Global cannabis sales will increase to $57 billion, but depends on new markets

As Prohibition reverses an ugly grip on cannabis, the new market is thriving. BDSA is an analytics company that tracks the industry across a vast point-of-sale network. A recent report from the company suggests that global cannabis sales will reach $57 billion by 2026.

This author spoke to the founder and CEO, but also to Andy Seeger, who serves as one of the BDSA’s directors of analytics. Seeger provided an insight into the current era of the US cannabis market.

We are now in a price-based innovation wave 2.0. And that at both ends. We’re seeing crowds where whole ounces dominate the market in Colorado, despite a one ounce daily buy limit. All the way down to Illinois where they sell a .3G chillum for $12 – that’s $36 grams.

Whether it’s one-gram cartridges taking over vapes because the price has gotten so low — or sampling and testing in Illinois because the price has gotten so high — price realization is driving much of the innovation, accessibility, and trends right now ahead of the market.

Andy Seeger

Quality as global cannabis sales grow

BDSA expects Illinois to reach $2 billion in total revenue in 2022, up 14% year over year. Following her most recent report, this author discussed the growing market with BDSA Founder and CEO Roy Bingham. With a price reduction, however, quality can be partially retained through product diversification.

I think there is a difference between floral and vaporizer products – possibly. But certainly if you’re talking about edibles.

There is a lot of competition in the mature market. And in some situations there is an oversupply. So the price is a by-product of that, isn’t it, since the price has been falling in the mature markets over the last year.

Roy Binham

The product review is on the right lane

Brand reputation and consistency are critical for more processed consumer goods [CPG] markets such edibles and vapes, according to Bingham. In contrast, the quality of dried flowers is less complex to produce, but more multifaceted.

Well, I don’t know that when it comes to cannabis, there has to be a compromise between price and quality – maybe not. When you’re talking about relatively processed products like vaporizers and edibles, I’m not sure there’s a huge difference that needs to be noted. Except maybe a lack of innovation when prices are low. There is less incentive for companies to create the next new thing or technology.

But if you’re talking about bud, there’s a chance that cutting corners at different stages of growth could result in a lower-quality product.

Binham

On the consumer side, Seeger found that top products are becoming cheaper on the market.

Infused pre-rolls offer more value for money than regular pre-rolls, which are now comparable to very cheap flower everywhere else. We see that [infused pre-rolls] with additions of keif or wax.

We are seeing rosin being squeezed into edibles and cartridges at affordable prices, or higher order cannabinoids now being used in lower order formats. So the quality is there. But the price only affects the quality, and now consumers expect that.

seeger

Mapping the rollout from state to state

BDSA released their report this morning highlighting emerging market strengths contrasting flat mature states. Do you see advantages or disadvantages in slow federal adoption versus immediate federal legalization?

I think federal adoption has had some benefits in the past. Some companies have been able to establish a very solid base in their own state before facing the challenges of logistics and other challenges when attempting to expand very quickly over long distances.

We’re probably at the point where federal legislation would benefit consumers and probably many of the big and established companies the most. And of course, being able to grow and distribute cannabis products is not just an advantage. It is also a benefit of access to banking and financial services and other services not readily available to the industry due to federal legislation.

Binham

Lessons for emerging markets to strengthen global cannabis sales

The cannabis market is currently still being evaluated among accountants. And Bingham noticed a big problem with taxation. Instead, he warned nations preparing to legalize cannabis, like Germany and Mexico, of potential supply shortages.

Even going back far enough into the medical market, there was a supply problem in the beginning. And that can take anywhere from a few months to several years.

It is difficult to anticipate the level of demand and build a supply chain that is able to handle it and move around without taking outrageous risks and bets as a business. And I think the other thing we usually see is there’s a category of product format.

You’re basically selling your flower every time before you’re actually far enough down the tube to start making these alternative products.

Binham

compensate for oversupply

The BDSA report discusses the Oregon and Washington moratorium to slow the oversupply problem. Bingham called their oversupply another problem that surfaced six or seven years later.

And of course it has a lot to do with the legal status of the market and the extent of the illegal market. And also what happened to the prices – so you can end up in a situation of massive oversupply.

Binham

Advantages and disadvantages of a federal law

National legalization would change the course of the entire market. While it could take at least 2026 for this bill to come into force, it could have short-term implications given the huge potential.

They have established growing and processing facilities in every state. They would be unnecessary if you could ship your product across state lines. And then there are many sub-optimal operations in terms of scaling.

Binham

The founder and CEO of BDSA commented on the classic trend of the cannabis industry. That said, licensed producers with deep pockets and a lack of expertise often enter the competitive market with a half-country trajectory.

And therefore much more efficient as there are many economies of scale in the manufacture of cannabis products.

Corporate LPs are constantly trying to trap smaller competitors. Still, the world’s cannabis market has room to grow — from $30 billion in 2021 to $57 billion in 2026.

[Die Branche]will have its fast growth years and tougher years – like this year for the mature markets. But we will see that its overall growth outperforms all other foods and most other CPG categories. Roy Bingham

The cannabis industry is home to new markets with unusually thriving values. In contrast, flatline sales by maturity. New markets are therefore expected to support global cannabis sales growth through 2026.