In recent years, the legal cannabis industry in the US has gone from strength to strength, as more and more states have legalised the drug for medicinal or recreational purposes and, in some cases, for both.
And now, a new report has suggested that the legal cannabis industry in the US could grow to $50 billion in the next decade, expanding to more than eight times its current size, as lawful cannabis purveyors gain new customers and win over users from the illicit market.
Cannabis is already legal for recreational use in Alaska, Colorado, Oregon, Washington, and the District of Columbia, and is also legal for medical use in 25 states. The $50 billion figure assumes that the drug receives federal legalisation, a move that has over 50% popular support.
In California, for example, cannabis has already been legalised for medical use but recreational legalisation depends on the ballot in November. If recreational use is legalised in the state, however, it would triple the size of the USA’s legal cannabis industry, which currently stands at $6 billion.
In November, nine states will vote on pot-related legislation – five on whether to legalise the drug for all adults, and four on whether or not to legalise the substance for medicinal use.
Because cannabis is still federally illegal, large companies have tended to shy away from the industry and the market is dominated by smaller start-ups. But, as the industry expands, it is likely to affect big business too, particularly those within the tobacco and alcohol industries.
According to the report, legal cannabis would present a major opportunity for Big Tobacco. Vapor technology, which is popular way of ingesting both tobacco and cannabis, is a key part of tobacco’s less combustible-dependent future. Companies such as Altria Group Inc. and Reynolds American Inc. already have expertise in vapour and crop-growing technologies, as well as familiarity dealing with complex regulatory frameworks.
The report suggests that, by 2036, tobacco companies could make up 20% of the cannabis industry, adding over 20% to their revenue whilst almost doubling tobacco’s underlying growth.
When it comes to the alcoholic beverage industry, however, the report suggested that legal marijuana would not have such a positive effect. Over the past five years, the consumption of alcohol has declined, particularly amongst men. The use of cannabis, on the other hand, has risen. The number of drinkers who also use pot has increased, whereas the number or cannabis users who also drink alcohol has decreased.
For both the tobacco industry and the alcohol industry, the scale of the changes on the horizon are unusual.
According to Cowen, who’s company 10 Cowen & Co. undertook the report, “A 24 percent, 10-year revenue compound annual growth rate is hard to find in consumer staples, in particular one with a $50-plus billion end point.”