The growth of the legal marijuana industry has exploded in recent years; aided by the full legalization of weed in California at the beginning of 2018. Despite all the trials and tribulations, cannabis lovers in the United States are fortunate to be living here rather than the majority of nations in the world. Weed is now legal either medicinally or recreationally in 30+ states plus D.C.
In 2017, before recreational legalization in California, the U.S. accounted for 90% of the world’s legal cannabis market! One would expect a slight reduction in market share now that Canada has fully legalized the herb. For the record, our northern neighbor’s market share was just 6% in 2017.
With a Gallup Poll from October 2017 showing that 64% of Americans now support full legalization of medicinal marijuana, the wind is very much at the backs of the cannabis industry. However, the market has an unexpected challenger.
The Rise of CBD & Hemp
Hemp and marijuana both come from Cannabis sativa, one of the three main phenotypes of the marijuana plant. However, they are very different in many ways, including one crucial aspect which gives hemp a decided edge. As you know, marijuana contains THC, the psychoactive compound that helps you get high. In contrast, hemp contains less than 0.3% THC in general, but is filled with cannabidiol; a non-intoxicating compound purported to have a variety of health benefits.
As a result, CBD can be used by children. Crucially, CBD extracts are legal in almost every state, and new legislation could result in the complete legalization of hemp. The Hemp Farming Act was introduced by none other than Mitch McConnell, the Senate majority leader, which means it has significant bipartisan support – a rarity in the current political climate.
If and when the Hemp Farming Act passes, which looks extremely likely, hemp will be removed from the federal list of controlled substances which will ensure it can be grown and sold as an ‘agricultural’ product. This means consumers in states where marijuana is illegal can use CBD-rich hemp for medicinal purposes.
As a consequence, there is every chance that the hemp market could outstrip its marijuana cousin within just a few years. A report released by the Brightfield Group showed that CBD market sales were likely to reach $591 million in 2018. However, it is set to surge to $22 billion by 2022.
According to a report by BDS Analytics and ArcView Market Research in 2017, Canopy Growth became the first $5 billion cannabis company. The global market was worth approximately $9.5 billion and will reach $23.4 billion by 2022. Of course, we can’t assume that these reports will prove accurate; After all, they were created before the introduction of the Hemp Farming Act. It also doesn’t consider the possibility of marijuana being fully legalized in several states by that time.
Hemp Market Moves
Judging by the size and frequency of moves in the hemp market, the $22 billion estimate by 2022 could prove to be conservative. The CBD-infused soft drink market is arguably one of the most interesting potential sub-markets. According to Grand View Research, the global carbonated soft drinks market will be worth over $600 billion by 2025, with an emphasis on healthy, sugar-free beverages.
CROP Infrastructure recently announced plans to create a new line of cannabis-infused drinks called CANNADRINK. It is unclear if this beverage will contain THC, or whether it will be a drink only rich in CBD. Given the legal issues surrounding marijuana in many American states, we would assume it will be the latter.
The list of potential CBD-infused products likely to hit the market in the next few years is lengthy. Already, edibles, creams, chewing gum, and niche drinks are available. There are even a handful of breweries that specialize in CBD beer!
The vast potential of the hemp market has already resulted in significant moves by major corporations. The main drivers of growth, aside from imminent legalization of hemp, include the popularity of hemp CBD against pharmaceutical products, increased investment, the evolution of distribution channels, and a more diverse range of products.
Only a few years ago, the best way to get CBD was via tinctures which were sold online or in smoke shops. Today, there are dozens of CBD products. It seems as if natural food stores are struggling to fill their shelves quickly enough, and you can also find hemp products at gyms and massage spas. Once legalization is complete, major retailers such as Target, Walmart, 7-Eleven, and Whole Foods will begin selling hemp products.
Meanwhile, hemp sellers such as Elixinol already see the benefit of market growth. In the first half of 2018, the seller of industrial hemp products announced a profit of almost $15 million, an increase of 110% when compared to the first half of 2017. The firm has also engaged in a joint venture which sees the expansion of an industrial hemp production facility in Colorado from 8,700 square feet to 20,700 with plans for a further 20,000 square feet worth of expansion.
The cannabis market isn’t resting on its laurels either, however. Aphria Inc. and Emblem Cannabis Corp. have entered into a wholesale supply agreement. The former will supply the latter with an incredible 175.000 kilograms of premium quality marijuana over a five-year period beginning in May 2019. HEXO Corp. has announced its interest in the acquisition of a 2 million square-foot facility in Belleville, Ontario.
Final Thoughts on the Growth of the Hemp Market
In answer to the original question, we have to say “we’re not sure.” Initial projections place the hemp and cannabis markets almost neck and neck, with the latter probably enjoying a slender lead in 2022. However, there is no way of knowing what will happen in the next four years.
About the only certainties are that both markets will expand exponentially and that the Hemp Farming Act will pass, whereas cannabis will not be made federally legal within that time-frame. We also expect an increased range of products, better supply lines, and further research indicating the efficacy of hemp and cannabis for treating a variety of medical conditions.