From ‘the Demon Weed’ to an American Consumer Tradition

From ‘the Demon Weed’ to an American Consumer Tradition
From ‘the Demon Weed’ to an American Consumer Tradition

As “American as apple pie.” As American as the 4th of July. As American as cannabis?

Ask any reader which of these statements does not belong with the others and no one would break a sweat. It’s the third one.

But how long until that statement no longer looks out of place? It’s not as preposterous as it sounds.

Cannabis is going mainstream in the United States.

It can be seen in terms of the explosive growth of the cannabis industry. It can be seen at the political/regulatory level through not only the increasing speed of cannabis legalization but an end in sight to cannabis Prohibition at the federal level. And it can be seen by the rapid and dramatic shifts in pro-cannabis attitudes by Americans as both consumers and voters.

How cannabis spending is becoming a consumer tradition

Nothing is more “American” than fireworks for 4th of July celebrations. U.S. consumers spend approximately $1 billion per year on 4th of July fireworks.




This year, Americans also spent $400 million on legal cannabis as part of their 4th of July spending. This is despite the fact that only ¼ of U.S. consumers live in cannabis-legal states.

Obviously, these numbers will go way up as the legalization wave continues to spread. Not only will 4th of July spending on cannabis soon exceed spending on fireworks.

Spending on cannabis will eventually exceed total spending on alcohol as well – becoming the #1 expenditure by Americans as they celebrate the ultimate U.S. tradition.

However, it’s not just on the 4th of July that cannabis consumption has a growing place as a holiday tradition among American consumers. A recent comment on Reddit’s “Weedstocks” forum illustrates this.
 
The last time I got drunk with my family (Christmas) everyone got loud, old half ass sleights or grudges came out and in the morning we all felt like shit.

Had we passed around a vape pen or had an edible Christmas cake I probably would be going back again this year.

From the same article:
 
I quit drinking almost completely when I started smoking. And that was after drinking nearly daily for the last 5 years. 2-3 beers in the evening was replaced by a couple bowl rips. It's helped my life tremendously.

…and:
 
It helped my job performance in the mornings because there was never that 'slightly hungover' feeling. It helped my workouts- I've been in the gym for several years and really have plateaued (which is fine for me). I found 1-2 hits from a one hitter prior to my workout made my gym time not only more enjoyable, but I would be sore in the morning from a better work out.
 
I’m a pretty high strung and over-worked person, smoking helped calm me down tremendously. That led to better interactions out in the world and most noticeably improved my relationship with my gf.

I lost about 15-20lbs. I attribute this to no drinking right before bed.

Sex is better

Food is better

Why will cannabis become an American consumer tradition? Pick your reasons.

This tectonic shift in pro-cannabis attitudes extends to voting patterns as well. Support for full cannabis legalization among U.S. voters continues to hit new all-time highs.

The latest numbers show:
 
  • 4 out of 5 Democrats (80%) now support legalization
  • Only 37% of Republicans continue to oppose legalization

Overall, more than two-thirds of the population (68%) now support full cannabis legalization.

For once, the politicians seem to be paying attention. At both the state and federal level, cannabis legalization is now seen as a priority.

The end of Prohibition in sight

The end of U.S. cannabis Prohibition? Only a few years ago, that line would still have seemed like a joke or a misprint. No longer.

Now it is an imminent reality.

Congress is currently holding a hearing to discuss ending cannabis Prohibition. Not talking about “if” to end it, only how and when.

With a number of competing proposals currently tabled, it may take some time to narrow this down to a single initiative that can be put to a vote. But that vote is coming.

It’s coming (among other reasons) because there have been a string of other recent breakthroughs in normalizing cannabis commerce in the U.S.: liberalizing banking laws to help finance the industry, blocking enforcement of federal laws in cannabis-legal states, introducing a bill into Congress to allow state-to-state cannabis trade (among legal states), and (at the state level) passing a law to allow interstate cannabis exports.

Illinois recently became the 11th state to fully legalize cannabis. It has passed the nation’s most progressive cannabis normalization legislation.

New York’s state government received considerable criticism both from inside and outside the state for (once again) failing to fully legalize cannabis.

Once upon a time, a vote to legalize cannabis in the U.S. was considered to be a surprise. Now, in most jurisdictions, approval is expected and it’s a negative vote for legalization that is the surprise.

Then there is the industry perspective.

An exponential growth opportunity

The cannabis industry has already been identified as the fastest-growing industry in the U.S. Now it’s also been touted as the one of the fastest-growing job creators as well.

As cannabis becomes a mainstream consumer tradition, it is rapidly becoming a more important industry for the U.S. economy as well. This is where an emerging consumer tradition translates into investor profits.

In BDS Analytics’ latest Cannabis Insights (June 2019), it released some bullish numbers for the cannabis industry:
 
- Revenues from cannabis retailing are expected to rise from $9.8 billion to $30 billion by 2024, representing a CAGR of 20%

However, as The Seed Investor will explain, there are many reasons to regard this growth number as a very conservative projection.

Demographics:

As noted above, only ¼ of Americans currently live in cannabis-legal states (both legal medicinal and recreational markets). Full legalization is where the vast majority of revenue dollars lie for the cannabis industry.

This represents a potential quadrupling for the industry. However, even in fully legal states, on average the black market continues to take in the majority of revenue dollars. That means the potential for an additional doubling of revenue dollars from current levels.

This projects to cannabis industry revenues increasing by a factor of eight in the U.S., even if individual cannabis consumers don’t choose to increase their consumption. However, as an alcohol-substitute alone, there are $100’s of billions of additional cannabis revenue dollars on the table.



As an alcohol-substitute:

As The Seed Investor has reported previously, there is a strong desire among consumers to migrate away from alcohol use to cannabis because of the growing health issues associated with alcohol. In contrast, cannabis is non-toxic and non-addictive and presents no known serious long-term health issues.

Globally, alcohol is a $1 trillion per year industry.

If just 15% of that spending went to cannabis, that represents an additional $150 billion per year in cannabis revenues. In the fully-legal state of California, that would translate into an additional $4.2 billion per year (based on national U.S. consumption figures).

Those extra dollars are achievable in the near term. Over the long term, cannabis is a threat (if not a certainty) to claim most of this market share. But it will claim much more market share on its own merits.

For better health:

Cannabis is a safe, natural substance. Cannabinoids, the active ingredients, are produced naturally in the human body. They are passed to infants in mother’s milk to promote infant health.

Cannabis has already been used as a medicinal therapy in the treatment of literally thousands of medical conditions. Formal pharmaceutical research to produce dozens of cannabis-based licensed and approved drugs is already underway.

Cannabis has similar potential to keep us healthier as a food additive or a nutritional supplement. It’s equally useful as an additive for cosmetics and other topicals.

These are additional industries with multi-billion dollar potential in the U.S. Additional important markets where cannabis can (and will) also become a U.S. consumer tradition.

Cannabis is becoming a mainstream industry in the United States.

It’s becoming a consumer tradition among Americans.

And as these mega-trends translate into corporate profits, cannabis investments will become an increasingly important component of investor portfolios.
 

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