Most accept that cannabis is a high-growth industry.
Far fewer have identified why cannabis is such a powerful emerging profit opportunity.
So, that’s precisely where I open this week-long focus on the marijuana industry.
The numbers are finally in for the full year 2020 on the cannabis market. And to get a feel for why cannabis is such a remarkable opportunity, we must start there.
U.S. cannabis sales increased 67% last year.
That simple fact probably answers most of the “why” question right away. But the prospect gets even more enticing than that.
The industry itself is now estimated to be worth $61 billion.
Think about that. Without the federal government’s say so, a simple plant-based industry is worth that much.
And it’s only going to get larger.
Estimates for just how big it’ll be in 10 years blew up last year. In 2019, Wall Street expected the industry to grow to $80 billion by 2030. That number is now $100 billion.
Chances of further raised estimates are high.
And if you look at specific states, you can see why.
Illinois legalized recreational marijuana in January 2020. It brought in $39.2 million in that month. By December, it was bringing in $86.9 million.
That’s been true for every state during its first year.
Yet only 12 states have passed and started selling recreational marijuana. Just wait until all 50 open up. That will be a wild year for the industry. And it could be coming soon.
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Path to Legalization
We’ve all seen how successful marijuana has been on ballots in various states. New Jersey passed legalization in November by a two-thirds majority.
Medical marijuana has also been incredibly popular on state election ballots, with some 35 states approving of it (36 with D.C. included).
People are clearly in favor of opening up their pot laws. 2020 was yet another milestone here.
For the first time ever, more than two-thirds of the nation believe weed should be legal. That’s not gone unnoticed.
With the recent changes to Congressional makeup and the White House, currently elected officials are more cannabis-friendly than ever before.
VP Kamala Harris ran on decriminalization in her bid for the Presidency.
Others, even those definitely not part of the recent wave of progressives coming to power, have bent on this subject.
When CBD came up for a vote in the 2018 Farm Bill, it was Mitch McConnell who pushed it through, saying that it would be a boon for Kentucky farmers.
Florida Congressman Matt Gaetz, a loyal Trump supporter, is leading a small group of Republican Congressmen and women in a push for legalization. He even co-sponsored a bill to make it happen last year.
The political winds have shifted, and the stage is set to bring the kind of growth Illinois saw last year to all 50 states.
But that still doesn’t completely answer the question of “why” cannabis is such an incredible emerging profit opportunity.
First Time Profits and Access to Big Money
The current state of the cannabis industry is rather jumbled. Since Canada legalized the drug in 2018, most of the largest cannabis companies are located up north.
But that comes with its own problems. The U.S. is by far the largest market for the plant. Yet, because of the federal government (so-far) dragging its feet on legalization, these companies don’t have access to U.S. banks.
Many are also unable to get their stocks listed on major U.S. exchanges. This is a giant bottleneck in what could be the fastest-growing industry in the market.
Access to capital at this stage in an industry’s lifespan is crucial. Expansion into new markets, securing supply lines and building brands and market presence are all imperative. But these companies can’t do any of it without money.
That too could quickly change. Even without full federal legalization, decriminalization (dropping cannabis from the list of controlled substances) and banking legislation are on the table now.
That could be a catalyst itself, even if Congress remains gridlocked.
But even with all of that said, the cannabis industry itself isn’t going to stop growing.
Already, we’ve seen some players in this industry reach their first year of profits recently.
One of the biggest telltale signs of success will come when the biggest of players finally go into the black. Canopy Growth Corp. (NASDAQ: CGC) surprised investors this month by offering net-positive guidance for the second half of next year.
As these companies fight and claw their way to profits, it just loosens that bottleneck of access to capital.
Another solution is private investment. Canopy famously inked a deal years ago with Constellation Brands Inc. (NYSE: STZ) for $4 billion.
Others, like Altria Group Inc. (NYSE: MO), famously one of the world’s largest cigarette makers, penned its own multibillion-dollar deal to get a piece of the cannabis industry.
The point of all of this is that market as a whole is at a tipping point.
Sales are growing faster than supply. Legislative opportunities are opening up. And companies of all sizes are gaining access to capital.
The “why” question is straightforward. The industry is growing up. And there’s no lack of customers and positive catalysts coming down the road.
Tomorrow, I'll be sharing with you great insights on Getting Started With Pot Stocks.
To your prosperity and health,
Joshua M. Belanger