Cannabis in 2018: The Ups & Downs of Legalization

The worldwide legal cannabis industry saw massive changes in 2018, as detailed in the 2019 Update to “The State of Legal Marijuana Markets, 6th Edition” (SOLMM6), published January 15, 2019. We had in that original report forecast the market to hit $12.9 billion; but, in the final reckoning of the year, re-estimated spending to only reach $12.2 billion. Worldwide spending is now forecast to grow 39% to $17 billion in 2019, and to reach $31.6 billion in 2022 – an average compound annual growth rate (CAGR) of 26% from 2017-2022.

The 2018 shortfall was primarily driven by the transition from medical-only to adult-use cannabis in California, the world’s largest cannabis market. Adult-use sales began as scheduled on January 1, 2018 but the slow pace of licensing new dispensaries, and transitioning existing dispensaries, primarily in Los Angeles, along with issues surrounding new rules for testing of cannabis products resulted in estimated sales for the year of just $2.5 billion—far less than the nearly $3.4 billion originally forecast in SOLMM6.
Canada, too, launched its adult-use cannabis market in 2018, with sales nationwide beginning on October 17. That move made it the second country worldwide, after Uruguay, to fully legalize cannabis for all adults. Sales of adult-use cannabis are estimated to have reached nearly $380 million by the end of the year, alongside medical cannabis sales of nearly $800 million—with year-end registered patients climbing to an estimated 374 million.

Nevada completed its first year of adult-use cannabis sales at the end of June 2018. In the 12 months since sales began in July 2017, cannabis retailers generated more than $425 million in adult-use sales. This figure edged out first-year sales in Colorado ($310 million in 2014) and Washington ($212 million between July 2014 and June 2015), though lag behind the estimated $2.5 billion in 2018 adult-use sales in much-larger California. Tourism is a huge factor, with more than 60 million annual visits versus just three million residents, resulting in per-adult expenditures of about $190 during the first year of adult-use sales—more than twice that of $80 during Colorado’s first year (2014) and $74 in California (2018).
On November 6, 2018, voters in three states approved major cannabis initiatives: Michigan legalized adult-use cannabis, and Missouri and Utah legalized medical cannabis. Those new markets could see sales of more than $700 million and directly employ more than 10,400 workers by 2022. Additionally, in June 2018, voters in Oklahoma approved Question 788 (58%) – with the first dispensaries expected to launch operations before the end of the year. By December 24, the Oklahoma Medical Marijuana Authority had approved nearly 25,000 patient and 136 caregiver applications, and had licensed 1,284 cultivators, 336 processors and 799 dispensaries, even more stores than in similarly sized Oregon or much larger California markets. Sales amounted to an estimated $19 million in 2018 and are forecast to grow to $165 million in 2022.

Other key cannabis news included the launch of Massachusetts’ adult-use market in late November, the Home Office approval for medical cannabis prescriptions in the United Kingdom, and the legalization of medical cannabis in South Korea and Thailand in November and December, respectively. In all, the worldwide cannabis industry is looking extremely robust and the pieces are in place for a reacceleration of growth in 2019 and beyond. The cannabis boom isn’t slowing down anytime soon.