Cannabis is going to disrupt more than just the medical industry…
The cannabis industry doesn’t need medical sales to be successful. Last month, I spoke to you about how much potential for sales growth legal marijuana has thanks to its ability to cut into the business of prescription drug makers.
And I stand by that analysis. I expect cannabis to make major waves among people suffering from a wide array of serious and costly ailments.
But the thing is even though cannabis has all of that potential, it doesn’t actually need it to survive.
And that’s because it has another entire dimension of potential markets that it can cash in on. I’m talking about the over-the-counter market.
And when I say “over-the-counter market,” I don’t just mean the market for over-the-counter medications (although those are included)…
I’m talking about literally every single thing you can use cannabis for that doesn’t require a medical prescription.
So to start off with those over-the-counter health-related uses, it’s worth pointing out that the global market for dietary supplements alone was projected at $123.28 billion in 2019, according to Grand View Research.
While cannabis is not exactly a dietary supplement, this figure illustrates an important point – that there is a huge market out there for general wellness products beyond clinically prescribed medicine.
To look at this angle through a more specific lens, consider that Market Data Forecast projects the global market for sleep aids to reach $91.53 billion by 2024. This is a market where cannabis products have the chance to make huge inroads.
That’s because, while the exact effects of different cannabinoids on sleep are not completely understood, the ability of cannabis to ease stress gives it some possible potential in treating stress-related sleeping problems.
But we can look even closer at non-prescription pain relievers as well. Market.us projects that the market for one single over-the-counter pain reliever, Ibuprofen, will be more than $8.71 billion by 2028.
And that’s without even taking into account the other options out there, such as acetaminophen, the active ingredient in Tylenol as well as a variety of other over-the-counter pain relievers and cold treatments. There’s also acetylsalicylic acid, most commonly sold under the name Aspirin.
It’s just a small look that helps to get across the extent of the market for over-the-counter pain relievers that cannabis stands to disrupt.
Cannabis has further applications in the world of skincare products. The oils of the cannabis plant can serve as effective skin moisturizers, and its chemicals can also reduce skin inflammation and produce a calming effect when applied topically.
Since Grand View Research claims that the global market for skincare products was as large as $134.8 billion as far back as 2018, this dimension of use cases for cannabis gives this one class of plants another massive potential market to spread into.
And then, of course, there is the recreational angle. True, recreational cannabis use has been heavily stigmatized but so has the entire industry and unfairly so. It’s really no different than alcohol. It can be used responsibly in moderation, and you shouldn’t drive when you’ve had some.
And the world market for alcoholic beverages is projected by Allied Market Research to reach an astounding $1.684 trillion by 2025.
Right now, the only real advantage that alcohol has is that it is already well established in society, but that advantage will only get weaker and weaker over time. I want to clarify that I’m talking about both social acceptability and price.
Statista claims, for example, that the average price for a pound of wholesale marijuana in Colorado has declined tremendously from 2015 to 2019. It fell from $2,007 to $781 across that time period.
This demonstrates the principle, true for most industries, that the longer it has been around, the more efficient and cost-effective it becomes. This leads to cheaper prices for the consumer.
If we take these numbers as an example for cannabis in general, it becomes apparent that, over time, the price of cannabis will become more and more competitive with alcohol.
At the same time, Pew Research claims that the percentage of U.S. adults who oppose marijuana legalization has fallen dramatically over time from a majority, 52%, in 2019 to a mere 32% in November of 2019. This means that, as of 2019, a supermajority of American adults support legalization.
Much like with price, the trends suggest that this advantage is only going to grow over time. Eventually, it’s going to create a situation where the choice to use alcohol or cannabis will functionally amount to a coin flip. This could even mean that cannabis would go on to claim half of the massive alcohol market.
The ongoing coronavirus outbreak is making the importance of this market segment even clearer. With so many people all over the world confined to their homes, the demand for recreational products of all kinds that can be enjoyed from the safety of indoors and during social distancing has increased.
Reports of this taking place have already started to appear, with USA Today reporting that Washington state saw a 33% increase in cannabis sales in the week leading up to March 15.
And whether the coronavirus crisis proves to be short-lived or long-lasting, if it achieves popularity as a remedy for quarantine boredom, that in and of itself could be a major milestone.
So, in general, and in these specific times, cannabis has enormous room to grow and disrupt markets for personal use just as much as prescription use.
In fact, I would go so far as to say that cannabis has the potential to become an extremely commonplace element of society. I say this based on all of the potential uses that it has. From a functional point of view, it is an amazingly useful and practical plant.
The only reason it hasn’t already assumed a role of greater prominence in society is due to the many decades of wrongheaded prohibition that are only just now coming to an end.
From here on out, I think that users and investors alike will be seeing green.
Advisory Board Member, National Institute for Cannabis Investors
Editor’s Note: Want to learn more from Michael? Head on over to Strategic Tech Investor today.
23 responses to “Here’s How Cannabis Will Disrupt over $1 Trillion in Markets”
April 03 2020