The Legally Hazy World of The Cannabis Renaissance

This piece was written for The Twenty Mile Club.

The big investment ‘booms’ for businesses: blockchain, machine learning and… cannabis?

As a sector that has been soaring meteorically from the shadow of the black market, the global demand for marijuana is poised for a spectacular high. From mixing cannabis with wines, to rubbing it on your skin, explosive sales growth are drawing scores of entrepreneurs and investors into the industry. This is considerably raising the level of sophistication, competition and complexity of the business every year. But how much more is it expected to grow?

According to Arcview Market Research and BDS Analytics, spending on legal cannabis worldwide is expected to hit $57 billion by 2027, with the recreational use market covering 67% of the spending, and medical marijuana the remaining 33%.

The legal status of cannabis varies widely between countries, from the completely legal (e.g. Uruguay), to medicinally legal (e.g. Australia, Chile, Germany, Italy, Israel, Mexico, and the UK from November 2018) and the totally illegal (the majority of the world). Recreational marijuana is legal in 9 US states, and medicinal marijuana is legal in 30 states. At the forefront of widespread acceptance is North America, where perceptions and stigma surrounding the industry have, and continue to, undergo a massive shift. The statistics speak for themselves…

  • In 2017, sales of medical and recreational cannabis were almost on par with Americans’ collective spending on Netflix subscriptions, and could easily eclipse McDonald’s annual US revenue by the end of 2018.
  • Annual cannabis retail sales are projected to increase by 50% from 2017, on pace to reach $8-10bn by the end of 2018. Projected annual retail sales in the US could top $20bn in 2022, representing a 200%+ increase from 2017.
  • It is estimated that for every $1 a consumer spends on retail marijuana, another $2.50 in economic benefit is created in cities, states and nations.
  • The number of full-time jobs in the cannabis industry is growing at 21% per year, a rapid rate compared to other prospering industries.
  • Total demand for marijuana in the US (including the black market) is around $53.5bn.

These developments around the world point to a retail renaissance, and a chance to exploit the plant like never before. In the UK, it remains illegal for residents to possess cannabis in any form, however, attitudes in the government may be shifting. According to recent polls, 82% of Britons support legalising medical marijuana, and 51% support full legalisation (The Guardian, 2018). We might be close to following in the footsteps of Canada, who have become the first G7 nation to fully legalise the drug, following the highly publicised case of Billy Caldwell; a 12-year-old boy who uses cannabis oil to treat his life-threatening epilepsy, had it confiscated at Heathrow Airport earlier this year. It’s time to reimagine the weed industry, as it could soon be a bigger market than fizzy drinks. If marijuana is made legal nationwide in the US by 2030, it could generate $75 billion in sales by that year. Fizzy drink consumption, on the other hand, is declining. 2016 saw a 31-year low in per capita consumption in the US and $76.4 billion in sales in 2017 (Business Insider, 2018).

A little chemistry lesson: the two principal chemicals (or cannaboids) found in cannabis are tetrahydrocannabinol (THC) and cannabidiol (CBD). THC is the psychoactive agent that gives you the high, while the CBD permeates a sense of calm and rest. CBD is the fulcrum of the cannabis-based health industry for treating disorders such as epilepsy, Crohn’s Disease, and PTSD.

Humans have an endocannabinoid system (ECS), a remarkably complex network of cannabinoid receptors in our central and peripheral nervous systems. Whilst we do not fully understand why, or how, the ECS works, it fine-tunes most of our vital physiological functions such as sleep, appetite, pain, inflammation, memory and mood. This knowledge has sparked a renewed interest in cannabis products, as it explains why natural cannabinoids in hemp and marijuana have therapeutic and medicinal effects, acting as a tonic to our most central physiologic healing system.

With the legal cannabis market exploding with no intention of slowing down, there is incredible potential for growth for both independent retailers and corporations. There have been many start-ups launching cannabis-based consumer products, but more surprisingly, most are in the high-priced and luxury segments. Other than the obvious marijuana products, such as space cakes and joints, how are businesses capitalising on the plant?

Well there are a growing number of weird and wonderful cannabis-based organisations sweeping the industry. For example, a multitude of CBD-based natural wellness products have been established in the US by start-ups such as Dosist, Mineral Health and Aceso, that serves to relax and calm the brain and induce sleep. Whoopi & Maya, an organisation co-owned by actress Whoopi Goldberg, sell a line of cannabis-infused products to aid menstrual cramps. There are now chocolates and teas with CBD being produced, as well as restaurants serving CBD-infused cocktails. Cannabis also has a finger in the beauty industry, due to its potent anti-inflammatory properties, treating everything from acne to eczema and wrinkles. The Hemp Business Journal believes that the US CBD market could be worth $2.1bn by 2020, compared to $202mn in 2015.

Perhaps the most unusual component in the industry are the numerous Cannabis dating apps, for those looking for that special someone who wants to do more than just share a spliff with you. The most popular being ‘High There!‘ (boasting the largest user base), 420 Singles and Highly Devoted – “connect over cannabis”. Last year, IBM pitched blockchain-based technology to the Canadian government that could track weed supplies throughout the entire supply chain. Supporting this, the cannabis industry also has its own cryptocurrencies such as PotCoin and DopeCoin. Both cryptocurrency and marijuana are extremely high-growth emerging industries coming into their own at the same time, and whilst exciting for investors, it comes with a multitude of unpredictable considerations (such as marijuana legalisation).

The average number of years from medicinal legalisation to recreational legalisation for the 9 US states with legal recreational use is 14.5 years (California being the longest at 22 years, and Massachusetts the quickest at 4 years). It is doubtful that legalisation of recreational marijuana in the UK will be 14.5 years away; for the US states that legalised medicinal use in more recent years, the number of years to full legalisation is significantly less compared to those states who have been fighting for full legalisation since the 90’s. So, whilst legalisation of recreational marijuana in the UK may be a few years away, it’s a ripe opportunity to learn from, and be inspired by the most innovative companies and start-ups blazing their way through the industry…