Finance

Why is the cannabis sector so profitable?

Canopy Growth, Aurora, HEXO and West Coast Ventures Corp. (OTC: WCVC) show how profitable the cannabis business can be, but it also causes tension with Californian wine growers

By 2025, the legal cannabis market could reach between $100 billion and $200 billion worldwide. Despite the potential the business represents, cannabis is also a source of tension.

Why the cannabis market is a success

A year ago, Canada decided to follow Uruguay and some American states by legalizing the use of recreational cannabis. A decision that quickly enabled the country of the Great White North to become a world leader in the production of legal marijuana. Eight of the ten largest global companies involved in cannabis cultivation are Canadian.

Among them, three mastodons stand out today: Canopy Growth, Aurora and HEXO. Companies that, in addition to marketing their products in the country, do so wherever the sale of cannabis is legalized. This is the case in Uruguay, the United States, India and South Africa. But also countries such as Brazil, Spain, Italy, Greece, Greece and Australia, to name but a few, where cannabis consumption and/or cultivation is at least partially decriminalized (in the sense that it remains officially illegal, but tolerated or subject to much less severe penalties). To date, 35 countries are in this situation.

However, smaller companies also capitalize on the cannabis boom. West Coast Ventures Corp. (OTC: WCVC) recently became America’s first CBD restaurant stock, by successfully combining fast-casual dining and CBD sectors. The company recorded an impressive $3,054.623 revenue in the first year of operations (2018) and expects to exceed it in the next few years. In the first quarter of 2019 the revenue grew by 21.55% which is usually considered a slow quarter. The sales in quarter two are on pace to hit an even higher score.

500 million and 2 billion euros for France

Given the market for cannabis, the growth prospects for marijuana players are bound to be appetizing. In France, if therapeutic cannabis were legalized, the market could fluctuate between 500 million and 2 billion euros, observers estimate.

Not to mention that the sector is growing on a global scale that many sectors could envy. On average, analysts estimate that the annual growth rate of this market should be around 30% by 2030. On paper, cannabis is positioning itself in a market that is still in its infancy but is already proving particularly lucrative. Especially as the phenomenon continues to spread around the world and is beginning to whet investors’ appetites.

The cannabis market under tension

The fact is that behind this incredible growth there are already some problems. Starting with the fear of speculative fever, many analysts consider that a financial bubble is swelling and that the explosion of the marijuana market is not far away. This is because this is a new and flourishing sector which, although it may well grow over time, is not the market of the century like oil for example.

In the United States, cannabis is also a source of tensions of a completely different kind. California wine growers are currently waging a merciless war against marijuana growers.

For what reason? Because the odours emitted by cannabis plants are considered unpleasant and harmful to the wine-growing slopes of the region. As a result, the atmosphere between West Coast wine growers and marijuana growers is not pleasant. In addition, they argue that cannabis plants visibly pollute the landscape. This is something that the Californian wine industry deplores.

Also, at a time when the green wave of cold weather is spreading all over the world, marijuana growing is nowadays not only facing fears of a loss of market power, but also those of other industries that see cannabis as a business that can burn theirs.

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