Cannabis Industry Growth Potential for 2021

By  //  February 19, 2021

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Canada has been on the lead in cannabis legalization and decriminalization. The United States is also toeing the line with many states now allowing cannabis sales for medicinal and recreational use.

These advances mean there is a huge potential for the cannabis industry in the cannabis industry.

But what does the post-pandemic era mean for the cannabis industry? With Cheap Weed readily available in the market, can weed stocks rise in 2021? Let’s look at a few scenarios that may play out in 2021 and how they may impact the cannabis industry.

Cannabis Growth Potential for 2021

1. Prospects for U.S and Canadian Markets

The cannabis industry is already a multi-billion-dollar industry, and as new markets open, its market value will only grow further. Canada should see a rise in its weed consumption after the 2018 legalization of recreational use. The Canadian cannabis market is expected to hit between $5 and $8 in 2021, far below the earlier projections.

You must be wondering why the market has not peaked since 2018. Well, the largest consumption comes from recreational use, and weed users were getting their weed from the black market even before the legalization.

As the government issues more licenses to retailers and opens more dispensaries for weed consumers, the black market is slowly fading off as consumers approach the legal market. These changes will impact the weed market in 2021, which will create growth.

In 2020, the US cannabis industry outperformed the Canadian market, yet cannabis is still federally illegal in the US, limiting its use and research. But as cannabis legalization continues across states, the process continues to mount pressure on the federal government, which is seen in the FDA response to decriminalize cannabis.

The pressure for cannabis reforms and federal legalization could push the cannabis industry into new markets. Even with the recent wave of legalizations, the US cannabis industry remains barely tapped. Market projections show that the US cannabis industry alone will reach $30 billion annually by 2025.

The Californian cannabis market alone is estimated at around $2.8B, which is far larger than the whole of the Canadian market, which stands at about US$2.5B. Given the US population’s size, increased legalization means there is considerable potential for growth in 2021 and beyond.

2. Positive Political Climate

The new U.S. administration could also mean good business for the cannabis industry. While the new President has not committed to legalizing cannabis, his commitment to decriminalize weed is a positive sign that his administration will be friendlier to weed than the past administration.

In December 2020, Congress passed the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act). The bill still needs to go through the Senate, and even if it does not pass, the bill is an indication that federal lawmakers are willing to pay attention to the call for cannabis legalization.

STATES Act (Strengthening the Tenth Amendment Through Entrusting States Act) is another legislation that indicates a favorable political climate for the cannabis industry. The Act protects cannabis industries and enables banks to work with cannabis companies that meet the legal requirements. This means weed companies could have access to financing from financial institutions, which has not been possible.

3. Market Stability

Cannabis stocks went through a turbulent market from 2017, only to emerge from a bearish market in late 2020. The bullish trend should continue through 2021. Companies also started going public again, and in late 2020 Hydrofarm did undergo a successful IPO. The Hydrofarm IPO signals the beginning of new entrants into the cannabis stock market. More companies are in the pipeline of listing in the CSE.

Mergers are also looking strong in 2021. 2018 saw many weed companies listing on the CSE, resulting in Mergers and Acquisitions. The pandemic, however, brought a halt to the market activities that the new laws had triggered. But now, things are looking bright again with cannabis sales increasing through the pandemic period.

With the pandemic, investment activities also came to a halt. But the weed industry has emerged from the pandemic unscathed. In the US alone, sales grew by about 40% in 2020. Such new inspire investors confidence and can be explained by the strong growth cannabis stocks witnessed to the year’s close.

Cannabis stocks now look mature and stable, which is likely to attract M&A activity in 2021. Investors that stood on the sidelines during the pandemic are now more likely to come back into the game to cement their dominance.

4. Growth Beyond North America

North America (the US and Canada) is the largest weed market and is a key predictor of the future of the cannabis industry. The Canadian and US production has also focused on home consumption, but now things are beginning to change with talks of up markets outside of North America.

Medicinal cannabis is now moving across borders, which shows even more prospects for the cannabis industry in 2021. Latin America made its first sales into Germany late in 2020, marking a new era.

As more countries legalize cannabis, the international market and trade are likely to grow. The Israeli cannabis market is growing considerably, and more countries are likely to legalize adult-use in 2021.

Conclusion

The cannabis industry has not grown as much as it was expected once Canada legalized recreational use. Regardless, the industry has shown resilience over the pandemic, and with increasing legalization, 2021 could mean good business for the industry.