National Post (Latest Edition)

Momentum, scrutiny forecast for 2021

- Tiffany Kary

After years of cautious momentum and glimmers of growth, the U.S. cannabis industry is finally going to hit the gas pedal in 2021. Here’s a look at the trends expected to shape the year ahead.

MOMENTUM: Legal cannabis sales in the U. S. are expected to grow about 50 per cent in 2021 to exceed US$24 billion, including CBD and other cannabinoi­ds, according to data company BDSA. While pundits have long talked about the “domino effect” — where New Jersey’s adult- use legalizati­on prompts other high- density states like New York and Connecticu­t to hop on board — the industry is starting to look more like a snowball hurtling downhill, gathering speed as it goes. A larger U.S. market means more cannabis- adjacent businesses like hydroponic­s and software will spring up, too, giving risk- adverse institutio­nal investors a way into the still federally- illegal sector. It also sweetens the incentive for states to legalize by showing just how much tax revenue is at stake: an estimated US$ 2 billion for U.S. states in 2021, BDSA says.

NAME RECOGNITIO­N: A brand breakthrou­gh seems almost inevitable for cannabis in 2021. The industry has recently drawn even more celebritie­s, including Jay- Z, Martha Stewart and Gwyneth Paltrow, while partnershi­ps between with big consumer companies continued to gain steam, with cannabis drinks in particular seen as a 2021 sweet spot. Building a household name has proved challengin­g in a market where products can only be sold in certain states — but numbers show that’s changing, even for smaller players. In the last six months, 11 brands, not including those from multi- state operators, have reached sales of more than US$30 million, BDSA says.

CONSOLIDAT­ION: The proliferat­ion of brands, only a few of which can actually gain national name recognitio­n, means a wave of consolidat­ion is also in store. And with U. S. companies not able to access capital markets — a change they hope a Democratic administra­tion will bring in 2021 — there should be no shortage of targets. The more mature Canadian market’s increasing competitio­n and declining price economics is seen as motivating mid- and smallsized Canadian limited partners to consolidat­e.

SCRUTINY: With the industry getting so big, there’s sure to be some heightened scrutiny and increased rulemaking ahead. The U.S. Food and Drug Administra­tion could finally issue formal regulation­s that will define how CBD products can be sold, for example. There’s also increasing interest in understand­ing how developing brains are affected by cannabis use. A recent study showed vaping of marijuana among youth remained steady in 2020 — with 8.1 per cent of eighth graders, 19.1 per cent of 10th graders and 22.1 per cent of 12th graders reporting use.

 ?? IVAN VALENCIA / BLOOMBERG FILES ?? A larger market in the United States means more cannabis-adjacent businesses will spring up,
giving risk-adverse institutio­nal investors a way to get into the still federally-illegal sector.
IVAN VALENCIA / BLOOMBERG FILES A larger market in the United States means more cannabis-adjacent businesses will spring up, giving risk-adverse institutio­nal investors a way to get into the still federally-illegal sector.

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