Increasing usage of Cannabis for Recreational Purposes is expected to be driving the growth of Cannabis

Posted by MarketsandMarkets on Jan 9, 2019 7:57:52 PM
MarketsandMarkets

Cannabis is a drug derived from cannabis sativa, cannabis indica, and hybrid strains. Although cannabis is composed of different cannabinoids, the two main cannabinoids that are considered to be the most active compounds are tetrahydrocannabinol (THC), the psychoactive compound, and cannabidiol (CBD), the non-psychoactive compound.

Nagesh Manepalli - Head of Research : Food, Beverage, Animal Nutrition & Agriculture, at MarketsandMarkets™, shares his Point of View as mentioned below:

Some of the recent developments in the cannabis market are:

  • On January 7, 2019, Brent Zettl, CEO of CanniMed Therapeutics Inc. (Canada), started a new business of Cannabis in Saskatoon, Canada to focus on the development of cannabis-based medicines for patients globally.
  • On January 7, 2019, the government of Ontario, Canada, rolled out lottery applications for 25 retail cannabis license stores in the province. The licenses are being divided regionally, with five going to the east, seven to the west, two to the north, six to the Greater Toronto Area, and five to Toronto.
  • Green Thumb Industries (GTI) (US), a national cannabis consumer packaged goods company entered into an agreement to acquire Advanced Grow Labs LLC (US), on January 7, 2019. Once the acquisition is completed, GTI will have 12 manufacturing units and licenses for 85 retail locations.
  • The first ever legal retail recreational shop was opened in Vancouver, Canada, on January 5, 2019. This would help the consumers to buy recreational cannabis with ease.

While the cannabis market remains a fairly new industry in terms of global trade and distribution, the commodity is expected to witness robust growth and adoption during the forecast period, owing to burgeoning legalization trends and the increasing number of medical applications. Furthermore, the growing usage of cannabis for recreational purposes is expected to impact the market positively during the forecast period. While manufacturers are looking forward to tapping into this fast-growing industry, the major hindering factors are the stringent and complex regulatory structures associated with the trade of the commodity. However, the industry remains a dynamic one, with technologies rapidly aiding the development of new drug delivery systems to further enhance product usage. Growth in the adoption of these novel drug delivery systems amongst consumers is further expected to promote market growth for cannabis globally.

According to a recent study by MarketsandMarkets™, the global cannabis market is projected to grow at a CAGR of 30.7% to reach USD 39.4 billion by 2023 from an estimated value of USD 10.3 billion in 2018.  North America is estimated to account for the largest market share in 2018.  The market in this region is primarily driven by growth in the US and Canadian markets. The market in this region is also driven by the increasing legalization of cannabis for both medical and recreational purposes all over North America, and the increasing awareness among consumers regarding the health benefits of cannabis. The market is further fueled by the presence of major cannabis giants such as Canopy Growth Corporation (Canada), Aurora Cannabis Inc. (Canada), and Medical Marijuana Inc. (US). These companies are continuously investing and collaborating for the development of new products to fulfill consumer demand.

What’s driving the growth of cannabis in the global market?

Some of the key drivers that are accelerating the demand for its adoption are highlighted below:

  • Increasing cannabis legalization is driving the growth of cannabis. For instance, as of November 2018, it is legal to smoke marijuana for medical usage in 33 states in the US, whereas nine states will still be requiring a doctor’s prescription to do so. The recreational use of cannabis is, in turn, legalized in ten of these states.
  • Growing medical application and the implementation of cannabis-derived compounds for treatment and therapy globally have resulted in the demand for cannabis. For instance, GW Pharmaceutical’s drug, Sativex, which contains both CBD and THC, is available as a treatment for multiple sclerosis-related spasticity, in Canada, Australia, and a majority of the European and South American regions. Furthermore, the infusion of CBD in edible products has also been developing as an emerging wellness trend in many countries. This is expected to  impact the market for cannabis positively. The chart below reflects the estimated value of cannabis used in medical and recreational purposes in 2018.

Medical and Recreational Cannabis Market

Complex regulatory systems for the production and sale of cannabis to restrain market growth

Companies offering cannabis and cannabis-infused products are required to comply with different regulatory guidelines globally. While countries across the globe practice different levels of legalization for different applications of cannabis, the strict regulatory norms pertaining to the production and sales of cannabis across different states in the same country could be tedious for the manufacturers and stakeholders to comply. For instance, for both Washington DC and Vermont, the possession of cannabis is permitted up to specified limits, but its trade for recreational purposes remains restricted. Similarly, Chile allows the possession of a certain amount of cannabis, with the cultivation of about six plants. However, public consumption and trade are still not allowed.

Key Developments in the Cannabis Market

  • Canopy Growth Corporation has been focusing on mergers & acquisitions and various agreements to expand its reach across different provinces of Canada as well as other countries such as Australia, Chile, Denmark, Lesotho, and Spain. The company is also strategizing to focus on upcoming products in the cannabis industry. For instance, in October 2018, the company acquired Eddu (Colorado) for the manufacturing of innovative products, such as cannabis-infused beverages. Moreover, Constellation Brands (US) has invested USD 4 billion in Canopy Growth Corporation to strengthen its position and establish widespread operations across 30 countries.
  • Aurora Cannabis Inc. acquired and partnered with many companies to build a strong presence in terms of geographical reach, technology, production, and product offering. It is the only company that has launched a mobile application for ordering medically prescribed cannabis that will help the patients to order in a more user-friendly way. Additionally, to target the emerging consumption of cannabis among adults, it has been associating with liquor manufacturers to resell their recreational cannabis products. In September 2018, Aurora Cannabis Inc. acquired Agropro UAB (Lithuania) and Borela UAB (Lithuania) to extract and produce CBD-based wellness products for the European market.

Research, product developments, and novel product delivery solutions to disrupt the cannabis market in the coming years

Robust growth in the global demand for cannabis has further propelled the need for better product delivery systems as well as sustainable product strains. This need has, in turn, led to a number of companies coming up with R&D, which extensively looks into several genetic improvement strategies for cannabis. For instance, Hydropothecary (Canada), partnered with Segra (Canada), in March 2018 to incorporate plant tissue propagation into cannabis plant production process to help increase the yield of healthy and better variant plants to serve the growing industry for medical and recreational cannabis. Additionally, an increase in the demand for industrial hemp has given rise to the need for hemp, which is consistently low in THC content. The development of new genetics has led to the development of varieties that have an improved herbicide tolerance, to allow for greater flexibility in crop rotations, which could get affected by residual herbicides. Such improvements in the genetic structure of cannabis have further been established to help improve the industrial potential for hemp.

Europe is projected to be the fastest-growing region in the cannabis market due to increasing legalization of medical cannabis in the region, coupled with the healthcare system present in several European countries; this system covers the health expenditure of most patients in these regions. Further, to meet the increasing domestic demand for medical cannabis products, these countries majorly depend on imports from Canada, Israel, and Australia. However, to increase the supply, the governments in these countries are increasingly granting import and cultivation licenses to other players.

Cannabis is the growing market that is expected to rise worldwide in the upcoming years. The growth of the market is attributed to the application of cannabis for treating various medical conditions such as multiple sclerosis, cancer, HIV, epilepsy, insomnia, and inflammatory bowel diseases. In addition to this, legalization of cannabis is also driving the market. For instance, after the legalization of cannabis for both recreational and medical purposes in developed countries, India, a developing country, has taken steps to legalize the cultivation of cannabis in Uttarakhand for the development of medicinal products. However, different regulations related to the production and sale of cannabis in different countries is an obstacle to the faster growth of the cannabis market.

Topics: Food and Beverage, cannabis

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