Legal Medical and Recreational Cannabis Industry Overview 2017
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Legal Medical and Recreational Cannabis Industry Overview 2017 Table of Contents 2…………Disclaimer 2…………History 3…………Legal Status 3…………Medical Uses 5…………Recreational Cannabis 6…………US and Global Market Size 8…………Canada Market Overview 8…………Europe Market Overview 8…………Israel Market Overview 13…………Challenges and Opportunities 16…………Key Ingredients for Success 18…………Charts Prepared by Daniel Horowitz – IPB Intern Edited by Cobi Bitton | JUNE 2017 | www.integritas.co.il 1 Disclaimer General Integritas People & Business (IPB). (“Company”, “Our”, “We”, “Us”, “IPB”) publishes market research reports on various sectors of industries. All reports purchased directly through us or via our website are subject to the following disclaimer. A purchase automatically indicates acceptance of the disclaimer. The information provided in our research reports is collated from publicly available data (e.g. annual reports, websites and media releases). 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Except as specifically stated in this report, neither IPB nor any of its affiliates, directors, employees or other representatives will be liable for damages arising out of or in connection with the use of this research report. This is a comprehensive limitation of liability that applies to all damages of any kind, including (without limitation) compensatory, direct, indirect or consequential damages, loss of data, income or profit, loss of or damage to property and claims of third parties. The information in the research reports are for the personal use of the authorised recipient(s). Under no circumstances, this information should not be distributed publicly or reproduced without prior permission. Any such act will be deemed as a breach of the ‘Terms & Conditions’ under which the report has been purchased. 2 History Cannabis has been used medicinally for thousands of years by cultures around the world to treat a variety of ailments. There are historical records of its use in ancient China, ancient India, ancient Egypt, and medieval Islamic culture, among others. Irish doctor, William O’Shaughnessy, was credited with introducing cannabis to Western medicine in 1842. Cannabis and treatments derived from it were widely prescribed in the US until it was fully outlawed in 1941. In the history of the world, only in the past century or so has there been any kind of stigma or illegality associated with cannabis, and now public opinions are shifting back towards positive support for the plant and the many medicinal benefits it provides. The US government declared cannabis a Schedule 1 narcotic in 1970, asserting that it has no accepted medical use. However, 29 out of 50 US states have legalized it for medical use in some form in the past 20 years, and an additional 17 signed legislation allowing for use of CBD treatments, which are extracted from cannabis. Eight states and Washington D.C. have fully legalized cannabis for recreational use. Although it is technically still federally illegal, the government has thus far not chosen to enforce this, and the general consensus is that the federal government will legalize it in the near future. Colorado and Washington were the first to pass recreational legislation in 2012, so there is already significant data that we can use to inform future projections. The results have been overwhelmingly positive, even in ways that were completely unexpected. For example, since legalization there has been a decrease in car accidents, and no increase in teen use.1 There are also very substantial expected effects such as a drop in violent crime and opioid abuse, and tax revenue and job growth.2 1 Business Insider. http://www.businessinsider.com/marijuana-legalization-public-health-colorado-traffic-fatalities- 2016-11/#recreational-legalization-doesnt-seem-to-make-kids-more-likely-to-use-marijuana-1 2 Think Progress. https://thinkprogress.org/5-states-weighing-marijuana-legalization-would-reap-enormous- economic-benefits-study-suggests-cb06831d154b 3 Legal Status Cannabis has been approved for medical use in many countries, with varying degrees of legal restriction. The major countries that have legalized it in some form include Argentina, Australia, Brazil, Canada, Chile, Colombia, Croatia, Czech Republic, Germany, Greece, Israel, Italy, Mexico, Netherlands, Philippines, Poland, Spain, Turkey, United Kingdom, United States, and Uruguay. Notably, cannabis is still completely illegal in China and India, despite their long and rich histories of using it as medicine. With the general attitude shift regarding cannabis, it is possible that they will soften their laws, especially India, where there is a significant movement pushing for legalization. China and India’s inclusion would greatly expand the market, as they combine to account for more than a third of the world’s population. Medical Uses Cannabis is used to treat a wide variety of diseases and symptoms. It is favored by both doctors and patients because it is much safer and has less severe side effects than many of the drugs it replaces, such as heavy painkillers. Some of the conditions that are successfully treated by cannabis include AIDS, ALS, Alzheimer’s, arthritis, cancer, chronic pain, depression, diabetes, epilepsy, glaucoma, migraines, MS, Parkinson’s, PTSD, and Tourette’s.3 3 NORML. http://norml.org/library/recent-research-on-medical-marijuana 4 It is also widely used alongside other treatments either to enhance their effects, or to combat negative side effects. For example, cannabis is very effective at reducing nausea and increasing appetite among chemotherapy patients, making the excruciating treatment more bearable. It is also used in combination with traditional opioid painkillers, which allows patients to significantly reduce the dosage and frequency of opioids, and also provides greater pain relief. Side effects can include tiredness, dizziness, increased heart rate, increased appetite, and psychoactive effects. Patients generally develop a tolerance for the effects within a few days or weeks. No negative long-term effects have been identified among adult users. Among people who used cannabis heavily in their teen years, minor learning and memory issues have been observed in the long-term. 4 4 American Psychological Association. http://www.apa.org/monitor/2015/11/marijuana-brain.aspx 5 Recreational Cannabis As of now, recreational cannabis is a niche market compared to medical cannabis. It is only legal in a few relatively small countries, most notably Netherlands and Uruguay. A few US states have fully legalized it in recent years as well, including Colorado, Washington, California, and Massachusetts, although it is still federally illegal in America. However, support for legalization is gaining strong momentum in the US, as well as Israel and much of Europe. The majority of US citizens believe it should be fully legal and regulated just like alcohol and tobacco. This would generate billions of dollars a year in tax revenues, as Colorado and Washington are already seeing. They are also seeing numerous other benefits, as discussed earlier in this report. According to Marijuana Business Daily, the US legal recreational market will surpass the medical market for the first time in 2017, despite only being available in a few states. In Colorado, there are more cannabis dispensaries than McDonald’s and Starbucks locations combined. Recreational sales were $1.8 billion in 2016, an 80% increase over the previous year. Washington and Colorado combined to account for $1.5 billion of that total. Marijuana Business Daily also estimates a total economic impact multiplier of 4x, meaning that for each dollar of retail sales, another $3 go into the economy.5 This money goes toward real estate/construction, job creation, taxes, and tourism. 5 Marijuana Business Daily. https://mjbizdaily.com/wp- content/uploads/2017/05/Factbook2017ExecutiveSummary.pdf 6 Recreational cannabis is a major opportunity in the US, as well as the rest of the world, and its market is widely expected to surpass the medical market shortly after its legalization in a given country. US and Global Market Size The 2016 World Drug Report estimated the number of global cannabis users in 2014 at 182.5 million. Given the rapidly shifting attitudes and legal environment, it is safe to assume that this number has grown significantly higher in the past three years. According to New Frontier Financial, the US medical cannabis market will surpass $10 billion annually by 2020. This estimation does not even take into account additional states passing legislation, or the federal ban being lifted. The RAND Corporation estimated the illegal cannabis market in the US at $40 billion in 2010, compared to $100 billion for the tobacco industry.