High hopes for the US cannabis industry?
The United States’ cannabis industry saw explosive growth during the COVID-19 pandemic. In a one-year period, Americans purchased $18.3 billion in cannabis products — $7.6 billion more than the previous year.
While there are a number of pandemic-specific factors that contributed to this boom — for example, in a recent study 72% of respondents said that COVID was the top cause of stress in their lives, and 40% of these participants said they used cannabis to help cope — experts predict that these sales are indicative of long-term trends and sustained demand. So much so that the industry is forecasted to hit $100 billion in annual sales by 2030.
So what is the cause of the high hopes?
Once a taboo topic, the politics and perceptions of cannabis are rapidly changing. Since Colorado and Washington became the first states to legalize the recreational use of marijuana in 2012, the vast majority of states have followed suit in some form. Currently, 18 states and Washington, DC allow adult use of marijana and an additional 37 states have legalized medical marijuana — leaving only three states that have not changed their laws.
This summer, the US Senate introduced the Cannabis Administration and Opportunity Act to end the federal ban on marijuana, and allow pot to be regulated and taxed like alcohol and tobacco. States would still be allowed to determine their own laws around marijuana, but it would no longer be illegal under federal laws — paving the way for cannabis companies to use the banking system, apply for loans, and list on major stock exchanges.
Should the legislation pass, it would have widespread public support across the electorate. Surveys show that nearly 70% of Americans believe cannabis should be legal at the federal level. But the cannabis industry has also found strong allies in two influential, and maybe surprising, players: Charles Koch and Big Tobacco.
A staunch liberatarian, Koch believes that federal prohibitions on cannabis infringe on personal freedoms and contribute to America’s mass-incarceration issue. The billionaire has put nearly $25 million towards influencing criminal-justice reform and legalization by the end of 2021. This is in addition to the roughly $70 million he has spent in this arena over the last two years.
Along with his financial backing, Koch brings substantial rightwing political weight. This could help encourage lawmakers, candidates, and other public figures from the conservative side of the aisle to come out in support of legalization.
As the rate of adult smokers in the US continues to fall, Big Tobacco is pivoting from cigarettes to alternatives including e-cigarettes, tobacco-heating products, and now cannabis. While it is still unclear how the biggest tobacco companies will be getting involved in marijuana, some recent moves are giving investors an idea. For example, British American Tobacco Plc made a significant investment in a company that has strong patents in a technology that makes CBD water-soluble.
But one thing is almost certain: when Big Tobacco gets further involved with cannabis, it will be bringing its powerful lobbying machine with it. The question is whether they will need it, or will the majority of Americans and their elected leaders already support legalization?
In short: the smoke signals are indicating that today is a good day to be a cannabis investor, and tomorrow could be even better.
Danilo Diazgranados is an investor, collector, and lover of fine wines and a member of the prestigious Confrérie des Chevaliers du Tastevin, a fraternity of Burgundy wine enthusiasts.
