With Trump on His Way out, and Biden Coming in, the 2021 U. Cannabis Market Is Looking Good, a New Report Predicts

The news remains dismal on many fronts: the raging pandemic, America’s deep political divisions and the continuing fallout from the violence at the Capitol fomented both by Donald Trump’s presidency and potential impeachment conviction.
Joan Oleck
Written by Joan Oleck, Cannabis Journalist
Last Updated
Election

But despite these issues, a new administration is setting up shop and the new Democratic control of both houses of Congress, 2021 certainly promise a banner year for legal cannabis, according to a new report from New Frontier Data. Some highlights:

  • Growth of the industry: The legal market in 2019 was worth an estimated $13.2 billion. And with sales growth projected to be in the neighborhood of 21 percent annually, the prediction for 2025 is projected to exceed $41.5 billion.
  • Opportunities afforded by the pandemic: 2020 saw developments such as the World Health Organization’s recommendation in favor of cannabis’s medical use and research; expansion of U.S. access to the plant; and removal of cannabis and resin from the 1961 Single Convention on Narcotic Drugs.
  • Illegal markets being eroded by legalization: The conservative states of North Carolina, Georgia and Texas are the three largest unregulated state markets, estimated to host a combined $8.3 billion in illicit cannabis sales. That situation may change: Given the five states that legalized recreational cannabis in 2020 and others (e.g., New York) expected to follow suit, “illegal” states are feeling pressure to legalize.

“If a key objective of legalization is to disrupt illicit markets,” the report says, “that end is being achieved in those states where cannabis is legal.”

The research study, titled Cannabis in America in 2021 & Beyond (where the term “cannabis” applies exclusively to high-THC products, i.e., marijuana), makes other important points. In her introduction, New Frontier Data founder and CEO Giadha DeCarcer writes that, “Both in the United States and across the quickly evolving North America cannabis markets overall, 2020 marked an inflection point in the maturation of the industry as a whole, embraced and encouraged by cannabis consumers’ behavior, demand and continually increasing appetites in general.”

In simpler terms, people being stuck inside their homes during a global pandemic has been good for the cannabis business.

The Numbers Behind Cannabis’s Positive Outlook

New Frontier Data’s report drew on data collected over 12 years from sources ranging from government agencies to retail sources. A March 2020 survey of 4,074 adults also contributed data.

Breaking down that $20.1 billion annual sales figure that legal cannabis is expected to reach by 2025, the report says that legal adult-use sales are predicted to grow 22.7 percent annually, and legal medical sales, 18.7 percent.

These are U.S. numbers of course. In fact, the New Frontier data report says, “The U.S. will be the most consequential cannabis market for the next four years. Among the trends cited:

The Biden White House’s openness to reform: Joe Biden will be the first president supporting federal cannabis policy reform. Biden supports descheduling, if not full legalization – which his vice president, Kamala Harris does support, chiefly due to the issue of discrimination against minority men who have been locked up, sometimes for decades, for minor cannabis offenses. At a minimum, the report says, the new administration will continue the policy of minimal intervention in regulated state markets.

Scalable innovation: Barriers to multi-state expansion have turned legal states into “the world’s hotbed” for product innovation, the report says. Also contributing is the capital markets’ focus on new products, with the expectation of growing multi-state operators.

Replicable innovation: New states legalizing at this point have multiple legal cannabis markets to borrow from as they set up their own operational models.

Federal change as regards recreational legalization may come slowly but the states are moving ahead. The report names New Jersey as likely to “incite a race to legalize cannabis in eastern states.” Already, it points out, Virginia Governor Ralph Northam has come out in support of legalization. On January 6, New York Governor Andrew Cuomo proposed his state’s move toward legalization as part of his State of the State address.

Marijuana has hit roadblocks but medical cannabis has proved its potential to pass in western and southern states. Medical legalization easily passed in South Dakota and Mississippi in the November election. So, says the report, Alabama, Idaho, Kentucky, Nebraska and Texas look like safe bets.

The Upbeat Outlook for Infused Products and Novel Cannabinoids

Non-combustible product categories – edibles, beverages and topicals – are “posed for strong growth” in 2021, the report says. Reasons include their rapid onset; bioavailability (the efficiency with which cannabinoids are absorbed into the body; and innovations in food science.

Efforts to market minor cannabinoids, meanwhile, promise a lucrative result, the report says, but also potential “peril,” i.e., harmful effects, due to the lack of regulation.

The Pandemic’s Impacts on the Industry

“One unanticipated effect of the Covid-19 pandemic has been the growth acceleration of legal cannabis markets in those states which have activated both medical and adult-use sales,” the report says. Other effects:

High-performing pre-pandemic medical markets like Florida and Oklahoma continued at that level despite the pandemic’s disruptions and sheltering-in -place requirement.

Increased consumption by consumers with children under age 18: From early in 2020 to late in the year, 18 percent of consumers surveyed said they’d increased “a lot” and 25 percent “a little.” Cannabis use, however, also saw the desocialization of consumption due to fears about Covid.

Changes in product forms: These included:

  • Flower increased in use during the first six months of the pandemic.
  • Vapes dropped in summer 2019 due to the reports of lung injury from e-cigarette vaping products had fully recovered by early 2020 only to fall again by fully one quarter of their market because the pandemic brought renewed concerns about lung damage.
  • More than half, 52 percent, of current cannabis consumers reported using cannabis to improve their mental health during the pandemic.

Some of the Report’s More Interesting Takeaways

Tax considerations: legal markets are competing against well-entrenched and illicit markets, so they need to carefully consider their tax rates for cannabis because those rates could impact how quickly consumers transition from the illicit market to the legal one.

Future public consumption of cannabis: Social-use spaces are poised to draw a broad base of cannabis consumers into the open as the setting for consumption evolves. The report calls the “advent of public cannabis spaces” a key influence in the public emergence of legal cannabis consumers.

New venues : The Original Cannabis Café in West Hollywood, along with plans for the Coachill Inn Resort, are some of the latest examples of companies going beyond the cannabis product itself to curate consumers’ entire experiences.

Cannabis stocks are poised for a comeback: This follows acute turbulence in 2019. At the same time, the industry has raised large sums for investment throughout the past five years. “Over $34 billion of tracked investment deals have been struck since 2015, with infused products and extracts becoming strong focuses for investment due to high growth in popularity and revenue share in legal markets where concentrates and extracts are approved product forms,” the report states.

 

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Joan Oleck
Joan Oleck
Cannabis Journalist
Joan Oleck is a freelance writer currently specializing in the cannabis industry and cannabis tech. She has been an editor and reporter on staff for such publications as Forbes.com, Business Week, Newsday and The Detroit News. She won the Jesse Neal Award for best feature series in a trade publication, Restaurant Business, and a GLAAD Award for a Salon story about discrimination in adoption against single and gay parents

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