This is How Big the Cannabis Retail Sector is Going to Be

By Sarah Jane Callendar

Within the next 10 years, the legal cannabis industry is likely to boom around the globe, according to Arcview Market Research and its research partner BDS Analytics.

Spending on legal cannabis is expected to reach $57 billion by 2027. The adult recreational market is predicted to reach 67% of the spending and the remaining 33% will be taken up by medical marijuana.

More states are recognising cannabis

Take the U.S. for example, where it looks like more states are likely to legalize cannabis. Thirty states plus the District of Columbia now allow the legal use of medical marijuana. Nine of these states plus D.C. have also legalized the recreational use of marijuana.

Two more states, Michigan and New Jersey, seem to be on the path to legalization in 2018. In April, The Michigan Board of State Canvassers approved an initiative to put recreational marijuana legalization on the ballot paper later this year. They needed to gather 250,000 signatures and ended up with more than 365,000 signatures of support.

Meanwhile, Democrat Phil Murphy, Governor of New Jersey, voiced his support for the legalization of recreational cannabis and is promoting a bill that would legalize recreational use of marijuana in his state.

Cannabis Sales Could Even Eclipse Beer

The cannabis market is even putting pressure on alcohol sales and could out-sell beer.

Binge-drinking rates have fallen 9% below the national average in states that have legalized marijuana, and 11% in states that allow the recreational use of the drug, according to Bloomberg reports. Adults in states which have legalized marijuana binge drink on average 13% fewer times per month than those in states which have legalized recreational usage.

Other estimates show that the market for cannabis could even eclipse the sales of soda.

According to investment bank Cowen, if marijuana is legalized nationwide in the US by 2030, the legal weed industry could generate $75 billion in sales by that year. Soda consumption, on the other hand, is declining. Per capita, soda consumption fell to a 31-year low in the US in 2016, Bloomberg reports, with $76.4 billion in sales in 2017.

Having said this, even though the US decriminalization of cannabis is likely over time, there are still legal challenges for the booming market. Marijuana is still considered illegal and a Schedule I substance by the federal government and therefore cannabis-based businesses don’t have access to traditional banks and so cannot open lines of credit. And around the globe, the adult recreational cannabis market remains hampered by the United Nations and its 1961 Single Convention on Narcotic Drugs.

A Canadian Perspective

Meanwhile in Canada the cannabis industry is expected to soar as the recreational use of marijuana will be legalized on October 17, 2018. The market is due to increase drastically as Justin Trudeau announced the long-awaited date after months of speculation in Ottawa, confirming that Canadians will be able to purchase and consume the drug.

Of course, no one can know for sure what the retail environment will look like once marijuana stores are legal. But according to Avery Shenfeld, chief economist at CIBC World Market, if businesses are allowed cannabis shops and to compete in the same way other retailers do, then Canadians could be buying as much as $10 billion worth of marijuana products per year.

To put this in perspective, Canadians bought around $9 billion worth of beer in 2015, according to Statistics Canada.

Further promises of the booming market come after the Ontario Cannabis Store (OCS) announced that it has partnered with 26 licensed producers for its online retail platform, which is the province’s only retailer for recreational marijuana this fall.

The store says that supply agreements with these Health Canada-authorized producers were extremely competitive and will allow for a variety of products to be sold when pot becomes legal on October 17th.

The Picture of Legalization

The online store plans to sell various products including dried flowers, cannabis oil and cannabis seeds to customers 19 or older and plans to expand the selection over time.

Ontario has also announced it will allow recreational pot to be sold in retail stores while the province will handle online sales.

With this plan, the OCS will not operate any storefronts, but will provide an online channel that will include an age-verification system to ensure safe home delivery of cannabis products. This means the OCS will act as a wholesale supplier for private retailers.

Minister of Finance Vic Fedeli says that the government will propose an official Ontario Cannabis Retail seal which will help consumers identify retailers that sell federally qualified products. “Consumers can look to this seal to confirm they are buying from a legal channel,” said Fedeli. “This is an assurance that the illegal market simply cannot match.”

The full regulatory framework for the private sector will be designed in consultation with stakeholders, including municipal governments, indigenous communities, law enforcement, public health advocates, business and consumer groups. Fedeli assures sceptics that the government’s priorities are ensuring public safety and eliminating the black market. “The Government of Ontario will not be in the business of running physical cannabis stores,” said Fedeli. “Instead we will work with private-sector businesses to build a safe, reliable retail system that will divert sales away from the illegal market.”

So what does this mean for the future of cannabis retail? Although the exact outcome is unknown, the $57 billion spending on legal cannabis predicted by Arcview Research is extremely promising. We are already seeing positive steps in the US and Canada, where legalization is becoming increasingly common and is arguably filtering into mainstream law. This is fantastic news for the marijuana retail sector.

The cannabis retail store definitely shows huge potential and only time will tell just how big the market will really be.

Leave a Reply