Cannabis Has Reached Its Tipping Point
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As the country regains a sense of relative new normalcy, many cannabis companies spent this week celebrating the industry's biggest holiday. At Green Thumb, we're celebrating this 4/20 all month long throughout our stores and Rise Dispensaries across the country. We've aptly named our celebration "The 1st Anniversary of Essential Cannabis," in a tribute to the essential status many Governors and state officials placed on cannabis during the Pandemic.
With cannabis deemed an essential industry, it's essential to recognize several complementary trends in the space that have also reached a watershed moment. We can borrow lessons from the time-tested social innovation adoption theory developed by E.M. Rogers in 1962 that explains how products and ideas gain momentum and spread through the public. According to Rogers, novel ideas or products disseminate through five stages: the innovators, early adopters, early majority, late majority, and, finally, the laggards.
Cannabis is currently making its way along the curve, roughly situated between the early adopters and the early majority. You might say cannabis stands at what Malcolm Gladwell calls "The Tipping Point."
New products and innovations
A desire for more natural alternatives and rapid innovation of new products fuel cannabis' accelerating mainstream adoption, with edibles, beverages, and topicals forms gaining popularity for newcomers looking for familiar consumption experiences. Infused drinks like Cann are attracting a new class of cannabis consumers in the same way White Claw has carved out a modern market for alcoholic beverages. Innovation and education will continue to drive increased cannabis acceptance, adoption, and overall market evolution from where we are today. In doing so, we anticipate a continued shift from the canna-curious to regular consumers. This is the tidal wave of consumer demand.
The resounding support for legalization
Legalization exploded in 2020 and early 2021. Before cannabis was deemed essential, only ten states had legalized adult-use. Roughly one year later, the total sits at 18. So far, in 2020 and 2021, we've seen Arizona, Illinois, Montana, New Jersey, New Mexico, New York, South Dakota and Virginia either introduce or pass adult-use legislation. The list could grow in 2021, with Northeastern states like Connecticut and Rhode Island knocking on the door.
Momentum has also reached Capitol Hill, with Senate Majority Leader Chuck Schumer saying the Senate will take action on cannabis reform with or without the White House. Although federal legalization still faces many hurdles, crucial industry bills were introduced and passed by the House of Representatives, including the SAFE Act, which has already resurfaced with the new Congress and is up for a vote in the House this week.
Tailwinds in the U.S. capital markets
The capital markets have historically preferred Canada's cannabis companies over the U.S. businesses due to the plant's federally legal status up north, as well as the accessibility for investors of Canadian company listings on the major U.S. exchanges. Still, that pattern appears to have shifted around the time of the Pandemic.
While over the past few years, Canadian stocks have been stymied by regulations. Reports of Health Canada being slow to review cultivation and retail applications have persisted. The government body is also responsible for delaying the launch of high-margin derivatives by two months, with sales of edibles, infused beverages, vapes, topicals, and concentrates only beginning in mid-December 2020.
Despite these holdbacks in the development of the Canadian cannabis market, the real shift is driven by a continuing acceleration of demand in the U.S. Record growth in even the most established of markets, like Colorado, and increasing institutional bid for U.S. cannabis companies as the U.S. growth opportunity reveals itself quarter after quarter.
U.S. tailwinds over the past year created a comparatively healthier and diverse market that continues to grow. While analysts' opinions vary, many estimate that Canada will generate $5 billion in sales by 2024 while the U.S. will reach $30 billion. Keep in mind that the projections were created before the latest Green Wave at the end of 2020. More simply, the U.S. has a population 9x larger than Canada's and run-rate industry revenue about 10x greater.
Consumer and industry enthusiasm
Last summer's nationwide protests against police brutality and systemic racism highlighted the staggering inequalities in the U.S., many of which are still perpetuated by cannabis prohibitionists.
The lasting effects of the War on Drugs continue to impact BIPOC individuals, their families, and communities. Today, approximately 40,000 people are still incarcerated for cannabis-related charges, although the plant is recreationally legal in one in three U.S. states.
It is the responsibility of industry leaders, stakeholders, and lawmakers to ensure those most impacted by prohibition have a seat at the table in the nascent market. A majority of legal companies at every stage of growth have incorporated social equity initiatives, spanning hiring commitments to incubator programs to small businesses grants, to address the glaring racial disparities in the industry.
New York, the latest state to legalize adult-use, recently passed one of the most equity-driven bills in the country. The Empire State received praise for including policies that guarantee conviction expungement, which created a pathway for individuals with cannabis charges to participate in the industry. Both advocates and business leaders are hopeful that New York's bill will serve as a blueprint for other states drafting their legalization legislation.
This has been a truly decisive year for the future of cannabis in America. The industry's essential status served as a significant catalyst that will undoubtedly create new market opportunities soon. As more Americans reevaluate the dated stigmas attached to the plant, they also recognize the industry's full potential and the plant itself. Considering the confluence of all of these tremendous cultural shifts, it's no wonder we're in the mood to celebrate 420 this year and resoundingly agree that Cannabis is Essential.