Report: Recreational Cannabis Spending to Hit US$16.9 Billion in 2019

Global spending for recreational pot will reach US$16.9 billion in 2019, a new study says.

The study, done collaboratively by the Arcview Group and BDS Analytics, indicates that in 2018 adult-use cannabis sales racked in US$12.2 billion. The study projects a jump of 38 percent in spending this year.

Findings of the research were made public by the Arcview Group on Tuesday (January 15).

Troy Dayton, CEO of the Arcview Group, called 2018 “a year of historic importance” for cannabis, crediting the entry of established firms from industries such as alcohol and tobacco, along with the legalization of hemp and its derivatives thanks to a new US$867-billion farm bill.

Beyond 2019, the Arcview Group is calling for recreational cannabis sales to hit US$31.3 billion in 2022.

That pace of growth would amount to a 26.7-percent compound annual growth rate over a five-year timeframe starting in 2017, when sales reached US$9.5 billion.

Multi-state operators in the US aid sector growth

According to the study, multi-state operators of cannabis assets in the US boomed in 2018, with five of these companies reaching valuations of over US$100 million.

The report calls this activity a “gold-rush” for these operators, and indicates that those companies reached a combined market capitalization of US$5.5 billion in 2018.

Meanwhile, in Canada five licensed producers (LPs) had reached a combined value of nearly US$20 billion by the end of the year.

Due to the federal illegality of cannabis in the US, companies looking to raise capital and pursue opportunities in legal marijuana states must do so on the Canadian Securities Exchange (CSE).

As cannabis stocks flock to the CSE, the exchange is seeing interest in these stocks raise. According to a report from The Globe and Mail, the CSE attracted C$2.73 billion from the rapidly expanding cannabis sector in the US in 2018. That amount represents over half of the investment seen on the whole exchange throughout the year.

“According to S&P Global Intelligence, there were 32 CSE companies with a market capitalization of at least [C]$100-million as of [January 11]; 31 of those, including the 17 biggest, were in the cannabis business,” the report indicates.

Hemp play raising in value

Since the passing of the farm bill, several Canadian cannabis companies have disclosed plans to pursue markets in the US with hemp products, with Canopy Growth (NYSE:CGC,TSX:WEED) among the entrants.

The Canadian LP obtained a production license in the state of New York this week and officialized its intentions to deploy between US$100 and US$150 million in the state to produce these products.

Research firm Brightfield Group projects the passing of the bill will set the industry for hemp and its derivatives on the way to making over US$20 billion in sales by 2022.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.