Global Ganja Report

California's ArcView Market Research and its affiliated BDS Analytics have released a "2019 Update" to the 6th edition of their report on The State of Legal Marijuana Markets, which was published back in June. The Update takes stock of events in the second half of the year, and anticipates that worldwide spending on legal cannabis will grow 39.1% to $17 billion in 2019.

As is often the case with such reports, it provides a useful sweeping overview, but fudges some critical details.

Recreational surpasses medical
The general subtext here is dangling the hope of mega-profits as an inducement to further liberalization. The report's chief editor Tom Adams writes in his introduction: "Legal cannabis continued its winning streak at the ballot box in 2018, but the industry is  finding such victories can sometimes be hollow, or at least an opportunity to learn patience." Even with legal space opening for cannabis in several states and countries, too often "legal cannabis launches have faced expensive regulatory regimes, such as that in California that handicapped the legal business with a 77% price disadvantage against a robust illicit market."

Of the four states that voted to go legalize in November 2016, "Maine remains medical-only, Massachusetts took until November 2018, to get stores open, and California is on track to be the first state to actually shrink legal spending (from $3 billion to $2.5 billion) in its first year of adult-use legality. Only Nevada put reasonable regulations in place quickly, opened stores apace in July 2017, and is now seeing a shrinking illicit market..."

Of total worldwide spending on legal cannabis this year, the two biggest single markets by far will be Canada and California, the report predicts. Each has a population of about 40 million. "Although their combined share of the worldwide market dropped from 49.1% in 2014 to 29.9% in 2018, it is forecast that Canada and California's combined share will rebound to 36.3% by 2022." Both are now permitting legal sales to all adults, while in other major world population centers, legal cannabis is likely to remain medical-only through 2022.

Nonetheless, progress is accelerating in the rest of the world too. Among the advances in the second half of 2018, the November elections saw voters in three states approve major cannabis initiatives: Michigan legalized adult-use cannabis, while Missouri and Utah legalized medical marijuana. Additionally, in June, voters in Oklahoma legalized medical use. Only North Dakota voted no on cannabis in 2018, rejecting an adult-use initiative and remaining a medical-only state for now.

And the industry is starting to globalize .Tilray of British Columbia saw the first US initial public offering of a Canadian cannabis company in June. That move was made possible by the fact that US exchanges are open to foreign companies so long as they are not violating the law of either the US or their home country. Canada's licensed producers are now held to meet this criteria.

The global picture
Zooming out for a bigger picture, the report notes the Mexican Supreme Court decision in October mandating legal personal use of cannabis (although the law has not yet been brought into conformity with the ruling), and the July edict by the UK Home Office to allow medical marijuana.

This section, however, contains a howler. The report states: "South Korea became the  first Southeast Asian country to legalize cannabis for medical purposes." This claim—highlighted in big bold type as a pull-quote—is inaccurate on two separate counts. First, Korea is not in Southeast Asia (consult an atlas, fellas). And secondly, the medical marijuana initiative unveiled by the South Korean government in July certainly does not "legalize cannabis" for any purposes—only cannabinoid-based pharmaceutical products. Bizarrely, the text of the report actually states this elsewhere.

After the South Korea flub, the report states that "Thailand followed suit shortly afterward." It is Thailand which actually did pass a law legalizing medical use of herbaceous cannabis in December. (And it is also Thailand that is actually in Southeast Asia.)

Also noted is the South African high court's September ruling that essentially decriminalizes nationwide, and various advances in such unlikely places as Lithuania, which passed a medical marijuana law in October.

Three breakthroughs 
The report notes three "most significant events" of 2018: legalization taking effect in Canada in October, FDA approval of cannabinoid-based drug Epidiolex in September, and the legalization of hemp in the US by passage of the Farm Bill in December. With Canadian legalization, the report notes, "adult sales surpass[ed] medical for the first time." (Somewhat problematic terminology, as medical use by adults is also adult use. The term "recreational," although eschewed by some, might be clearer here.) "The doubling of Canada's market from a medical-only 2017  figure of $569 million to an estimated $1.2 billion in 2018 helped make the adult-use component of worldwide legal cannabis spending larger than the medical market for the first time ($6.5 billion versus $5.7 billion)."

The report finds that "Canada did one major thing differently than California that largely explains why its market grew in 2018 while California’s shrank: Provinces, unlike cities and counties in California, were not allowed to ban legal cannabis." But the provinces are allowed to regulate, and cumbersome regs are blamed for bottlenecking growth of the Canadian industry.

The semantic dilemma 
In critiquing the US Farm Bill, which legalizes hemp and cannabinoids derived from it but not "marijuana" (that is, varieties with a psychoactive effect), the report states refreshingly: "The distinction in the law between 'cannabis' and 'hemp' is artificial: the hemp now cleared for cultivation in the US is the same cannabis sativa plant that produces what is sold as 'cannabis', some strains of which are more than 25% psychoactive THC. The new farm bill simply enshrines in US law that hemp is now defined as having no more than 0.3% THC."

That 0.3% standard was actually first imposed in the 2014 Farm Bill, which allowed for cultivation of hemp for research but not commercial purposes. And it should be noted that the text of the new Farm Bill actually does make reference to "cannabis." But the stigma that still attaches to psychoactive cannabis has created a degree of semantic confusion. "Cannabis" has to an extent become a euphemism for psychoactive cannabis—that is, for "marijuana," a word now increasingly eschewed by the industry for its supposed negative associations. But clarity is being lost through disuse of the word, as both "hemp" and "marijuana" are cannabis. Some previous ArcView reports have eschewed the word "marijuana" altogether. Happily, this one does not.

Despite decrying confused and overly zealous regulation, the report strikes an overall optimistic tone. Adams writes that "there's every reason to remain bullish about the future of the legal cannabis business. The science, product development and consumer marketing of a consumable that humans have enjoyed for at least 8,000 years is just beginning. There's enormous potential in all of that."

Cross-post to Freedom Leaf

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