Global cannabis sales for 2022 will reach just over $35 billion, and will almost double that in the next few years – and with newly legal states coming online, continued growth in the big states, more products, and more marketing of those products, it’s not hard to believe.
A report from BDSA provides a deep look at where the industry is heading, but there’s a lot more behind the numbers to know for cannabis businesses and firms that serve those businesses. The report outlines key takeaways, market forecasts and consumer insights.
Micha Tapman, BDSA’s new chief, talked with us for our latest podcast about the report, and what it means for ancillary businesses like the insurance industry.
Following are takeaways from that conversation.
Tapman attributed the growth pushing global sales to the $35 billion figure to big markets and emerging ones.
“So, the big drivers for growth are, of course, states like California, which continue to see increases year over year and represent the largest share of the market, but also the emergence of new markets,” Tapman said. “For example, Michigan has really emerged as a top-performing market, as they legalized recreational sales. We also anticipate seeing sales in New Jersey, which hopefully, will be starting relatively soon.”
BDSA in its report expects some of those same dynamics – big states and states becoming legal for adult-use of medicinal-use sales – will push global sales past $61 billion in 2026, a compound annual growth rate of 16%.
A bigger, even more important, dynamic may be in play. Not just more consumers, but greater consumer interest.
“So BDSA has been doing consumer research for about four years. And so we have this longitudinal trending analysis of why people are consuming and how many people as a percentage of the population are consuming,” Tapman said. “What we’ve seen is there is a great penetration within a market for new consumers. Meaning, let’s say, Colorado, comes online initially about a third of the population of adults 21-plus are consuming cannabis products. Now we’re north of 50%. And so that is a really exciting dynamic to understand within the market.”
Therein lies an important takeaway for ancillary businesses like insurance. Growth, even within more mature markets, continues accelerating. A trend that will naturally grow the need for more goods and services to be provided to emerging and growing cannabis operators, and one that will change the needs – and risk profiles – of these businesses rapidly.
“I think if we’re looking at, for example, a financial support provider, like an insurer, one of the big things to be thinking about is that the market as a whole is growing,” he said. “So, even in states like Colorado, which is one of the longest-tenured states…there is still quite a bit of growth happening. So as an insurer, one of the things to watch for is essentially an understanding of ‘Is the person underinsured,’ right? ‘Is the growth of their company and what’s going on in, let’s say their inventory management, is the insurance level correct?’ And that’s likely to change very, very quickly, meaning within months, that they’re increasing.”
Skeptics might see a bubble emerging from all of this rapid expansion. The bubble question wasn’t tackled in the report, but it was put to Tapman.
Even based on stocks, which are not a good measure of the industry’s growth potential – especially cannabis stocks, which are largely traded under complex regulatory framework in Canada – Tapman believes the industry is “undervalued.”
So, will we ever see a bubble in cannabis sales at some point on the horizon?
“It’s a pretty far horizon,” he responded.
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