US legal cannabis market shows strong fundamentals for growth


Broad acceptance and growing habitual consumption is driving growth in the global legal cannabis market, evidenced by soaring numbers in the United States (US). Strategic consultancy Emerton reports the recreational cannabis market in the US could reach $20 billion by 2025. 

Setting the context, Emerton analyzed NewFrontier data from last year to highlight the strength of the US cannabis market – a driver of growth for the segment worldwide. Already at a market value of nearly $8 billion, legalized recreational cannabis in the US is expected to grow at an impressive 14% every year in the lead up to 2025, landing anywhere between $15 billion and $20 billion.

Legalization has a large role to play here. Fourteen US states have legalized recreational cannabis use at this point, while more will inevitably follow suit. By 2025, more than half of the US population will live in a legal use cannabis state, which lays the foundation for a thriving market.

US legal cannabis market shows strong fundamentals for growth

No doubt, legalization paves the way, although consumption has an equally large part to play in growth. Against the backdrop of a booming market, Emerton surveyed around 1,000 consumers – cannabis users and non-users – to understand how consumption patterns are shaping up.

The resultant report – informed by the consulting firm’s advanced data analytical capabilities – breaks consumption down into three categories of cannabis-infused products: beauty, food, and drinks.

The results are fairly mixed. On the plus side, those who do consume cannabis-infused products do so habitually. More than 50% of consumers in the ‘”beauty” category report their usage to be daily, or at least multiple times a week. The same is true for more than 40% in the drinks category and nearly 30% when it comes to food.

“These proportions increase to 86%, 62%, and 71% respectively when considering weekly usage,” read the report. The trend signals a set of loyal consumers, likely to sustain a steady growth rate in the market. Breeding this loyalty is a high degree of customer satisfaction with cannabis-infused products, with more than 80% of consumers across all three categories declaring the products very effective, if not extremely so.

US legal cannabis market shows strong fundamentals for growth

In the case of beauty products, the satisfaction rate jumps to nearly 90%. Not surprisingly, most of these consumers expect to continue their usage in the future. Between half and two-thirds will go on indefinitely, while an additional 20% to 30% will at least continue using cannabis-infused products in the near term.

So among cannabis consumers, loyalty is strong. Also in the plus column is that these consumers are willing to spend big. In fact, Emerton reports that nearly 60% of this consumer segment spends more than $100 every month on cannabis-infused beauty products, food, and drinks.

The researchers went a step further into the hypothetical: If given an extra $100 to spend on beauty products, food, and drinks, how much would consumers spend on cannabis-infused channels? For beauty products, that would be more than 60%. For drinks: more than half. Cannabis-infused food, meanwhile, would draw nearly 40% of the additional spend.

US legal cannabis market shows strong fundamentals for growth

All these numbers suggest strong fundamentals for cannabis growth in the US. According to Dan Dannenberg, managing partner for the US at Emerton, investors have certainly taken note of all the telling signs.

“The size and forecasted growth of the market and the legalization trend make the US a fertile ground for cannabis-derived products to thrive, as illustrated by the surge in investments in the cannabis industry in recent years, growing from less than $1 billion in 2015 to ~$14 billion in 2018.”

These are the positives. On the flipside, several factors are holding the legal cannabis segment back from its true market penetration potential. High on this list is the perception issue that many consumers still view cannabis as a deviant or dangerous drug. What results is a lack of willingness to self-educate on cannabis, as well as a broader lack of trust in the products.

US legal cannabis market shows strong fundamentals for growth

Businesses have to overcome this barrier, while also tackling more conventional challenges such as understanding the regulatory landscape – particularly confusing in the case of cannabis – and building market competitiveness by giving consumers more for less.

“Lifting the non-consumers’ mental (misconceptions, health & safety concerns) and practical road- blocks (availability, pricing) appears key to unleashing the potential of the cannabis-derived products market. If successful, the growth potential seems to be substantial. Traditional companies and brands can, and should, play an active role in supporting the market development,” said Dannenberg.

Provided that these challenges can be met, the US could potentially establish itself among the largest legal cannabis markets in the world. In the meantime, a set of loyal and satisfied consumers is expected to keep the market cruising to new highs.



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