Canada Is Crushing the U.S. in the Marijuana Market.

Marijuana grandma
Marijuana grandma

There aren’t too many times you can say this. Canadian businesses are poised to dominate the global trade in one of the hottest new markets.

Meanwhile, the U.S.-based companies are stuck watching on the sidelines.

I’m not going to fall back on American exceptionalism to justify how rarely this happens. Business is business, after all. It’s all about the numbers.

And in most regards, Canada can’t possibly keep up. The U.S.A. has nine times as many people, over nine times the GDP, about $2,000 more in GDP per capita, and the domestic stock market is about 15 times bigger.

Those kinds of figures create massive advantages, if all things were equal. If…

So what makes up for such a glaring mismatch? Reasonable, comprehensive, and cohesive regulation.

As a result of it, Canada is poised to become the dominant global player in the medical marijuana market, right as it balloons at an astronomical rate.

The focus in the U.S. has been the expansion of medical marijuana business, which is hardly surprising.

Over a few short years, it has expanded to 28 states and Washington, D.C. One in five Americans now have access to prescriptions of marijuana and marijuana-based pharmaceuticals.

That is phenomenal growth, but there is an inherent flaw in it. It relies on the fragmented American federal system.

While the U.S. government has abdicated enforcement and regulation to the states, other nations have comprehensive regulations that lay a clear framework across the board.

Without that kind of national-level guidance, medical marijuana businesses have to stop at their home state’s border.

Canada, on the other hand, has a robust regulatory system, with a national recreational use system on the way this year.

With this advantage, Canadian-based companies are now exporting their products on a global scale, tapping a much more massive market with greater growth potential.

Various programs are either ready to be implemented or already up and running in countries like Canada, Australia, Germany, Italy, Israel, and the Czech Republic.

And Canada’s established and entrenched medical marijuana businesses are moving on all of them, creating ever-higher barriers to entry for newcomers.

The first medical marijuana exports from Canada are already underway. The first shipment of two types of capsules containing marijuana extracts was sent in early June 2016.

The same month, a company received a business permit to manufacture products in Colombia, which also allows permits.

July saw exports start to Germany, which completely revamped its medical marijuana laws and regulations to streamline the process for patients.

November saw an approval for another company to export to an Australian biotech company, and Australia has clearly indicated it is looking to other countries with established markets for imports.

Also in November, exports started to Brazil for the research and development of cannabis-based therapeutics in the country.

All of these developments pale in comparison to what will come.

The North American marijuana market alone posted $6.7 billion in revenue in 2016, up a full 30% from 2015, according to a recent report from Arcview Market Research.

And that phenomenal growth isn’t an outlier. Arcview projects sales to grow at a compound annual growth rate of 25% through 2021. At that point, it’s expected to be a $20.2 billion market.

Tom Adams, editor-in-chief of Arcview Market Research, said in a statement:

“The only consumer industry categories I’ve seen reach $5 billion in annual spending and then post anything like 25% compound annual growth in the next five years are cable television (19%) in the 1990s and the broadband internet (29%) in the 2000s.”

That’s right. The marijuana market is growing as fast as internet companies were in the 2000s.

But even that $20 billion number may end up being too conservative as the global trend accelerates. Those figures heavily rely on Canadian and U.S.-based growth.

As nations around the globe open up markets, revenue may soar at even greater rates, as export sales boost figures far beyond what the domestic market has to offer.

Unfortunately for U.S.-based companies, that market is entirely off limits. Fortunately, for U.S.-based investors, it is not.

By Adam English

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