Seeing Green: A Synopsis of the Global Cannabis Marketplace
There’s no end in sight to international cannabis legalization and the industry is growing internationally at a remarkable pace. Legal cannabis sales are projected to reach more than $10 billion in 2018, according to Marijuana Business Daily’s “Industry Insights: Countries to Watch” report. But, the global cannabis market is growing exponentially. As more nations liberalize their laws, projections put the value closer to $146.4 billion by 2025.
North America accounts for the largest market share in the world, according to Grand View Research, Inc. That’s because the biggest group of cannabis consumers live in the U.S and Canada. Thanks to markets in states like California and Colorado, the U.S. dominates legal cannabis sales. “In 2017 the worldwide legal marijuana trade [...] was worth $9.5 billion,” reports Forbes, “At $8.5 billion, the U.S. accounted for 90 percent of it. At $0.6 billion Canada’s 2017 share was six percent. The rest of the world combined made up the remaining four percent.”
While flower remains popular among American consumers, research shows that demand for concentrates and edibles will drive growth. In fact, the continent leads the world in the development of new cannabis-based consumption methods -- think: infused foods and drinks, concentrates, tinctures, vaporizers, etc. -- according BDS Analytics. That’s because more people want convenient, smoke-less options, and more precise dosages. They also want more alternatives to pain and anxiety medication, or sleeping pills. Data from Eaze’s “2017 State of Cannabis” report proves consumers of all ages use cannabis as an effective substitute to pharmaceuticals.
The U.S. is expected to remain the epicenter of recreational/commercial sales in the future. However, its market share is expected to drop to 73 percent by 2022. While more people gain access to cannabis in the U.S. and beyond, it will be laws -- not demand -- that drive growth. Cannabis remains illegal at the federal level in America, which may affect its standing... and leave room for others to catch up.
This year, Canada became the second nation in the world (following Uruguay) to legalize medicinal and recreational cannabis use. The country’s existing medical cannabis industry gives it an edge. The addition of retail sales may make Canada the second largest domestic market in the world (next to California). Canada’s federal government will regulate licenses for: cultivation (large and small scale growers), industrial hemp production, and processing licenses, among more. Individual provinces regulate retail sales, and allow for private and government-owned operations. But, as BDS Analytics puts it, approximately five percent of the world’s population live in cannabis-friendly nations. That leaves lots of run for growth in the international market.
Thirty-five countries made progress toward medical marijuana, according to MJ Biz Daily. Chile is one of those nations. In 2015, its parliament legalized medical marijuana, and decriminalized small amounts for recreational use, according to the MJ Biz Daily’s “Countries to Watch” report (MJBD report). The country, the MJBD report adds, has some of the highest consumption rates per capita in Latin America. It’s also home to one of Latin America’s first medical grow operations. The Agriculture and Livestock Service of Chile is responsible for approving medical cannabis cultivation licenses. So far, few have been awarded. Per the report, medical marijuana products are allowed to be imported into Chile; “A special authorization allows the country’s health department to grant provisional authorizations for the distribution and sale of [unregistered] pharmaceutical products in cases of scarcity or [unavailability].”
Colombia’s medical marijuana industry is booming. Since former President Juan Manuel Santos legalized the use and export of medical cannabis two years ago, the country has poised itself to become a major producer of medical marijuana. According to a Reuters’ report, the new cannabis-friendly laws aim “to take the marijuana trade from the hands of [...] rebels and traffickers, transforming Colombia into a multibillion-dollar producer for the pharmaceutical industry.” Manufacturing, cultivation, and distribution licenses are available. Cultivation permits allow: psychoactive (one percent or higher) or non psychoactive (one percent or lower) plants, and hemp seeds for either commercial or scientific use. Flowers sales aren’t allowed; cannabis must be sold in extract form, which must come from certified labs. There are more than five million medical marijuana patients in Colombia alone, making it “the second-biggest medical cannabis patient market, behind Germany’s patient population,” the MJBD report finds.
The demand for medical cannabis in Germany rose dramatically since the country legalized it in 2017. However, the German court halted a decision to grant cultivation licenses, which has left the country without domestic producers for now. Foreign companies can get cultivation licenses if they’re able to establish residency or partner with a local business. They must also be able to prove they’ve got experience producing medical grade flower with a THC content of one percent or more between 2015-2018. The application period for permits ends in late October. Less than 15 are expected to be awarded. In the meantime Germany is left to rely on imports -- mainly from Canada and the Netherlands -- to meet its growing demand. The country also won’t issue retail, processing or manufacturing licenses as cannabis is sold exclusively in pharmacies, according to the same report mentioned above.
Another European market to watch, according to MJBD research, is Portugal. The Iberian nation decriminalized cannabis (and other drugs) in 2001. It wasn’t until June 2018 that the Portuguese government took steps to approve medical cannabis, which will only be sold in pharmacies. According to the MJBD report, “The new law spells out rules for medical cannabis cultivation, production, extraction and commercial manufacture, as well as wholesale, distribution to pharmacies, import and export, transit and sale of the products.” Like Germany, retail sales aren’t allowed. But, Portugal's National Authority of Medicines and Health Products (Infarmed) will grant cultivation, extraction and manufacturing licences. Opportunities will lie in cultivation, due to the country’s climate and skilled workforce.
Israel is another nation with a climate that’s ideal for cannabis cultivation. Sunshine is abundant in the Mediterranean country -- and so is scientific exploration of the plant. Medical marijuana has been accepted in Israel since the early 1990s. This year, the country’s parliament -- the Knesset -- took the first steps toward decriminalization. The Israeli Ministry of Health issues cultivation, and distribution licenses (the latter is available only to pharmacies). Israel is a pioneer in the research and development (R&D) of medical cannabis. As of last year, “Newsweek” reports, there were more than 100 different cannabis related clinical trials happening within its borders. Its government approved the export of cannabis in 2017 -- a decision that would’ve earned up to $1 billion in revenue. But, that plan was put on hold a few months in early 2018.
Israel’s small patient population (30,000), combined with its abundance of cannabis make exports a major opportunity for Israel. Until that happens, it’s advanced R&D sector make the country ideal for partnerships. According to the MJBD report, approximately 50 Israeli companies currently grow for commercial use or for R&D. “This opens opportunities for U.S. based extractors and processors to partner with Israeli researchers and firms exploring cannabinoid compounds, delivery systems like vaporizers and other technologies.”
There are a number of markets in Africa poised to capitalize on the cannabis industry. In 2008, Lesotho became the first country on the continent to regulate medical marijuana. The law allows for manufacturing, cultivation, distribution, storage, and import/export licensing. MJBD data finds opportunity for investment “up and down the supply chain” in Lesotho; “There are no input suppliers specifically for cannabis companies, including […] irrigation equipment, greenhouse, generators, farming equipment, nutrients and cannabis-specific fertilizers.” Lesotho is said to be a staging ground for entry into the continent’s (potentially) multi-billion dollar cannabis market. Plus, conditions are ideal for cultivation – one reason why it’s known for its plethora of cannabis farms.
This year, Zimbabwe became the second African nation to legalize the production of cannabis for medical use and research purposes. Individuals and companies can get a license to cultivate, according to Reuters, which added, “The five-year renewable licenses will allow growers to possess, transport and sell fresh and dried cannabis as well as cannabis oil.” In September, the Constitutional Court in South Africa ruled to decriminalize cannabis for private, personal use. So far, legal framework for medical cannabis cultivation in South Africa is still being built.
Legalization looks different in markets across the world, which means there’s a gamut of options, and opportunities ahead. Some of the most exciting opportunities, so far, lie in the American markets (U.S. and Canada), and the emergence of the South African industry. Other countries that are worthwhile to watch include: Jamaica, and Uruguay.