North America is one of the most progressive regions in the world when it comes to legalising marijuana for both medicinal and recreational use. Starting with the legalisation of medical cannabis in California in 1996, many US states followed. Canada legalised cannabis for medicinal and recreational use in late 2018. The policy environment in this region, coupled with growing public support for legalising marijuana, has set the foundations for North America to be the largest market in the world now and into the future. This article provides an overview of North America’s legal marijuana industry, where it fits within the global market, and key threats and opportunities that companies in the sector should address. Given the market share of the USA and Canada in this region, this article will primarily focus on the cannabis industry in these countries.
Marijuana is thought to have been brought to North America by the Spanish in the late 1500s. Medicinal use of the substance dates back to this time, with reports that it was used to treat inflammation, malaria, gout, depression, nausea, and as an anaesthetic. Fast forward to the early 1930s, and marijuana was prohibited until it was slowly legalised throughout the region from the late 1990s. Throughout the 19th century, “cannabis” was used to refer to the plant. However, in the early 20th century, the term “marijuana” became common as its negative connotations with drug use in Mexico amid rising racial tension helped garner support to prohibit the plant.
In the USA, the Marijuana Tax Act 1937 imposed impossibly high taxes that resulted in pharmacies removing cannabis from their shelves in 1941. And as part of the “War on Drugs”, started by President Richard Nixon, the Controlled Substances Act 1970 effectively repealed the Marijuana Tax Act 1937. From then, cannabis was classified as a Schedule 1 drug in the USA, putting it in the same category as heroin, LSD, cocaine and ecstasy. While the medicinal and recreational use of cannabis remains prohibited federally, it became legal for medicinal use in California through the Compassionate Use Act 1996. Following this, Washington, Oregon, Alaska, Maine, and Washington D.C. legalised marijuana for medicinal use. In the early 2000s, Nevada, Montana, Rhode Island, Hawaii, Vermont, and New Mexico also passed laws to legalise medicinal cannabis. There are now 39 states plus Washington D.C. where medicinal cannabis use is legal, and 19 states where recreational use is legal too.
The first states in the USA to legalise marijuana for recreational use were Washington State, Colorado and Vermont in 2012. With 64 per cent of Americans supporting the legalisation of marijuana, federal legislative changes governing how the substance is cultivated, sold and used could be on the horizon. The Marijuana Opportunity and Reinvestment Expungmeent Act (The MORE Act) was introduced to the House in 2021 and passed on 4 January 2022. The MORE Act seeks to decriminalise marijuana by removing it from the list of controlled substances under the Controlled Substances Act while providing a federal framework for taxing retail sales of cannabis. The tax proceeds would be directed to the Opportunity Trust Fund. The Fund will invest in a Community Reinvestment Grant Program, supporting substance misuse treatment programs, and the equitable licensing grant program. The MORE Act has been before the Senate since 4 April 2022, where it was referred to the Committee on Finance.
Following the USA, Canada is the second largest cannabis market in the world, valued at USD4 billion in 2022. This figure is expected to grow to USD7.6 billion by 2026. Alberta currently has the highest number of cannabis stores, with 578 locations, while Prince Edward Island has the fewest. Based on the current regulatory environment and market dynamics across North America, the future of the industry in the region presents many growth opportunities.
North America is the largest legal marijuana market in the world, accounting for 96.8 per cent of worldwide legal cannabis sales in 2020 alone. In 2021, the region’s market was worth USD10.6 billion, and it’s expected to be worth USD42.3 billion by 2030, based on a 15.7% CAGR from 2021. The widespread legalisation of marijuana for medicinal and recreational use across the USA and Canada has driven growth in this market while decreasing the unlicensed illicit market. For example, recent research has found that the number of people who reported buying from an unlicensed source in Canada went from 56 per cent in 2018 to 17 per cent in 2021.
While cannabis was used in its pure form from the 1500s to the 1900s, companies have innovated in recent decades to produce various products, from gummies to tinctures. The USA and Canada have some of the widest ranges of cannabidiol (CBD) and tetrahydrocannabinol (THC) products in the world. Further, THC was used to create the drug Marinol, which treats nausea and vomiting associated with cancer treatment. And like other countries, the CBD-based drug, Epidiolex, was the first CBD-based drug approved by the Federal Drugs Administration in the USA to treat epilepsy. Epidiolex was approved in 2018.
Accessing legal cannabis for medicinal and recreational use is easier in the USA (in states where it’s legalised) and Canada than in other markets, such as the UK and Australia, where a prescription is required, and the range of medicinal cannabis products is limited. To access legal cannabis for recreational use in the US states where it is legalised, a person needs a valid state-issued card. Once a card is issued, a person can purchase from a licensed retailer. Similarly, for medicinal use, a patient needs a valid state-issued card to access medicinal cannabis products from a dispensary.
In Canada, retailers and individuals have to abide by the laws set by each province. An individual will need to provide proof of age to a legal retailer to access legal cannabis. There are now over 3,000 legal retailers across the country, and edibles are a significant market with an estimated CAD1.6 billion in sales annually.
The ease at which people can buy cannabis for both medicinal and recreational use in the parts of North America where it is legal demonstrates that there are myriad opportunities for legal retailers, researchers and other associated services (such as legal and financial) to benefit from the progressive nature of the industry in the region. Further, North America’s global market dominance provides a large total addressable market and the resources to access and conduct research and development opportunities that may be faster to market than those in less developed markets. Despite the progression in North America’s legal cannabis sector, there are still challenges to overcome, particularly when it comes to funding.
In other regions worldwide, such as Europe, the UK, and APAC, further legalisation of cannabis is expected to drive growth in the sector. While legalising cannabis for medicinal and cannabis use in further parts of the USA will drive some of the future growth in the market, capitalising on the existing market in this region presents a range of opportunities. For example, in Canada, where a range of cannabis products are available through legal retailers, those who already use cannabis legally could be open to multiple formats of CBD and THC products. The most popular legal cannabis forms are:
Based on these numbers, the formats with the highest growth in interest over the next year are expected to be pre-rolls (10 per cent increase), CBD products (10 per cent increase), capsules (7 per cent increase), and beverages (12 per cent increase). Further, 70 per cent of legal cannabis consumers in Canada used products recently to assist with relaxation or sleep, with over half (59 per cent) using the products to relieve stress and anxiety. Companies that develop products for these uses while helping consumers overcome some of the barriers to access (price, quality and convenience) in legal channels could tap into an engaged market that is already well-versed in the benefits of cannabis in its many forms.
Growth opportunities in the USA are similar to those in Canada, where the population currently using legal cannabis for medicinal and recreational use understands the benefits of the plant. Further, in the USA, a push for an equitable cannabis industry that seeks to use tax revenue raised from sales to reinvest in communities and make cannabis more accessible for minority groups is a major focus of the public and private sectors. The industry in the USA currently supports 321,000 full-time jobs. This number could grow with developments such as The MORE Act and its broader policy objectives. According to companies within the industry, these broader objectives should include implementing “social equity strategies” to create economic and employment opportunities for minority groups. It should also include progression, such as mandating the expungement of cannabis records to truly overturn the prohibition of cannabis in the USA.
Despite the relatively progressive policy environment in North America’s cannabis industry, funding remains a challenge. This is due to the conservative nature of traditional funding channels and the fact that cannabis is still a Schedule 1 drug federally in the USA. Throughout 2018 and 2019, Canadian cannabis companies raised more capital than those in the USA, but this trend shifted in 2020. Cannabis companies in the USA raised USD 5.6 billion up to September 2021 compared to USD3.1 billion for Canadian companies. North American companies that can overcome funding hurdles and capitalise on the demands of cannabis consumers in the region stand to have a competitive edge as the established market in the region continues to grow.
The global legal marijuana market was valued at USD13.2 billion in 2021, with an expected CAGR of 25.5 per cent from 2022 to 2030. By 2030, the global market is expected to be worth USD65.8 billion. With North America’s marijuana market expected to be worth USD42.3 billion in 2030, this equates to 64 per cent of the global market. To that end, North America is likely to remain the largest market in the world for the foreseeable future.
The global medicinal cannabis market is expected to be worth USD62.6 billion by 2024, equating to 4 per cent of the worldwide pharmaceutical market. At this time, it's expected that North America will continue to dominate both the medicinal and recreational cannabis markets. To date, regulatory change has predominantly occurred across Europe, North America, South America, and the Asia Pacific. The map below outlines current medicinal cannabis legality globally, noting that medicinal cannabis remains illicit federally in the USA.
North America’s legal cannabis market demonstrates how a methodical approach to legalising the plant for medicinal and recreational use can deliver economic and social benefits. Not only are access pathways in the region easier for individuals, but the competition in the region makes cannabis relatively affordable too. Key developments, such as the potential passing of The MORE Act in the USA, could pave the way for the next stage of growth in North America’s market. This next stage of growth aims to create a more equitable market and invest the tax revenue generated from cannabis sales to continue driving the industry forward while decreasing persistent stigmas around cannabis use.
Companies and researchers alike in North America can capitalise on the next phase of growth in the cannabis market by ensuring they address the needs of consumers who already understand the benefits of cannabis rather than trying to convince people who may not be interested in or are against medicinal or recreational use. Further, as the industry continues to develop in this region, there will be opportunities for associated companies to provide legal, financial and research services to help individual companies sell their products or those organisations focused on delivering broader policy objectives, such as community reinvestment. The diversity of opportunity and maturity in the North American legal cannabis market will drive growth in the coming years. It also provides an example that other regions should look to as their markets develop.
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