by 2024 the legalization of cannabis could support over 41,000 jobs in the state and generate over 1.7 billion in labor income alone.
Reason #2 Legal Marijuana Market Growth Trends are Rising
After the approval of the Farm Bill back in December 2018, production in cannabis industries across the U.S. has skyrocketed. In a recent report by Data Bridge Market Research, the trends illustrate:
the Global Legal Marijuana Market expects to reach 90.83 Billion USD at a CAGR of 14.0% by 2027
considerable growth is expected to happen in global markets, where spending is assumed to grow from $52 million in 2017 to $2.5 billion in 2027 for a CAGR of 47%.
A significant development in the cannabis industry that led to an increase in market growth trends was removing industrial hemp from the U.S. list of Schedule I controlled substances. It has opened the door for CBD products that contain non-psychoactive CBD to enter the market, thus increasing the demand for CBD products across the country.
Hemp is a type of Cannabis sativa L.
known for its low volume of TCH and high amounts of the cannabinoid known as Cannabidiol (CBD). Unlike its close affiliate marijuana, hemp plants do not contain significant levels of the stimulating compound known as Tetrahydrocannabinol (THC).
CBD, which promotes wellness, has swept consumer markets because of its subtle and all-natural foundation derived in Cannabis. It has directly affected consumer spending growth trends and is also driving up the value of cannabis-derived products. Today, hemp uses include:
Other hemp uses include textiles, fabrics, and other manufactured and industrial products.
Companies capitalize on the shifts in consumer demands, making it far more likely that the trends will continue to rise. As this happens, investing in marijuana will become a more viable opportunity for many.
Reason #3 Financial Services is Now More Accessible to Cannabis Companies
Banks are more open to providing capital to cannabis companies and other services that have been difficult to acquire in the past. For example, before 2018, banks and credit unions were not as likely to provide banking services to these companies.
With the reintroduction of the SAFE Banking Act
in 2021, new banking and lending protections are creating possible safe harbors for bankers and insurers who might want to provide financial services to Cannabis-related businesses. The bill received bipartisan support even with the recent senate change late last year. Endorsements from the American Bankers Association and the Credit Union National Association make the likelihood of the passage in the senate appear good.
With banking and lending protections expanding, companies who wish to grow their operations now have access to services. Business owners can now access new lines of credit, loans, and bank accounts without adverse scrutiny against them exclusively based on owning such a business. New protections include leasing real estate, equipment, or providing any other service to this kind of business.
Reason #4 Cannabis Consumer Goods for Retail Are Expanding
Hemp Goods have grown tremendously and are used to make everything from beauty products to furniture, even higher priced wall art for art connoisseurs.
The cannabis home goods industry is becoming more widespread. With Companies like Seth Rogen's Houseplant, brands in the marijuana home decor space are becoming household essentials. For Houseplant, catering to the likes of cannabis consumers has been key. Products for your coffee table and your walls are now more commonly sourced, which brings us back to reason #1 on our list- the increase in legislation for Cannabis.
More legislation means more accessible methods for sourcing, and naturally, this yields more access to Brands wanting to compete in the marijuana industry. Cannabis brands that are high on design are changing how mainstream consumer goods emerge into the market.
For example, Hi, designed by Mau Design in Los Angeles, is a monthly subscription service bringing to consumers "Bud Boxes" with a casual and welcoming feel. The look and feel of the brand are demystifying and democratizing the concept of living with cannabis. With similar ideas, other experience-driven brands are changing the way marijuana brands cater to their consumers, which is working out great for retailers and marijuana companies.
There is also a growing trend of goods and products that aren’t made with Cannabis but complements its use. Brands entering the retail space with similar concepts include C-clean
with its smoke eliminator
or eco glass pipe cleaner
line. These products stand to support consumption and demystify what it means to live a cannabis-friendly lifestyle.
Reason #5 Shifting Technologies are Expanding Uses of Marijuana
Medicinal uses found in the marijuana leaf are pioneering medicine and treatments for the sick and the elderly globally. Cannabis pharmaceuticals report having a market size value in 2020 of 107.3 million USD. In 2025, the market size of medications derived from cannabinoids estimates to generate a whopping 25 billion U.S. dollars and on track to double at 50 billion U.S. dollars by 2029 (Ackrell Capital, 2016).
Medical use by patients with cancer has increased over the years due to its effectiveness in pain management. According to Statistica (2018), 93% of cancer patients reported that medical marijuana helped manage their conditions or related symptoms. Additionally, approximately 45.9% of medical oncologists have recommended medical marijuana for cancer-related issues.
Besides just helping conquer new frontiers in the Medical Field, the cannabis industry is helping to create more jobs. In a study produced by Leafly
and Whitney Economics, the cannabis industry now supports 321,000 full-time jobs, and positions within this industry have grown to over 161% in the last four years.
What does the future hold for the Cannabis Industry?
As the market moves forward and more protections popularize for companies and consumers alike, the industry will continue to expand. As companies begin to go public, cannabis stocks and marijuana stocks will become staples in many portfolios.