The Future(s) of Cannabis


Prohibition in America lasted from January 1920 – December 1933 and had some interesting (read – unintended) consequences. Namely, the government lost out on tons of revenue. At the time, almost 75% of New York state’s revenue was derived from liquor taxes, and due to prohibition, that revenue was completely eliminated. Ultimately, the 18th Amendment cost the federal government $11 billion in lost tax revenue, and took $300 million to enforce. 

Since the ratification of the 21st Amendment, the alcohol industry is responsible for millions of jobs, indirectly responsible for the success of independent restaurants/bars, and generates roughly $250 billion in revenue every year. 

This is supposed to be about marijuana, right? Pot, reefer, Mary Jane, weed, that sticky-icky-icky! Indeed. But it’s worth pointing out some of the similarities between alcohol and cannabis; mainly, how much money we’re seeing there is to be made on the legalization of a formerly maligned product. 

Key Points:

  1. Legal U.S. cannabis sales is expected reach $42 billion by 2026
  2. Over half of adults surveyed believe that cannabis should be legalized 
  3. 13 U.S. States have already passed legislation making recreational marijuana legal
  4. 7,5000 dispensaries across the U.S., and growing 
  5. $5.3 billion dollars of venture capital has been invested in cannabis globally

If You Grow It, They Will Come

Legal cannabis sales in the U.S. are expected to reach $42 billion by 2026, and continue growing as laws and attitudes shift. So far, 36 states allow medical use of marijuana, 18 states have legalized cannabis for recreational use, and 13 have decriminalized it. Additionally, over half of Americans (68%) are in favor of the federal legalization of cannabis. We don’t think it will be long until the growth, sale, and use of cannabis will be legal across the entire U.S. There’s simply too much tax revenue, job creation, and opportunity in the industry. In fact, Illinois, one of the most recent states to legalize the sale of cannabis, is on track to create $1 billion in tax revenue this year. 

So where is all of this legal pot coming from? There’s certainly no shortage of new growers in the U.S., with Nevada boasting the most licences (roughly 6 thousand), followed by California (almost 4 thousand). Some of these cultivators are massive, with several million square feet of greenhouse space, warehouse space, outdoor farms, or some combination. 

An interesting grower to keep an eye on might be Green Hygienics (GRYN). While it doesn’t grow medical marijuana–instead focusing on industry grade hemp for the extraction of cannabinoids–it is making a mark as the most highly-certified supplier on the market. Especially in California, where regulations can be quite strict, companies like Green Hygienics that show willingness to do their own ESG reporting and seek out the highest levels of certifications (eg. becoming FDA Certified Organic), are those we think will do well in the long run. More investors are looking to put their money behind companies that care about the environment and social issues, and Green Hygienics is a good example of a company in an emerging market that puts those needs at the forefront, while also delivering quality products.

Willy Wonka, Bob Marley, and Jordan Belfort Walk Into a Dispensary…

The opportunities in cannabis  are certainly not limited to growers. Consumers are driving innovation and sales in ways that are creating new possibilities every day. Between CBD, THC, Delta-8, smoking, vaping, gummies, chocolates, teas, tinctures, and even topicals, there have never been so many ways to get high/feel good. There is even one company, Cannabis Global Inc (CBGL) that has made strides, delivering THC/CBD in beverage form. Its patents are now being turned toward researching ways to infuse other psychedelic compounds as well, making us think that successful innovations by cannabis companies will extend beyond the industry in exciting ways. 

Companies breaking out are proving to be just as diverse and varied as their offerings. Item 9 Labs (INLB) is one such cannabis company, offering consumer products through a few different brands, while also extending into other verticals. It makes sense; in order to provide the best quality products, it behooves a company to acquire a supplier/grower. One of the more unique arms of Item 9 is their logistics brand, Dispensary Permits, which has helped obtain permits for clients in 14 states. Working within the ever-changing legal framework is one of the biggest challenges facing hopeful cannabis companies, so creating an entire branch dedicated to navigating those changes is quite ingenious. 

While revenue being made in cannabis is “high” – see what we did there – there is plenty of money in the more sober CBD market. Can B Corp (CANB), a health and wellness company focusing on CBD and other non-psychoactive hemp molecules, is projecting a 450% increase in 2021 revenue over 2020 revenue based on its current sales volumes. This kind of growth is being driven by multiple factors, including continued research showing the efficacy of CBD in reducing inflammation and the widespread adoption of CBD as a health additive.

Better Living Through Technology

Technology is quickly accelerating the shape of the cannabis industry as a whole. The products themselves require cutting edge (often patented) scientific formulations, while growers are constantly innovating and refining their own techniques. One of the technologies cannabis has been able to piggy-back on is the same tech that companies like Uber and Lyft use to track rides. 

Even though there are over 7 thousand dispensaries in the U.S., if you don’t want to leave your house to enjoy a bit of flower, you don’t have to. Weed delivery company Eaze proves that in the era of Amazon Prime, people are willing to pony up for convenient pot. They aren’t the only ones. Sugarmade (SGMD), a cannabis company with activity in both supplying and distributing, has recently opened up three Nug Avenue locations in Los Angeles, California to act as delivery hubs for the booming weed delivery market. 

Sugarmade CEO Jimmy Chan expands on his strategy in a press release, “ By using these licenses (for Nug Avenue) to cover manufacturing, distribution and delivery, we hope to further develop our fully-vertical approach to the dynamic California cannabis delivery market. With this agreement, we gain the potential to manufacture and package our own cannabis products, distribute them to multiple Nug Avenue locations, and then deliver them right to the front door of our loyal customer base, driving both top-line and bottom-line growth potential as we expand our footprint in this rapidly growing space.”

The move appears to be securing a supply chain, producing your own product, and then owning the means of distribution. This model is one we’re seeing repeated by most of the companies in the cannabis space, and it makes a lot of sense. Due to regulations and customer demand for quality, why wouldn’t you attempt to control as much of the process as possible?

Rolling it All Up

Cannabis is an exciting industry to be a part of. There have already been billions of investment dollars pumped into the sector, and we see billions more coming in soon. In a market projected to be worth several billion in the U.S. alone, we remain bullish on the whole. When looking across the various companies striving to break out as leaders, the successes seem to have a few things in common: vertical integration, a unique product offering of some kind, and/or a focus on either CBD or THC. Technological innovation will continue to drive growth here, so be on the lookout for companies pushing for patents, certifications, and new methods. It is clear that the cannabis market will continue to grow, so the question isn’t are you going to invest, so much as who will you invest in.




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