Expect Big Growth in U.S. Cannabis Industry in 2021

ALEXANDRIA, Va.—After years of cautious momentum, the U.S. cannabis industry is finally going to hit the gas pedal in 2021, Bloomberg reports, and here are four major trends you can expect to see.

MOMENTUM: Legal cannabis sales in the U.S. are expected to grow about 50% in 2021 to exceed $24 billion, including CBD and other cannabinoids, according to data company BDSA. A larger U.S. market means more cannabis-adjacent businesses like hydroponics and software will spring up, giving risk-adverse institutional investors a way into the still federally illegal sector. It provides an incentive for states to legalize by showing just how much tax revenue is at stake: an estimated $2 billion for U.S. states in 2021, BDSA says.

As NACS Daily reported yesterday, VERC Enterprises, based in Duxbury, Mass., and Sheetz, of Altoona, Pa., have both staked a claim in the CBD marketplace. VERC began carrying CBD products in its c-stores in 2018, starting with 16 SKUs and swelling to more than 100 before shrinking offerings when the company found that in the CBD space, often less is more. Sheetz added a line of CBD products in April 2019, starting with 37 SKUs and growing to 47 SKUs.

NAME RECOGNITION: A brand breakthrough seems almost inevitable for cannabis this year. The industry has recently attracted celebrities, including Jay-Z, Martha Stewart and Gwyneth Paltrow, to promote products, while partnerships with big consumer companies continue to gain steam. Building a household name has been challenging in a market where products can only be sold in certain states, but that’s changing. In the last six months, 11 brands, not including those from multi-state operators, have reached sales of more than $30 million, BDSA says.

CONSOLIDATION: The proliferation of brands, only a few of which can gain national name recognition, sets the stage for a wave of consolidation. And with U.S. companies not able to access capital markets—a change they hope a Democratic administration will bring in 2021—there should be no shortage of targets. The more mature Canadian market’s increasing competition and declining price economics is seen as motivating mid- and small-sized Canadian limited partners to consolidate.

SCRUTINY: With the industry growing, there’s sure to be some heightened scrutiny and increased rulemaking ahead. The U.S. Food and Drug Administration could finally issue formal regulations that will define how CBD products can be sold, for example. There’s also increasing interest in understanding how developing brains are affected by cannabis use. A recent study showed that marijuana vaping among youth remained steady in 2020, with 8.1% of eighth graders, 19.1% of 10th graders and 22.1% of 12th graders reporting use. If recent events around tobacco and vaping are any indication, the use of cannabis by young people may soon be under the spotlight.

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