Dec 24, 2020 by MICHAEL BERGER
Although the stock market has been in rally mode, 2020 has been a challenging year for the global economy. The US market has been significantly impacted the by pandemic and states are looking for new avenues to generate revenue.
One of the easiest avenues for states to accomplish this is through the legalization of cannabis. In the November general election, four additional states passed recreational cannabis legislation and we consider the results to be an inflection point for the burgeoning industry.
In 2021, we expect the US cannabis industry to record impressive growth and believe the opening of new markets will be the primary reason for the growth. Illinois is a great example of the potential financial impact that is associated with a state’s transition from a medical to a recreational cannabis market.
Prior to the opening of California’s recreational cannabis market, many analysts expected the opening of additional recreational markets to negatively impact states like Colorado and Washington, which were the first two states to legalize recreational cannabis. This trend never played out and Colorado has continued to record strong growth on a year-over-year basis.
A few weeks ago, the Denver Post announced that cannabis sales in the first ten months of the year have exceeded the record amount of revenue that was reported in 2019. This number was derived from Colorado’s Department of Revenue and we are excited about the trend.
In the first ten months of 2020, Colorado has reported more than $1.8 billion of cannabis revenue. In 2019, the state reported to have generated around $1.75 billion of revenue and we are favorable on how the industry has grown.
One of the reasons we find the data to be significant is related to how Colorado’s cannabis industry was previously supported by the tourism market. During the last year, there has been a huge drop off in travel and we were impressed to see how local consumers appear to be making up for the drop off in tourism in Colorado.
We are bullish on the US cannabis industry and believe that the COVID pandemic helped prove how defensive and recession proof it is. The 2020 sales figures continue to strengthen the case that the cannabis industry can weather the current market environment and will monitor how the state closes out the year.
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