And according to cannabis industry research firm New Frontier Data, the total U.S. legal cannabis market was worth $13.2 billion at the end of 2019. It’s expected to grow at a compound annual growth rate (CAGR) of 21% to more than $41 billion by 2025. That means tripling in size within five years.
In the first few months of the COVID-19 pandemic, many analysts expected the cannabis industry to be devastated by lockdown orders — but the opposite has happened. Established legal markets like Colorado and Oregon saw 26% and 29% annual sales growth in 2020, respectively, according to a report by cannabis sales data provider BDSA.
Meanwhile, new markets expanded rapidly. Illinois, which sold its first bud of legal cannabis in January of 2020, saw its market top $1 billion in its first year of operation. Getting stoned has been one of the most popular ways to cope with quarantines across the country.
Of course, none of this demand growth has changed the fact that marijuana is still federally illegal in the U.S. Nor the fact that this ongoing federal prohibition effectively prohibits legal cannabis companies from accessing banking services, building interstate supply and distribution infrastructure, or listing on U.S. exchanges.
As a result of this legal dichotomy — permitted at the state level, prohibited at the federal level — America’s biggest publicly-traded cannabis companies are multi-state operators (MSOs). MSOs are holding companies that own several independent cannabis production or distribution firms in different legal states, and which are usually listed on over-the-counter (OTC) exchanges.
Several of these MSOs are likely to be the next buyout targets for the big Canadian firms. We’ll discuss why — and name the specific MSOs in focus — shortly.
For now, it’s worth mentioning that President Biden has pledged to reschedule cannabis, a move that could pave the way for the creation of true interstate cannabis companies and open the door to multinational acquisitions.
Even farther south, Mexico’s Congress passed a bill in March that would decriminalize cannabis for recreational, medical, and scientific uses. The bill is backed by President Andres Manuel Lopez Obrador — and could create the world’s second-largest legal market.
In summary, the U.S. and its southern neighbor have overtaken Canada to become the world’s most important cannabis markets — and Canadian firms will need to find a way to claim a share of them…
Canadian Firms Are About To Snatch Up American MSOs And Mexican Suppliers Like Hotcakes
That’s because Canada’s cannabis market isn’t just small — its growth is also rapidly slowing.
In April of 2020, the Canadian Imperial Bank of Commerce slashed its estimate of 2020 recreational cannabis sales from C$3.4 billion to C$2.5 billion, citing slow growth in key provincial markets.
Its 2021 projections are even bleaker, showing pronounced slowdowns in Quebec, British Columbia, and Alberta — Canada’s three most populous provinces after Ontario.