Although 2022 has quickly proven to be a choppy year for the cannabis sector, we believe the industry is positioned to record strong growth in the years ahead. According to analysts from Bank of America, the legal cannabis industry in the United States (US) increased by approx…
40% in 2021 and generated approx. $25 billion of sales.
The Wall Street Bank reported that global cannabis sales increased to $31 billion in 2021 and we are not surprised that the US accounted for roughly 80% of total cannabis sales. In the coming years, we expect the US to continue to account for the vast majority of cannabis sales and believe the trend could change once the European Union’s (EU) industry ramps up.
When it comes to the cannabis market in the EU, we are the most bullish on the opportunity in Germany and expect the recent change in leadership to be a catalyst for its cannabis industry. Once Germany passes legal recreational cannabis legislation, we expect other countries in the EU to follow its lead and believe our readers should be aware of this potential catalyst.
Today, we want to highlight 3 key themes that we expect to have a major impact on the cannabis industry in 2022. From the EU to the US, several cannabis markets are reaching an inflection point and we believe that our readers need to be aware of these key long-term growth drivers for the sector.
US Legalization is the Biggest Potential Catalyst for the Sector
We believe the biggest potential catalyst for the sector is the passing of pro-cannabis legislation in the US. Last year, the cannabis sector was under pressure after the SAFE Banking Act was not included in the National Defense Authorization Act (NDAA). We consider cannabis legislation reform to be a question of when, not if, and expect to see advancements in the US this year.
Another attractive aspect of the US cannabis industry is related to the opening of new medical and/or recreational markets. Later this year, we expect several states to legalize recreational cannabis and believe this will be a catalyst for the US market. According to a poll conducted by Gallup (November 2021), 68% of Americans support cannabis legalization and we are favorable on the increasing amount of support for the industry.
When cannabis legislation failed to advance in 2021, the sector came under heavy pressure and this is a trend to be aware of. Although leading US multi-state operators (MSOs) are reporting record amounts of quarterly revenue, companies continue to be under pressure and we believe there is a major disconnect with the market.
2022 is a Make or Break Year for Several Canadian Operators
US MSOs were not the only operators to be under pressure in 2021 and Canadian Licensed Producers (LPs) were some of the biggest underperformers of the year. So far this year, these operators have remained under pressure and COVID lockdowns have been impacting the growth of the sector.
Companies like Canopy Growth Corporation (TSX: WEED) (Nasdaq: CGC) and Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB) have been especially impacted by the pandemic and we will monitor how these operators are able to bounce back this year.
For many Canadian LPs, we expect 2022 to be a make or break year for the businesses. This year, we expect the Canadian cannabis market will be highlighted by two main themes, consolidation and bankruptcies. Last year, we saw an increase in the number of mergers and acquisitions (M&A) in Canada and expect this trend to be more significant this year.
Which International Markets Will Grow the Most in 2022?
From the EU to Latin America, legal cannabis is becoming a major theme in markets all over the world. We believe the international cannabis industry is in the early innings of a major growth cycle and are the most favorable on the long-term opportunity in Colombia, Germany, Israel, and Mexico.
Last year, Mexico almost legalized recreational cannabis, however, legislation that was supported by the President stalled in the Senate. We believe the cannabis opportunity in Mexico is…
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