GLO BAL CANNABIS REPORT - 420 Property

G L O B A LCANNABISR E P O R T2019 INDUSTRY OUTLOOK

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G L O B A LCANNABISR E P O R T2019 INDUSTRY OUTLOOK

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© N E W F R O N T I E R D A T A . A L L R I G H T S R E S E R V E D .

© N E W F R O N T I E R D A T A , A L L R I G H T S R E S E R V E D | N E W F R O N T I E R D A T A . C O M | 1

TABLE OF CONTENTS

A B O U T N E W F R O N T I ER DATA 2

E X ECU T I V E SU M M A R Y 4

M E T H O D O LO G Y 7

G LO B A L OV ER V I E W 10

G LO B A L I N D U S T R Y O P P O R T U N I T Y I N CO N T E X T 20

K E Y T R EN D S S H A P I N G T H E G LO B A L C A N N A B I S ECO N O MY 21

R EG I O N A L A N A LY S I S 39

North America 39

Caribbean 43

Latin America 45

Europe 47

Oceania 52

Asia 53

Africa 56

K E Y TA K E AWAY S 59


New Frontier Data provides objective, rigorous, and comprehensive analysis and report-ing about the nascent and underserved cannabis industry worldwide. New Frontier Data’s ana-lytics and reports have been cited in over 82 countries around the world to inform industry leaders, investors, policymakers, and others. As the premier and only Big Data shop in the sector, New Frontier Data looks beyond plant cultiva-tion and distribution to raise the industry bar and improve visibility into what will inevitably soon be a mature and more complex global market. Founded in 2014, New Frontier Data is headquartered in Washington, D.C., and has additional offices in Denver, Colorado.

New Frontier Data does not take a position on the merits of cannabis legalization. Rather, its mission and mandate are to inform canna-bis-related policy and business decisions through rigorous, issue-neutral and comprehensive analysis of the legal cannabis industry. For more information about New Frontier Data, please visit: NewFrontierData.com.

Mission

New Frontier Data’s mission is to elevate the discussion around the legal cannabis industry globally by providing unbiased, vetted infor-mation for educating stakeholders to make informed decisions.

Core Values

• Honesty

• Respect

• Understanding

Vision

Be the Global Big Data & Intelligence Authority for the Cannabis Industry.

Commitment to Our Clients

The trusted one-stop shop for actionable cannabis intelligence, New Frontier Data pro-vides individuals and organizations operating, researching, or investing in the cannabis industry with unparalleled access to actionable industry intelligence and insight, helping them leverage the power of big data to succeed in a fast-paced and dynamic market.

ABOUT NEW FRONTIER DATA


A B O U T N E W F R O N T I E R D ATA

Report ContributorsPUBLISHERGiadha Aguirre de Carcer, Founder & Chief Executive Officer, New Frontier Data

EDITORJohn Kagia, Chief Knowledge Officer, New Frontier Data

LEAD AUTHORKacey Morrissey, Director of Industry Analytics, New Frontier Data

CONTRIBUTING AUTHORSMolly McCann, Senior Industry Analyst, New Frontier Data

Yona Torres, Associate Director of International Markets, New Frontier Data

Beau R. Whitney, Vice President and Senior Economist, New Frontier Data

QUANTITATIVE ANALYSISKacey Morrissey, Director of Industry Analytics, New Frontier Data

COPY EDITORJ.J. McCoy, Senior Managing Editor, New Frontier Data

HEADQUARTERS1400 I Street NW / Suite 350 / Washington, DC 20005

SALES & MARKETING535 16th Street / Suite 620 / Denver, CO 80202

[email protected] 844-420-D8TA

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EXECUTIVE SUMMARY

More than 50 countries worldwide have legalized some form of cannabis for medical use, and six — Canada, Uruguay, South Africa, Guam, Georgia, and the Northern Mariana Islands — have legalized cannabis for personal or recreational use. Yet, the legal, regulated markets command just a fraction of the global demand for cannabis.

Based on New Frontier Data’s latest analysis, more than 260 million adults worldwide consume cannabis at least once per year, collectively spend-ing $344 billion USD annually. As much of the world has not yet legalized any form, much of the demand is in illicit or unregulated markets.

The large number of cannabis consumers globally, coupled with the growing evidence of the plant’s therapeutic value and industrial potential, is trans-forming attitudes toward cannabis and rapidly driving reform. Many of the countries to legalize cannabis in some form have done so in the past 12 months. With highly divergent approaches to regulating cannabis sales and use, these countries

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CarribeanOceaniaLatin AmericaAfricaEuropeNorth AmericaAsia

$85.6

$9.8 $8.7

$U

SD

BIL

LIO

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$1.7

$37.3

$68.5

$132.9

Global Demand Value

Error bars shown depict range of uncertainty due to pricing variation within region.

$344.4 Billion

Source: New Frontier Data

TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND BY REGION(E S T I M AT E I N $U S D B I L L I O N S)


E X E C U T I V E S U M M A R Y

geographical size of the region – Asia is home to nearly 60% the world’s population - and the higher average prices paid in the region relative to other markets.

Average cannabis prices vary widely across regions, influenced by factors including GPD per capita and the severity with which prohibition laws are enforced. In regions with the harshest punish-ments for cannabis use (such as in Asia), the price for cannabis carries a heavy risk premium, and consequently some of the highest illicit market cannabis prices in the world. In Latin America and Africa, conversely, average prices are half of those in Asia, reflecting the higher usage rates and lower economic development in those regions.

are creating widely variable markets with differing levels of opportunity, impact, and operational and investment risk.

Analyses of legal cannabis markets globally have revealed that slight cultural, social, and regulatory variations can drastically impact the size of the cannabis consumer market. Influential factors in determining the total addressable market include the prevalence of cannabis use, average prices paid, and population size and growth.

Asia (with 39% of global sales) is the world’s largest market, followed by North America (25%) and Europe (20%). Despite relatively low rates of can-nabis use, Asia’s dominance is due to both the


� Legal Medical and/or Adult Use Cannabis

C ANNABIS & HEMP: GLOBAL PHENOMENA


• Investment capital’s role in accelerating industry growth and scale;

• Potential for technology and innovation in increasing cannabis business operational efficiency, and transforming the consumer experience;

• Digital media’s capacity for shaping cannabis awareness and building connectivity between consumers;

• Future cannibalization of alcohol demand by cannabis; and

• Hemp’s potential to foment economic growth and sustainable development in developing markets.

As government, business, health, and legal experts collectively lay the foundations for newly legal cannabis markets across the globe, it is important to understand the size of the market opportunities and the influencers of their growth. This report provides a foundation of the size and potential opportunity worldwide that legal cannabis could present, based on analysis of demand across 217 countries and 7 distinct geographical regions. Additionally, this report explores some of the key global cannabis trends, such as:

• Durability of legalization support as a long-term cultural trend;

• Effectiveness of medical cannabis driving acceptance and adoption;

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Global Average Price per Gram

$9.20

Min, Mid, and Max values are the average minimum, midrange, and maximum values across the respective regions.Source: Regional rates modeled by New Frontier Data using country-level pricing data described in the Methodology section of this report.

AVER AGE PRICE PER GR A M BY REGION ($USD)

� Min � Mid � Max


METHODOLOGY

There were 217 countries considered in this first-of-its kind analysis of total global cannabis demand.

The majority of this report quantifies figures by region. The table on the left displays which indi-vidual countries were included as part of each regional rollup in this analysis.

Demand Estimates and Market Sizing

Proprietary consumption and usage rate mod-eling, along with demographic census data and price sampling, were used by New Frontier Data to develop the demand and consumption esti-mates for cannabis in the 217 countries across the seven selected regions of the world. The demand figures herein represent an estimate of total current demand for cannabis flower without making distinctions on the legality of the markets in which consumption occurs.

As most legal markets are new and expected to experience regulatory volatility in the initial years of program deployment, the market anal-ysis herein does not make any assumptions for timelines for the implementation of new medical and adult-use markets. Instead, the analysis uti-lizes a total addressable market (TAM) approach to provide a foundation to quantify the potential opportunity that legal cannabis could present across the globe.

RegionTotal Countries

Included in Regional Analysis

Population

Asia 44 4,341,950,820

Africa 54 1,254,823,150

Europe 54 862,686,804

Latin America 20 601,424,293

North America 3 362,483,432

Caribbean 23 42,778,814

Oceania 19 40,901,664

TOTAL 217 7,507,048,977

REGIONAL TERRITORY BRE AKDOWN



M E T H O D O L O G Y

Usage Rates

Current cannabis usage rates (i.e., the reported percentage of adults in the population that consume cannabis) were estimated from various year rates sourced from the United Nations Office on Drugs and Crime (UNODC) and the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA). For the countries where usage data was unavailable, a regional average rate was applied based on the population-weighted average usage rate for the countries within the region for which usage rates were available.

Consumer Types and Consumption Volumes

Considerations for varying types of consumers with different consumption habits were made in this analysis. Through the aggregation and analysis of consumption and sales data across various legal markets, New Frontier Data developed distinct consumers segments within the total number of cannabis consumers. For the purpose of this anal-ysis, the total number of cannabis consumers in each country has been refined into two consumer groups: heavy consumers and light consumers. Heavy consumers are considered individuals who have consumed cannabis within the last 30 days, while light consumers are those who consume cannabis less than one time per month.

Pricing

Price sampling was completed by the New Fron-tier Data International team, and price ranges were developed based on pricing data compiled from independent online sources including: UNODC, WeedIndex.io’s 2018 Cannabis Price Index, PriceofWeed.com, and Havocscope. For countries where price data was not available, proxy values were applied based on regional averages, and adjusted using a relative-wealth ratio.

This report is intended to serve as a baseline for total estimated demand for cannabis. As new data becomes avail-able and regulatory policies guiding legalized markets become clearer, New Frontier Data will release individual country and regional specific reports that address the complex regulatory nuances of each market, and respec-tive, quantitative projections for legal market size and growth.


M E T H O D O L O G Y

The legalization of cannabis may prove to be one of the most consequential social changes of our time, and governments, investors, and business owners across the world are making enormously consequential decisions that will form the foundation of a global, regulated cannabis industry. With very little available data due to long periods of cannabis prohibition, many of these decisions are being based on anecdote and aspiration.

Despite the data limitations in quantifying the size of the current global market, New Frontier Data felt that it was imperative for the stakeholders who are defining the future of the legal cannabis industry have contextual scale of the industry's potential opportunity. Therefore, leveraging more than 4 years of cannabis business insights and currently available data, we have developed a new benchmark for the global consumer demand for cannabis.

As legal markets emerge across the globe, data collection and data harmonization across markets (by both industry and government) will be critical to refining our collective understanding of the size, growth, and evolution of the cannabis industry.

At the government level, metrics including: overall industry sales, number of issued cannabis business licenses, medical program participation, industry taxes paid, and demographics of the people employed by the industry, will all provide a more comprehensive view of the market's fundamentals.

At the operator level, metrics including: product sales trends, consumer profiles and purchase behavior, and wholesale and retail pricing will facilitate understanding of the evolving industry dynamics and emerging consumer trends.

New Frontier Data is committed to collecting, curating, and analyzing the coming global, regional, country and sub-state data as it becomes available. We continuously refine our market models to reflect the latest industry intelligence and we will update our global model as our insights into this market grow.

THE IMPER ATI V E FO R DATA IN THE G LO B A L C A NN A B I S ECO N OMY


GLOBAL OVERVIEW

ization have created widely variable markets across the world, among regions, and even inconsistencies within individual countries. In the United States, though cannabis remains illegal at the federal level, individual states have chosen to legalize medical and recreational cannabis, adopting regulatory structures with varying degrees of strictness that have resulted in drastically different market out-comes. Colorado has medical and recreational storefronts dispensing cannabis every few blocks, while other states have approved low-THC/high-CBD medical products only – granting access to just a relative handful of patients with serious medical conditions.

More than 50 countries around the world have legalized some form of cannabis for medical use, and six — Canada, Uruguay, South Africa, Guam, Georgia, and the Northern Mariana Islands — have legalized cannabis for personal or recreational use.

All cannabis legalization is not created equal, however, and the different approaches to legal-


� Legal Medical and/or Adult Use Cannabis

C ANNABIS & HEMP: GLOBAL PHENOMENA


Africa Asia Caribbean Europe Latin America

North America Oceania

Algeria Afghanistan Antigua and Barbuda Albania Argentina Canada American SamoaAngola Bahrain Aruba Andorra Belize Greenland AustraliaBenin Bangladesh Bahamas, The Armenia Bolivia United States FijiBotswana Bhutan Barbados Austria Brazil French PolynesiaBurkina Faso Brunei Darussalam Bermuda Azerbaijan Chile GuamBurundi Cambodia British Virgin Islands Belarus Colombia KiribatiCabo Verde China Cayman Islands Belgium Costa Rica Marshall IslandsCameroon Hong Kong SAR, China Cuba Bosnia and

Herzegovina Ecuador Micronesia/FSMCentral African Republic India Curacao Bulgaria El Salvador NauruChad Indonesia Dominica Channel Islands Guatemala New CaledoniaComoros Iran, Islamic Rep. Dominican Republic Croatia Guyana New ZealandCongo, Dem. Rep. Iraq Grenada Cyprus Honduras Northern

Mariana IslandsCongo, Rep. Israel Haiti Czech Republic Mexico PalauCote d'Ivoire Japan Jamaica Denmark Nicaragua Papua New GuineaDjibouti Jordan Puerto Rico Estonia Panama SamoaEgypt, Arab Rep. Korea, Dem. People's Rep. Sint Maarten (Dutch) Faroe Islands Paraguay Solomon IslandsEquatorial Guinea Korea, Rep. St. Kitts and Nevis Finland Peru TongaEritrea Kuwait St. Lucia France Suriname TuvaluEswatini Kyrgyz Republic St. Martin (French) Georgia Uruguay VanuatuEthiopia Lao PDR St. Vincent

and the Grenadines Germany Venezuela, RBGabon Lebanon Trinidad and Tobago GibraltarThe Gambia Macao SAR, China Turks and

Caicos Islands GreeceGhana Malaysia Virgin Islands (U.S.) HungaryGuinea Maldives IcelandGuinea-Bissau Mongolia IrelandKenya Myanmar Isle of Man Lesotho Nepal ItalyLiberia Oman KazakhstanLibya Pakistan KosovoMadagascar Palestine LatviaMalawi Philippines LiechtensteinMali Qatar LithuaniaMauritania Saudi Arabia LuxembourgMauritius Singapore Macedonia, FYRMorocco Sri Lanka MaltaMozambique Syrian Arab Republic MoldovaNamibia Tajikistan MonacoNiger Thailand MontenegroNigeria Timor-Leste NetherlandsRwanda Turkmenistan NorwaySao Tome and Principe United Arab Emirates PolandSenegal Uzbekistan PortugalSeychelles Vietnam RomaniaSierra Leone Yemen, Rep. Russian FederationSomalia San Marino South Africa SerbiaSouth Sudan Slovak RepublicSudan SloveniaTanzania SpainTogo SwedenTunisia SwitzerlandUganda TurkeyZambia Ukraine Zimbabwe United Kingdom

GLOBAL C ANNABIS LEG ALIT Y BY COUNTRY


Legal Adult Use Legal Medical


G L O B A L O V E R V I E W

The countries across the world where medical cannabis is legal have also taken var ying approaches to regulation, with some restricting possession and use to a case-by-case basis, with limited lists of approved products by import only, while others have opened the doors to patient access by approving expansive lists of qualifying medical conditions and establishing licensing for domestic production. In Europe, many coun-ties have taken a pharmaceutical approach to regulating the plant, with a few big players, like Germany, covering the costs of medical cannabis under their health insurance systems. On the recreational side, Canada has been the dominat-ing player: As the second country (and the first G7 nation) to legalize adult-use cannabis, it has been a key market for investors, with Canadian companies deploying extensive capital to new international markets.

Many of the countries to legalize cannabis in some form have done so in the past 12 months, and are just beginning to establish regulatory systems to structure its use and sale. As gov-ernment, business, health, and legal experts work to lay the foundation for newly legal can-nabis markets across the globe, it is important to understand the size of the market opportunity and the influencers of its growth. This report provides a foundation of the size and potential opportunity that legal cannabis could present. It is intended to serve as a baseline for total estimated demand for cannabis, which will be updated over time as better data becomes avail-able, regulatory policies become clearer, and consumer behavior evolves.

Global Market Demand Estimates

Social, cultural, and political differences globally have caused cannabis policies and cannabis usage rates to vary widely. Using data from more than 200 countries, we modeled consumption rates, market prices, and population trends to estimate the current global demand for cannabis today.

Based on New Frontier Data’s latest analysis, con-sumers globally spend an estimated $344 billion on cannabis each year. As much of the world has not yet legalized any form, much of the demand remains in illicit or unregulated markets. By way of comparison, the U.S., which is the world’s largest legal cannabis market, is forecast to generate $13 billion in legal retail sales in 2019.

It is important to note that this analysis does not make distinctions as to whether the consump-tion occurs in a legal medical, legal recreational market, or illicit market, and is solely an approx-imation of the totality of demand for cannabis across the world.

Based on New Frontier Data’s

latest analysis, consumers globally spend an estimated $344 billion on cannabis each year."


0.5%

2%

11%

39%

25%

20%

3%


� Africa � Asia � Caribbean � Europe � Latin America � North America � Oceania

GLOBAL C ANNABIS DEM AND: REGIONAL SHARE

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$344.4 Billion





Asia (39%) is the world’s largest market, followed by North America (25%) and Europe (20%). Asia’s dominance is due to the size of the region, which is home to nearly 60% the world’s population.

Total Estimated Number of Cannabis Consumers

There are an estimated 263 million people in the world who consume cannabis at least once per year. The estimated number of cannabis con-sumers per region depends on the population size, demographic age ranges, and average rates of cannabis use in the individual countries that compose each region.

RegionTotal

Countries in Region

Number of countries in region with legal medical cannabis programs

Number of countries in region with legal adult-

use cannabis programs

PopulationPercentage of Global

Population

Average GDP per Capita

(PPP)

Estimated Number of Cannabis

Consumers

Asia 44 2 0 4,341,950,820 58% $28,562 77.2 millon

Africa 54 3 1 1,254,823,150 17% $6,256 83.0 million

Europe 54 29 1** 862,686,804 11% $34,753 42.6 million

Latin America 20 8 1 601,424,293 8% $13,802 12.9 million

North America 3 1* 1* 362,483,432 5% $53,118 42.7 million

Caribbean 23 6 0 42,778,814 1% $23,118 1.0 million

Oceania 19 6 2 40,901,664 1% $11,754 3.7 million

GLOBAL 217 55 6 7,507,048,977 100% $24,480 263.1 million

TOTAL ESTIM ATED NUMBER OF C ANNABIS CONSUMERS

*In the United States, cannabis is illegal at the federal level. However, more than 30 states have legalized cannabis for medical use and ten have legalized for adult-use, with an additional 14 states allowing the use of CBD. **Multiple countries in Europe, including Spain and the Netherlands, do not have federally licensed distribution structures in place, but do allow for the use of recreational cannabis through private spaces, or social clubs.Sources: World Bank Group Data, 2017, New Frontier Data


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Annual Cannabis Consumers*263 Million

*Aged 15+ who consumed cannabis at least once in the preceding year.Source: New Frontier Data

TA M CONSUMERS (IN MILLIONS)

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GlobalAsiaLatin AmericaCaribbeanEurope AfricaOceaniaNorth America

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PE

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*Past year cannabis use (weighted on a population basis by region across countries where data sources were available).Source: New Frontier Data

REGIONAL AVG . C ANNABIS USAGE R ATE(O N A N N UA L B A S I S , P O P U L AT I O N W EI G H T ED)


Cannabis Usage Rates

In the adult populations across the globe (ages 15+ for the purpose of this analysis), the regions of North America, Oceania, and Africa have the highest rates of cannabis use.

Despite being the largest continent, Asia com-paratively has very low use rates relative to other markets. As such, even though Africa’s population is roughly 1/3 that of Asia’s, Africa’s higher canna-bis-use rate means there are similar numbers of cannabis consumers in both continents.

Nigeria has the highest rate of cannabis use in the world, with 19.4% of its population aged 15+ having consumed cannabis in the past year. This is significant, given the illegal status of the plant across most of Africa, and the fact that higher reported rates of use are typically associated with progressive cannabis laws.

Canada and the United States both have active adult-use cannabis markets (the U.S. at the state level) with strong public awareness and support for legalization, thus have the second and third-high-est usage rates worldwide.

0% 5% 10% 15% 20%

Greenland

New Zealand

Belize

Chile

Madagascar

Bermuda

Zambia

United States

Canada

Nigeria 19.4%

15.8%

15.0%

14.8%

14.3%

14.2%

13.1%

12.7%

12.6%

12.3%

In order to ensure methodological consistency, UNODC was the primarysource used for country level estimates of past year cannabis use. The currency of the data is widely varied across countries, and will be updated overtime as better data becomes available.

*Estimated current cannabis usage rate (use in the last year, weighted on a population basis by region across countries where data sources were available).Source: New Frontier Data

PA ST-YE AR C ANNABIS USAGE R ATES ( TOP 10 COUNTRIES)



Pricing by Region

Price analyses from illicit cannabis markets across the globe revealed the lowest prices to be in Africa and Latin America, where the average price-per-gram of cannabis is close to $3 due to lower relative-wealth per capita levels across the population. The highest prices are in Asia, where harsh penalties for possession, use, or sale mixed with lower levels of social acceptance lead to high-er-risk premiums on products. Of the six countries with the highest reported prices in the world, four are in Asia (United Arab Emirates, Qatar, Japan,

and South Korea). The range of prices reported in Asia is also wide, with an average low price-per-gram rate across the region at $9 per gram, with an average high price rate of $20 per gram.

In regions where there is access to legal cannabis (such as the United States and Canada), legal products compete with the illicit market, result-ing in pricing harmonization. In North America, the difference between the average high price and average low price for a gram of cannabis flower is $3.

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Global Average Price per Gram

$9.20

Min, Mid, and Max values are the average minimum, midrange, and maximum values across the respective regions. Source: New Frontier Data

� Min � Mid � Max

AVER AGE PRICE PER GR A M BY REGION ($USD)


It is important to note that any wide price variances within a region increase the levels of uncertainty when modeling the overall market demand. The chart above displays the estimated value of demand for cannabis, with error bars to indicate the high, low, and midpoint estimates for each region.

The wide variance between the average high and low price ranges in Asia, compounded by the region’s large population, result in that continent’s having the widest range in estimated spending.

Medical Cannabis: Potential Patient Reach

In legal medical cannabis markets around the globe, the respective lists of acceptable qualifying conditions are determining factors in the extent of patient access and program reach. Some of the most common conditions treated with medical cannabis in countries where it is legal include: epilepsy, Parkinson’s disease, forms of cancer, and chronic pain. The inclusion of pain, in particular, has proven to be one of the most influential deter-minants of how large and how quickly medical cannabis programs grow, as is whether physicians

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Global Demand Value


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can prescribe cannabis for any medical condition they deem appropriate or are restricted to a nar-rowly defined list of conditions.

To illustrate the potential patient reach for legal medical cannabis, the following table details the global prevalence rates for the most common conditions treated with medical cannabis in legalized markets.

If just 10 percent of the world’s population suf-fering from such ailments began to use cannabis therapeutically, it would create a market of more than 100 million patients.

Condition Rate (Mid)

Rate (Low)

Rate(High)

Lower Back and Neck Pain 11.75% 10.49% 13.04%

Cancers 1.00% 0.94% 1.08%

Alzheimer's Disease and Other Dementia 0.61% 0.54% 0.68%

Opioid Use Disorders 0.55% 0.46% 0.65%

HIV/AIDS 0.50% 0.47% 0.53%

Epilepsy 0.37% 0.29% 0.45%

Rheumatoid Arthritis 0.27% 0.24% 0.30%

Parkinson's Disease 0.12% 0.10% 0.14%

Glaucoma 0.08% 0.07% 0.09%

Multiple Sclerosis 0.02% 0.02% 0.03%

Total Global Prevalence Rate 15.27% 13.63% 16.99%

Total Number of People w/ Conditions 1,171,892,267 1,046,481,843 1,304,021,879

GLOBAL PRE VALENCE OF KE Y MEDIC AL CONDITIONS

Note: Rates do not imply mutual exclusivity; some individuals may suffer from multiple listed conditions. Source: Global Health Data Exchange

All of the quantitative estimates presented in this report are initial estimates that will be refined as more data becomes available, legal markets are established, and regulatory policies are refined in the initial years of legal cannabis in a handful of new markets around the world. While in-depth legal market analysis will be available through indi-vidual country reports by New Frontier Data, the initial estimates presented herein reveal an undeniable consumer base and opportunity for early investors and operators.

GLOBAL INDUSTRY OPPORTUNITY IN CONTEXT

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Synthetic Rope

Pain ManagementDrugs

Dietary Supplements

Product & PackagingManufacturing

Cosmetics Industry

Tobacco**

TextileManufacturing

Alcohol $1,439

$872

$785

$532

$514

$101

$63

$2

Global PotentialCannabis Capture (3%)

$129.24Billion

POTENTIAL 3%CANNABIS CAPTURE**

$43.17

$26.16

$23.55

$15.96

$15.42

$3.04

$1.90

$0.05

$ U S D B I L L I O N S

*Assumes cannabis will either cannabibalize or generate new spending equivalent to 3% of each category's value.**Excluding ChinaSource: New Frontier Data

POTENTIAL C ANNABIS C APTURE OF LE ADING GLOBAL INDUSTRIES


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2017

$593

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2017

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2017

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2018

$324

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$75.

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0020

18

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Antiperspirant

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RecordedMusic

TV &Video

Wine VideoGames

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The size and growth of the consumer population is shifting attitudes toward cannabis and driving a more pragmatic debate on legalization. New Fron-tier Data’s consumer research shows that cannabis is used by a diverse cross-section of society, and as millions of consumers slowly emerge from the shadows, they challenge perceptions about those who consume cannabis, as well as the demonization of cannabis consumers as anonymous “others”.

Cannabis consumer segmentation reveals important nuances about attitudes and use.

New Frontier Data’s research reveals new insights about the general cannabis consumer. Going beyond the binary of medical and adult use, the analysis of millions of consumer data-points inspired the identification of nine specific cannabis consumer archetypes defined by an array of attitudinal, behavioral, and demographic factors. By not defining these consumer groups by the regulations of the markets they live in (adult use, medical use, unregulated), these archetypes offer better understanding of diverse consumer ecosystems. Insights into unique consumer seg-ments not only enable manufacturers to more effectively tailor their products (and messaging) to uniquely defined groups, but they also provide deeper understanding into the evolution of can-nabis as a socioeconomic phenomenon.

The archetypes vary across markets based on factors including local culture, legal status, and prevalent rates of use. However, the U.S. segments enable stakeholders in all markets to understand that cannabis consumers are not monolithic, but rather representative of a large diverse spectrum of society with varied attitudes, consumption habits, and usage behaviors.

In this section we will explore some of the consequential social, cultural, political, legal and technological changes that are shaping the global cannabis industry.

1. Social and Cultural Evolution: Consumer Trends

2. Political and Legal Trends

3. Medical Applications: Increasing Awareness of the Therapeutic Value of Cannabis

4. Technology and Innovation

5. Cannabis & Alcohol

6. Hemp's Untapped Potential

Social & Cultural Evolution: Consumer Trends

More than 260 million adults consume cannabis at least once per year, collectively spending over $340 billion annually. Despite nearly universal prohibition, adults worldwide routinely choose to consume cannabis. That reality indicates that while prohibition may serve to constrain the extent of cannabis’ use, it has done little to deter a significant proportion of adults from regularly consuming it.

KEY TRENDSS H A P I N G T H E G L O B A L C A N N A B I S E C O N O MY


TRADITIONAL LIFEST YLERS

MODERN LIFEST YLERS

FUNCTIONAL DEPENDENTS

MEDICAL PURISTS

WEEKEND ENTHUSIASTS

DISCREET UNWINDERS

SOCIAL OPPORTUNISTS

SILVER DABBLERS

INFREQUENT CONSERVATIVES

Use Frequency Daily Daily Daily Varies Daily to

weekly Varies Less than once a month

A few times a month

Less than once a month

Spending on Cannabis Products

High spenders Highest spenders

Highest spenders

Average spenders High spenders Lower

spenders Lowest spenders Lower spenders

Lowest spenders

User Type Recreational Wellness Medical Medical Recreational Wellness Purely recreational

Purely recreational

Purely recreational

Most Popular Products

Joints, pipes & solid edibles

ALL types of products (joints, solid edibles, pipes, dabbing, vape pens, liquid edibles, topicals, tinctures)

Variety of products, especially alternative forms (liquid edibles, tabletop vaporizers, topicals, tinctures)

Solid edibles, plus higher than average use of non-combustible forms (topicals, tinctures, vape pens)

Joints (including with added concentrate) & pipes

Joints Joints, pipes & solid edibles

Joints & pipes Joints

Current Use of CBD-only Products

No Yes Majority yes Yes No No No No No

Primary Source Private dealer

Brick-and-mortar store/dispensary

Wide variety of sources

Brick-and-mortar store/dispensary

Private dealer Friends Friends Friends Friends

Consumption Reasons & Activities

Long list of reasons and activities involving decompression, socialization & leisure

Long list of reasons and activities relating to general wellness, leisure & daily life

Wide variety of reasons and activities including exercising, focusing, working & generally enhancing daily life

Medical reasons (pain management, anxiety reduction, sleep)

Long list of reasons such as stress relief, increased energy/creativity & enhancing a variety of leisure activities

Pain management, relaxation, doing low-key activities at home (watching TV/movies, doing household chores)

Relaxation & socializing

Relaxation & socializing

Relaxation & watching TV/movies

Importance of Cannabis Use to Identity

Cannabis is important to identity


Cannabis is a major part of identity

Cannabis is not important to identity




Cannabis not generally important to identity


Openness About Cannabis Use

Friends & family know; even coworkers often know. Most say they are public about use

Friends & family know; even coworkers often know. Most say they are public about use

Friends, family & coworkers all know. Very public about use

Friends & family know. Coworkers generally do not know

Friends & family know. Even coworkers often know

Average rates of family knowing, but friends are slightly less likely to know

Friends know about use, but family is less likely to know

Friends know about use, but family is less likely to know

Average rates of family knowing, but friends are slightly less likely to know

� High � Mid-High � Mid � Mid-Low � Low

HEA

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ON

SUM

ERS

TRADITIONAL LIFESTYLERS14% of consumersThe classic consumer.

MEDICAL PURISTS12% of consumersCannabis for health and wellness.

SOCIAL OPPORTUNISTS17% of consumersThe communal sharers.

MODERN LIFEST YLERS10% of consumersThe “Cannabis 2.0” consumer.

WEEKEND ENTHUSIASTS11% of consumersModerate leisure use.

SILVER DABBLERS14% of consumersThe occasional indulgers.

FUNCTIONAL DEPENDENTS5% of consumersThe extreme consumer.

DISCREET UNWINDERS8% of consumersPassionate but secret use.

INFREQUENT CONSERVATIVES9% of consumersThe greying traditionalists.


U.S . C ANNABIS CONSUMER ARCHE T YPES

NEW PRODUC T INNOVATION

3CONVENIENCE & DISCRE TION

4SOCIAL

ACCEPTANCE

5THER APEUTIC

EFFIC AC Y

2

K E Y T R E N D S: S O C I A L & C U LT U R A L E V O LU T I O N

More information about the U.S. cannabis consumer, including a detailed analysis of each consumer archetype, can be found in the 2018 Cannabis Consumer Report.

Accepting the reality of cannabis’ extensive use, the debate about prohibition is shifting from whether cannabis should be consumed - many adults have already made that decision – and focusing instead on questions including:

1. Should the millions of people who already consume cannabis be allowed to do so without having to risk breaking the law?

2. Is it in the government’s (and society’s) interest to actively prevent millions of consumers who wish to consume cannabis from doing so?

3. Given the widespread and entrenched demand, is the public interest better served by an unregulated but punitively constrained illicit market, or by a regulated but less-constricted legal one?

4. As the scientific consensus around medical cannabis builds, how should its medical use be governed?

Such questions are fostering a robust debate more reflective of the realities of the large, diverse, and highly lucrative global cannabis consumer market.

FI V E FO RCE S D I S RU P TIN G THE G LO B A L C A NN A B I S CO N SUMER M A RKE T

� Global markets are legalizing personal, medical, or full adult use.

� Retail channels enable access to commercial products.

� Medical use is introducing new consumers to cannabis.

� More consumers use cannabis as part of integrative wellness plans.

� Investment is fueling development of novel, new products.

� Significant funding is directed at non-combustibles.

� There is an increase in “cannabis appro-priate situations”.

� Portability, convenience, and discretion enables use in more places and situations.

� Cannabis consumers are coming out of the shadows.

� Cannabis use is more acceptable in social settings.

EXPANDING LEG AL ACCESS

1



K E Y T R E N D S: P O L I T I C A L & L E G A L T R E N D S

Political and Legal Trends

Where advocates and legislatures have led, courts have now followed. Most markets having reformed their cannabis laws have done so through ballot measures or legislative process. However, three countries – Georgia, Mexico, and South Africa – have each legalized personal use through the courts.

The respective cases were different, but in each the court concluded that the law affirmed citizens’ personal rights to use cannabis. It is worth noting

that none of the rulings established a frame-work for regulated cannabis markets, but instead generally permitted adults to grow, possess, and consume small amounts of cannabis.

Mexico’s legalization was notable because the court’s ruling was rooted in the assessment that any harms associated with cannabis use did not warrant its prohibition. The court stated that “the effects caused by marijuana do not justify an absolute prohibition on its consumption. There-fore, the [Court] ordered the [government] to authorize the complainants to personally consume marijuana, without this allowing them to market it or use other narcotics or psychotropic drugs.”

Such an approach to legalization, challenging the utility and efficacy of prohibition laws in court, will likely gain traction in countries where the cannabis-consuming population is small, or the cultural norms and social stigmas suppress public advocacy for legalization. Conversely, in regions where public support and social acceptance is high, advocates are more likely to advance legal-ization through ballot initiatives, which put the issue to a public vote, or through the legislative process – an often slower approach, especially in countries where the political class is more con-servative than the public.

The widely varied ways in which countries reform their cannabis laws and establish markets make navigating the global cannabis industry a highly complex proposition. It is imperative that investors and entrepreneurs exploring opportunities in the industry understand the dynamics of each market they wish to participate in to prepare for the com-plexity and costs of complying with a given space’s typically expansive, strict, and unique regulations.

The effects caused by marijuana do not

justify an absolute prohibition on its consumption. Therefore, the [Court] ordered the [government] to authorize the complainants to personally consume marijuana, without this allowing them to market it or use other narcotics or psychotropic drugs.”– S TAT E M E N T B Y M E X I C O’S S U P R E M E C O U R T R U L I N G T H E P R O H I B I T I O N O N C A N N A B I S U S E U N C O N S T I T U T I O N A L


K E Y T R E N D S: P O L I T I C A L & L E G A L T R E N D S

Overwhelming support for cannabis legalization among younger adults will make the expansion of legal cannabis markets a durable generational trend.

The extremely high levels of support for canna-bis legalization among young adults in the U.S. (and many other countries) make it difficult to envision a catalyst that could slow or reverse the trend toward expanding legal access to canna-bis. Instead, the momentum toward increasing support suggest it is highly likely that the shift in cannabis attitudes will last well into the future with cannabis being integrated to modern society in increasingly varied ways.

Medical Applications: Increasing Awareness of Cannabis Therapeutic Value

Increasing awareness of cannabis’ therapeu-tic value is accelerating broad acceptance and use of medical cannabis. Cannabis’ proven effi-cacy in treating debilitating conditions, such as acute epilepsy in children, has rallied support for expanding access to medical access across the globe. Indeed, most of the countries cur-rently debating cannabis reform are considering medical, not recreational, legalization.

0%

10%

20%

30%

40%

50%

60%

70%

80%

20182014201020062002199819941991198919871984198019761973

72%

64%

57%

46%

Source: National Opinion Research Center, General Social Survey

� 18-34 � 35-49 � 50-64 � 65+

U.S . C ANNABIS LEG ALIZ ATION SUPPORT BY AGE(197 3 - 2018)


K E Y T R E N D S: M E D I C A L A P P L I C AT I O N S

Affirmation of the therapeutic value of cannabis by respected institutions, including the WHO, and U.S. National Academies of Sciences, helps chal-lenge negative views of the plant, and encourages governments, health-care providers, academics, and consumers to consider its potential. As the medical community increasingly accepts cannabis as part of its therapeutic tool kit and legalization expands patient access, interest in, and demand for, medical cannabis will continue to grow.

Another reason for the rapid acceptance of medical cannabis is the feedback from patients. According to New Frontier Data research, 94% of medical cannabis patients reported that can-nabis treatment improved their condition, with 66% reporting significant improvement. Strong affirmation from medical consumers that can-nabis has improved their respective quality of life will play an important role in changing attitudes toward medical cannabis and advancing support for its legalization.

As previously stated, if just 10% of the world’s population suffering from conditions for which cannabis is commonly used were to begin using cannabis therapeutically, it would create a market of more than 100 million patients. The impact of such a shift on the health care industry would be seismic, with consequential implications for health care providers, the pharmaceutical industry, and public and private medical insurance sectors.

The significant opportunity that medical cannabis represents, coupled with the accelerating pace of its legalization, is fueling global interest among investors and entrepreneurs. And if the multibil-lion-dollar valuations reached almost overnight by Canada’s licensed producers (LPs) are any

S TAT E M E N T S A FFI R M I N G T H E T H E R A P EU T I C VA LU E O F C A N N A B I S BY L E A D I N G H E A LT H A N D R E S E A R C H I N S T I T U T I O N S

“CBD has been demonstrated as an effective treat-ment of epilepsy in several clinical trials, with one pure CBD product (Epidiolex®) currently in Phase III trials. There is also preliminary evidence that CBD may be a useful treatment for a number of other medical condi-tions. CBD is generally well tolerated with a good safety profile… there is no evidence of recreational use of CBD or any public health related problems associated with the use of pure CBD.”

World Health Organization Expert Commit-tee on Drug Dependence, November 2017

“There is conclusive or substantial evidence that cannabis or cannabinoids are effective for the treatment of chronic pain in adults (cannabis), as antiemetics in the treatment of chemotherapy-induced nausea and vomiting (oral can-nabinoids), [and] for improving patient-reported multiple sclerosis spasticity symptoms (oral cannabinoids). There is moderate evidence that cannabis or cannabinoids are effective for improving short-term sleep outcomes in individuals with sleep disturbance associated with obstruc-tive sleep apnea syndrome, fibromyalgia, chronic pain, and multiple sclerosis (cannabinoids, primarily nabiximols).”

U.S. National Academies of Sciences, Engi-neering and Medicine, January 2017

“…recent animal studies have shown that marijuana extracts may help kill certain cancer cells and reduce the size of others. Evidence from one cell culture study with rodents suggests that purified extracts from whole-plant marijuana can slow the growth of cancer cells from one of the most serious types of brain tumors.”

U.S National Institute on Drug Abuse, June 2018


0%

20%

40%

60%

80%

100%

HawaiiArizonaNevadaOregonColorado

93%89% 88% 86%

64%Reduction in Government

Pain Medication Spending in U.S. Medical

Cannabis Markets vs Non-Legal Markets

-11%

Sources: State government medical cannabis programs, New Frontier Data

CHRONIC PAIN PATIENTS A S A PERCENTAGE OF ALL PATIENTS IN KE Y MEDIC AL C ANNABIS PROGR A MS

73%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Improved SlightlyImproved Significantly

Conditioned Improved 94%

Have used cannabis as a substitiute or alternative to other medicines

(among medical cannabis patients)

66%

28%


PATIENT-REPORTED MEDIC AL C ANNABIS EFFIC AC Y


K E Y T R E N D S: M E D I C A L A P P L I C AT I O N S

indication, the expansion of legal markets will generate considerable business opportunity in the coming years.

The WHO recommendation to deschedule CBD is an important green light to both government and industry about medical applications for the plant.

The WHO’s 2019 recommendation to the UN to reschedule cannabis included an important emphasis on CBD: While the organization rec-ommended moving cannabis and its extracts to a lower schedule, it also recommended descheduling CBD entirely. Under the proposed regulations, ”preparations containing predomi-nantly cannabidiol [CBD] and not more than 0.2% of delta-9-tetrahydrocannabinol are not under international control.”

While it remains to be seen whether the UN will adopt the recommendations, the aff ir-mation that CBD presents a low-risk profile will encourage governments and consumers to reconsider its prohibition.

Technology & Innovation

Digital hyperconnectivity is disrupting gov-ernment control over cannabis messaging. For decades, governments have controlled the message on cannabis, widely resulting in a poorly served and often misinformed public. However, the proliferation of digital technology and advancements in social media are connecting cannabis consumers globally, and giving them access to the expanding library of cannabis-re-lated information.

Due to its illegality, most consumers have kept their cannabis consumption discreet, which has resulted in cannabis markets operating in opaque silos, with little interaction between cannabis con-sumers within or across geographic regions.

Digital media is enabling cannabis consumers to connect in new ways, facilitating interaction and knowledge-sharing, enabling businesses to engage with a global market of consumers, and empowering advocates to advance reform in their countries. Furthermore, the profusion of cannabis content platforms serving every sector of the market (from medical patients and recreational consumers, to home growers and professional cultivators) is helping cater to increasingly spe-cialized interests.

NOTE: In countries that maintain tight controls over Internet access, such as China, cannabis awareness, engagement, and reform will likely grow slowly.

Social media and digital connectivity will play important roles in the future of legal cannabis. Not only will these technologies tear down the walls that have long separated cannabis consumers worldwide, they will accelerate the acceptance and normalization of attitudes toward cannabis across markets.

Companies in this industry should consider early digital media strategies, including how to engage a consumer base that has been in the shadows for decades, many of whom remain concerned about the stigma associated with cannabis use. The brands that are able to most effectively capture newly empowered consumers will be well positioned for growth in the highly competitive markets that lie ahead.


INTERNE T S E A RCHE S S H OW S PIKIN G INTERE S T IN C A NN A B I S D U RIN G M A J O R L EG A L IZ ATIO N E V ENT S

Google search data shows that interest in cannabis surges during periods of major cannabis reform. Three instances were U.S. events – the elections of 2012 and 2016 (which collectively saw 7 states plus the Dis-trict of Columbia legalize cannabis), and the advent of legal sales in Colorado in January 2014 – while the fourth spike came with Canada’s legalization.

Interestingly, searches for “marijuana” surged during the U.S. inflections, but it was “cannabis” that surged during Canada’s legalization, reflecting the more commonly used term in each market.

In recent months, searches for ”cannabis” which have historically numbered less than ”marijuana” have gained momentum, more reflections of the influence of Canada’s legalization on the global cannabis con-versation, and of activists’ efforts to restore the use of the word “cannabis” over “marijuana” in the U.S.

20

40

60

80

100

20192018201720162015201420132012

PO

PU

LA

RIT

Y*

NOV 2012: U.S election: Colorado and Washingtonlegalize cannabis

NOV 2016: U.S election: 8 states legalize, includingCA (recreational) and FL (medical)

OCT 2018: Canada legalizes cannabis

JAN 2014: Adult use sales inColorado begin

*Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular.Source: Google Trends

GOOGLE SE ARCHES FOR 'C ANNABIS' AND 'M ARI JUANA' GLOBALLY( J A N 2012 - M A R 2019)

� Cannabis � Marijuana


K E Y T R E N D S: T E C H N O L O G Y & I N N O VAT I O N

C A N N A B I S I S R I S I N G TO T H E N AT I O N A L P O L I T I C A L S TAG E

Cannabis will be a visible issue in the upcoming U.S. presidential election amidst record levels of support for legalization. With sixty-two percent of Americans now supporting full legalization, most candidates vying for the Democratic Party nomination have expressed support for easing federal cannabis restrictions, with some endorsing full legalization. This increases the likelihood that some type of cannabis reform will be included in the in the party’s 2020 platform, elevating the issue’s status among national political priorities.

Over the coming months the U.S. will engage in the most robust public debate on cannabis in the country’s modern history. The outcome of the election will not only define the trajectory of cannabis in the U.S., it will stimulate a broader conversation globally, further raising the public’s awareness and engagement on this issue.

Innovation will transform the cultivation, pro-cessing, sale, and consumption of cannabis in legal markets.

Cannabis has been caught in a time warp. As prohi-bition gained traction globally more than a century ago, cannabis was removed from the regulated economy, cutting off the industry from access to innovation and technologies that have transformed other agricultural and manufacturing sectors.

Facing the competitive pressures of operating in legal markets, cannabis businesses are now fueling significant investments in innovation, effi-ciency, and scale as companies race to operate better, faster, and less expensively in their efforts

to capture strong initial market demand and build brand recognition in new markets

There have already been dramatic advance-ments in recent years, whether in LED lighting technologies (which enable indoor growers to precisely calibrate the quality of light that plants receive) to the oil extraction sector (which has seen equipment capacity grow from pounds per day to tons per day). Even the consumption of cannabis is seeing disruptive innovation, be it from web-enabled vaporizers that let consumers to precisely calibrate their vaporization temperature, or molecular distillation which enables canna-bis compounds to be reconstituted in ways that produce consistent, replicable experiences.

The scale of opportunity for market-moving innovation across the cannabis sector is hard to overstate. Continued emergence of new potential therapeutic and industrial applications will provide fertile ground for innovators and investors to break ground and shape the industry’s evolution.

Legalization is driving steep declines in market prices, giving an advantage to efficient, low-cost producers.

Within U.S. legal cannabis markets, full legalization has led to significant declines in wholesale can-nabis market prices. The price decline is due to a combination of factors, including increased com-petition with a rising number of growers, greater efficiency and scale as the industry matures, and elimination of the illicit market’s risk premium which has long artificially inflated cannabis prices.

The price declines are significant: In Colorado, the average market rate has fallen 60% over a four-


K E Y T R E N D S: T E C H N O L O G Y & I N N O VAT I O N

year period. The steep decline is pushing out the least-efficient operators and driving urgent focus on production costs and operational efficiency.

Cannabis producers must understand that although margins have been historically high, prices in the future will be dramatically lower than current levels. As such, it is vital that producers focus intensely on lowering their costs through agile approaches to enable them to integrate and capitalize new performance-improving innova-tions as they become available.

It is worth noting that during wholesale commod-itization, there will remain a market for premium and artisanal cannabis products. However, even

niche producers will face downward price pressure over time, even if not as acutely as those produc-ers serving the mid- and lower ends of the market.

Value-added products will displace smoking and revolutionize the cannabis consumer’s experience.

In markets where it is illegal, most cannabis is ingested by smoking the plant’s flower, either through cannabis cigarettes (i.e., joints) or via pipes. Homemade cannabis oils and infused edibles are also consumed, but generally on a smaller scale. With cannabis legalization comes the capital to commercialize products and build indus-trial scale, leading to a revolution in new products and evolution of consumption behaviors.

$0

$500

$1,000

$1,500

$2,000

$2,500

Apr 2019Jan 2019Oct 2018Jul 2018Apr 2018Jan 2018Oct 2017Aug 2017Jan 2017Jul 2016Jan 2016Jul 2015

CHANGE IN VALUEFlower Trim

-60% -$1,201+17% +$61

$2,007

$364

$806

$425

Note: The average market rate is used by Colorado’s state government to determine the excise tax rate for cannabis producers. Source: Colorado Enforcement Division

AVER AGE M ARKE T R ATE FOR C ANNABIS FLOWER & TRIM IN COLOR ADOJ A N 2015-A P R 2019

� Flower($/lb) � Trim Rate ($/lb)


This evolution is best seen in legal markets, growth in demand for non-flower products has far out-paced demand for traditional, smokable flower. Vaporizers (which heat the flower or extracted oils to a temperature that releases the cannabinoids and other compounds without combusting the product) have surged in popularity. Such products are discreet: Unlike with combusted flower, the odor can be almost imperceptible; the devices are small and increasingly sleek; and the dosing is consistent, giving consumers greater ability to monitor and calibrate their use.

The increasing diversity and improved quality of infused foods are attracting new consumers, as are innovations in how cannabis is ingested. Infused food has traditionally been at a disad-

vantage over smoking or vaping in terms of the immediacy of the effect onset. When inhaled, it takes moments to feel the psychoactive effects of THC in cannabis, but when eaten, the onset is generally delayed by 30 minutes (or more) as the food works through the gastrointestinal system. Companies are working aggressively to innovate processing and infusion techniques to enable the faster absorption of cannabis into the blood-stream, thereby reducing the latency of effects.

Some companies already offer infused beverages with claimed onset times of 10-15 minutes. The proliferation of fast-acting infusion technologies will transform the edibles market, and attract inter-est from current and new consumers. Categories including THC- and CBD-infused nonalcoholic

CHANGE IN MARKET SHARE BY CATEGORY

Flower Concentrates Edibles Other

-39%

+144% +45%

-$29

66%

7%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Sep 2018May 2018Jan 2018Sep 2017May 2017Jan 2017Sep 2016May 2016Jan 2016Sep 2015May 2015Jan 2015

% O

F T

OTA

L S

ALE

S

11%

40%

16%

5%

39%

SHARE OF U.S . C ANNABIS RE TAIL SALES BY PRODUC T C ATEGORYJ A N 2015 - S EP 2018

Source: New Frontier Data � Flower � Concentrates � Edibles � Other


K E Y T R E N D S: C A N N A B I S & A L C O H O L

beers and wines, sports beverages, natural juices, and coffees and teas, are all poised for growth.

Cannabis and Alcohol

Cannabis acceptance and use will substantially displace alcohol use in the future. Beyond the health-care sector, alcohol is another industry that will face significant disruption due to the expansion of legal cannabis access. The alcohol industry will face challenges on two fronts: First is the growing awareness of the negative health effects of drinking, as affirmed in the seminal 2018 paper in the British medical journal The Lancet, which concluded:

“Alcohol use is a leading risk factor for disease burden worldwide, accounting for nearly 10% of global deaths among populations aged 15–49 years, and poses dire ramifications for future population health in the absence of policy action today. Our results show that the safest level of drinking is none. This level is in conflict with most health guidelines, which espouse health benefits associated with consuming up to two drinks per day. Alcohol use contributes to health loss from many causes and exacts its toll across the lifespan, particularly among men. Policies that focus on reducing population-level consumption will be most effective in reducing the health loss from alcohol use.”

Alcohol use and burden for 195 countries and territories, 1990–2016: a systematic analysis for the Global Burden of

Disease Study 2016, The Lancet, August 23, 2018

$U

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LIO

NS

$0

$3

$6

$9

$12

$15

Q1 20192018201720162015

$0.91$1.29

$3.49

$13.80

$3.80

Constellation Brands’Investment in

Canopy Growth Corporation

$4 Billion

Altria’s Investmentin Cronos

$1.8 Billion

TOP 2018INVESTMENTS

42%from two

companies

Note: The second-largest investment was by Altria, one of the world’s largest tobacco companies.Sources: Viridian Capital Advisors, Bloomberg BI, New Frontier Data

C ANNABIS INDUSTRY INVESTMENTS2015- Q 1 2019


K E Y T R E N D S: C A N N A B I S & A L C O H O L

Public acceptance of this science will lead to increased community and individual efforts to reduce alcohol use, which may begin a durable long-term trend.

The second challenge facing alcohol is a cultural one. Increasingly, young people in the regions of the world with the most progressive views on can-nabis are coming of age in an environment where cannabis is viewed on par with, if not as safer than, alcohol. In markets where cannabis is increasingly accepted, many consumers are indicating that they intend in the future to displace some of their drinking with cannabis.

Additionally, young adults who come of age in markets where cannabis is as legal and available as alcohol may chose cannabis. Indeed, polled U.S. cannabis consumers expressed strong preferences for cannabis over alcohol. If consumers never develop a palate for alcohol in their formative adult years, it is unlikely that they would become regular drinkers later in life. As such, the total lifetime value lost by the alcohol industry for each young consumer who never develops a taste for alcohol will be considerable: They may still drink on occa-sion, but not with the frequency or intensity seen as part of the current drinking culture that is so entrenched in young adulthood across the world.

The rise of social use – and expanse of public spaces where cannabis use is permitted, such as among Amsterdam’s coffee shops – will represent another consequential steptoward social accep-tance of cannabis. Jurisdictions across North America and Europe have permitted social use in varying ways, but such remains a small fraction of the cannabis economy, even in legal markets. In the coming years, the expansion of social-use

spaces will further segregate cannabis consumers from alcohol as most jurisdictions only permit consumption of one or the other on the premises. Subsequently, social-use spaces will provide adults with alternative venues to bars and clubs, in places where alcohol is not sold.

The alcohol industry is well aware of the coming change. The single largest investment in the can-nabis industry to date - $4 billion in 2018 - was by one of the world’s leading alcohol companies, Constellation Brands, into Canada’s largest LP, Canopy Growth Corporation. Central to the investment was the development of fast-acting, nonalcoholic, cannabis- infused beverages.

Constellation Brands is just one of several alcohol companies having already invested in the cannabis industry. The scale of capital and technical exper-tise which such companies bring in production, distribution, retail, and consumer engagement will accelerate the professionalization, maturation, and scaling of the global cannabis industry. Resultant growth will predictably advance the acceptance, normalization, and use of cannabis across the world, which could in turn further erode demand for alcohol.

Hemp: Untapped Potential

The untapped potential of hemp will unlock major multisectoral opportunities globally, with CBD leading the introduction to non-consumers of cannabis.

While medical and recreational cannabis have been capturing headlines, a quiet surge is building in the hemp sector – which could foment an industry to dwarf the marijuana consumer market. Hemp is a


K E Y T R E N D S: H E M P

variant of the cannabis plant which has less than 0.3% THC (or in some countries less than 1% THC by law). With its low THC levels, hemp does not produce the psychoactive effect of higher THC cannabis. Yet, the plant retains many of its thera-peutic compounds, including CBD, and produces biomass suitable for a wide range of applications (ranging from human and animal food, or nutrition-als, to textiles or construction materials).

As has been seen in legal cannabis markets, expansion of hemp-specific legalization will fuel investment into diverse applications — resulting in strong sector growth and increased capacity, efficiency, quality, and scale.

Despite being described as the most versatile crop in the agricultural economy, the global hemp industry remains small. New Frontier Data estimates that in 2018, the global hemp market totaled under $5 billion. However, the calculus will change quickly as more counties explore hemp’s potential, and legalization expands consumer access and use.

Currently, most hemp production is taking place in developed countries: China, as the world’s second largest producer (after Canada), is an exception among hemp production leaders, as the country has very low illicit cannabis use but very large-scale hemp production.


USES FOR HEMP

Entire Plant

Cell Fluid Stalk Leaves Flowers Seeds

Bast Fibers Hurds (Pulp) Extracts Hempseed Oil Seed Cake Foods

Consumer Textiles

Industrial Textiles Paper Building

Materials Foods Industrial Products

Personal Hygiene

z Boiler Fuel

z Pyrolysis Feed-stock

z Abrasive Chemi-cals

z Apparel z Diapers z Fabrics z Hand-bags

z Denim z Shoes z Fine Fabrics

z Twine z Rope z Nets z Canvas z Tarps z Caulk z Carpets z Brake/Clutch Linings

z Argo-fiber Composites & Molded Parts

z Geotextiles

z Printing Paper

z Fine/Specialty Paper

z Filter Paper

z Newsprint z Card-board/Packaging

z Fiber-board

z Insulation z Fiberglass Substitute

z Cement z Stucco& Mortar

z Animal Bedding

z Mulch & Compost

z Oils z Distillates z Isolates

z Salad Oil z Margarine z Food Sup-plements (Vitamins)

z Cooking Oils

z Car Parts z Bio-Plastics z Scooters z Semicon-ductors

z Animal Bedding

z Oil Paints z Varnishes z Printing Inks z Fuel z Solvents z Lubricants z Putty z Coatings

z Soap z Shampoo z Bath Gels

z Cos-metics

z Lotions z Balms

z Animal Feed

z Protein- Rich Fiber

z Granola z Birdseed z Cereal z Bars z Protein Powder


However, as hemp is increasingly decoupled from cannabis, even countries with generally conserva-tive views on drugs are given to consider the plant for its agricultural and industrial uses.

Hemp is drawing interest in developing markets in for a range of reasons, including:

• It grows quickly, resulting in fast turn-around for farmers and short timelines for biomass applications. The rapid maturation also facilitates experimentation, enabling producers to quickly trial new genetics and cultivation techniques.

• In addition to key micronutrients, hemp seed offers among the highest concentrations of protein to be derived from any plant-based food. The plant is also rich in omega 3 fatty acids and vitamin E, making it a

well-balanced nutritional source. With increased food insecurity in many parts of the world, hemp-based foods have the potential to boost humanitarian relief efforts by addressing acute malnourishment, and to serve as a supplement for communities with nutritionally poor dietary staples.

• Its nutrient-rich oil (which contains CBD) can be inexpensively processed and used as a low-cost therapy.

• Hemp produces one of the strongest known plant-based fibers, making it well-suited for rope and other natural, low-technology building applications.

• Hemp biomass can be used for cattle feed: As the European Food Safety Authority concluded in 2011, “hemp seed and hemp seed cake could be used as feed materials

$0

$1

$2

$3

$4

$5

$6

$7

2020e2019e201820172016

$U

SD

BIL

LIO

NS

YE

AR

OV

ER

YE

AR

GR

OW

TH %

$2.76

$3.14

$3.74

$4.58

$5.73

0%

5%

10%

15%

20%

25%

30%

� Sales � Growth

GLOBAL HEMP SALES 2016-2022e

Source: Hemp Business Journal estimates ($ bil., consumer sales)


for all animal species”, and “the whole hemp plant, including stalks and leaves, would be, due to its high fiber content, suitable feed material for ruminants (and horses)”. Farmers who incorporate hemp into their cattle feed report improved health of their animals, and higher yields for market.

• Hemp biochar is used for water and air filtration, and the plant is a highly effective bioremediator, making it widely used to clean some of the world’s most contaminated lands, including the Chernobyl nuclear disaster site.

To be clear, hemp is not a panacea: It will not fix all that ails the developing world. Yet, it shows substan-tial potential to assist in alleviating the enormous challenges facing developing countries in the coming years, including feeding and housing the ever-expanding global population, stimulating jobs

for a growing workforce, increasing agricultural output, and addressing environmental contami-nation caused by rapidly industrializing economies.

Hemp resonates with the cultural zeitgeist on climate change, drawing interest from broad quarters. Much of the discussion about medical and adult-use legalization has centered on the personal liberties of adults. Whether it is the right of a patient in hospice care to use cannabis to alleviate intolerable pain, or for a middle-aged parent seeking to consume cannabis after a long workweek, the debate has broadly been bounded by the idea of adults having the personal liberty to consume cannabis.

With hemp, however, the plant’s environmen-tal and sustainability-related applications are attracting interest and support amid intensifying

GLOBAL HEMP CULTIVATION LE ADERS: ACRE AGE

Source: Health Canada, EIHA, FOASTAT, Vote Hemp and Hemp Business Journal

0

30

60

90

120

150

LithuaniaNetherlandsItalyGermanyEstoniaUnited StatesFranceChinaCanada

82.2

137

98.8

114

35.842.1

9.7

25.7

8.614.8

3.7 5.3 5.6 6.6 6.0 5.6 5.0 6.1

AC

RE

S I

N T

HO

US

AN

DS

� 2016 � 2017


K E Y T R E N D S: H E M P

concerns about climate change. As innovators work to actively reduce the environmental impact of economic development and reverse the damage done from years of unchecked growth, hemp offers rich potential to support a diversity of sustainability-related efforts based on proven practices and promising but still-experimental research. Additionally, hemp-based products will be well positioned to capture a growing market of environmentally conscious consumers for whom sustainability is an important influence on pur-chase decisions.

Hemp production and processing will fragment across developed and developing nations.

A trend to watch in coming years is the fragmen-tation of hemp processing in different regions of the world. Developing countries will discover signif icant advantages in labor-intensive and low-technology production (such as with seeds and fiber), whereas North America and Europe will likely maintain their long lead in technology-inten-sive production including extraction, molecular isolation, and infusion.

With hemp offering land-rich developing nations some opportunities to serve local needs and supply international markets, the hemp produc-tion leaderboard will likely change in the coming years as more developing nations activate their respective hemp markets.

18%

4%

2%

36%

11%

16%

13%

2018 U.S . HEMP SALES BY PRODUC T C ATEGORY


� Hemp CBD � Personal Care � Industrial Applications � Food � Consumer Textiles � Supplements � Other Consumer Products


REGIONAL ANALYSIS

N O R TH A MER I C A

$0

$20

$40

$60

$80

$100

Market Value Estimate (High)Market Value Estimate (Mid)Market Value Estimate (Low)

$90.2

$82.5$85.6

$U

SD

BIL

LIO

NS


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN NORTH A MERIC A ($U S D I N B I L L I O N S)

Home to the world’s largest federally legal adult-use cannabis program in Canada, and a patchwork of legalized U.S. states, North America is laying the foundation for a global industry. With total demand for cannabis valued at $86 billion, the demand for cannabis in North America is second only to Asia ($133 billion) in terms of value, and is 25% larger than the European market. Both the

TOTAL ESTIMATED NUMBER OF CANNABIS CONSUMERS

42.7 million

LEGAL ADULT USE

COUNTRIES:

1

LEGAL MEDICAL USE COUNTRIES:

1

N U M B ER O F CO U N T R I E S I N R EG I O N :

3


R E G I O N A L A N A LY S I S: N O R T H A M E R I C A

United States and Canada have been at the fore-front of the legal cannabis movement, influencing the way governments and legislative bodies across the world are approaching potential legalization of cannabis in their own countries.

Canada

Canada leads the global cannabis market: In 2018, it became the first G-7 nation to fully legalize cannabis for medical, adult-use, and industrial purposes, acting as a catalyst in the development of the international cannabis marketplace. While still deploying its domestic markets, its licensed producers (LPs, those companies authorized to grow and sell cannabis) are the world’s largest cannabis companies, with multibillion-dollar valu-ations. These companies are leveraging their deep pockets to fund supply chain and infrastructure investments into cannabis companies globally as they seek to produce in lower-cost regions and capitalize on newly legal markets.

0%

10%

20%

30%

40%

50%

60%

70%

20182014201020062002199819941991198919871984198019761973

62%

16%

43%

Source: U.S. National Opinion Research Center, General Social Survey

SHOULD M ARI JUANA BE M ADE LEG AL?( Y E S % , U. S . , 197 3-2018)

M ARKE T PRICES: AVER AGE PRICE PER GR A M

Country Average Price Per Gram

United States $10.48

Greenland $9.00

Canada $8.97



The United States

While the United States has not federally legalized cannabis for medical or recreational use, 33 U.S. states have enacted laws legalizing cannabis in some form for medical use, and 10 states have legalized cannabis for adult use. An additional 14 states allow the use of CBD – a non-psychoac-tive cannabinoid with strong therapeutic value - on very limited basis. Despite federal illegality, cannabis use in the U.S. is so widespread at the municipal level that it is increasingly becoming a low priority for law enforcement and the courts. As

Canadian LPs have agreements to export to over 20 different countries, giving the country a significant head start in the emerging global cannabis market. The companies exported nearly 1,500 kilograms of dried cannabis in 2018 (3x the amount exported in 2017).

The Canadian approach to legalization, while not free of its challenges (including acute product shortages when sales f irst began), broadly offers a model that can be adapted by other countries seeking to deploy legally regu-lated cannabis markets.

$U

SD

BIL

LIO

NS

$0

$5

$10

$15

$20

$25

20222021202020192018

$4.59 $5.88 $8.60

$10.4

$12.9

$15.2

$17.8

$20.4

$9.95$7.25

$5.78$6.99

$9.21$10.42

$7.99

Total Legal Sales$76.7 Billion

Total Adult Use Sales$40.4 Billion

Total Medical Sales$36.3 Billion

2018-2022COMBINED TOTAL


U.S . LEG AL C ANNABIS M ARKE T RE TAIL SALES GROW TH

� Medical � Adult Use



a result, not only do Americans hold very progres-sive views on cannabis legalization – 62% believe it should be nationally legal – the country has also led the world in cannabis innovation, with the creation of new genetics, cultivation techniques, derivative products, and ingestion methods.

While federal illegality will leave the U.S. behind Canada in the global cannabis market, American companies will have access to the world’s most lucrative cannabis market due to the large popu-lation of high-spending cannabis consumers.

The states where cannabis is legal are generat-ing significant revenues from legal sales. With new products enabling consumers to tailor their cannabis experiences, and advancing research conf irming new therapeutic uses, the legal markets are growing quickly.

New Frontier Data estimates that in 2019 the legal U.S. markets will generate nearly $13 billion in legal sales, growing to over $20 billion by 2022.

The U.S. has historically influenced international public policy through its “war on drugs”. The U.S. drove international agreements through the United Nations and other international bodies, to effectively prohibit cannabis legalization glob-ally through binding international treaties. Such policies, and specifically how Canada and other counties are interpreting them, are driving global debate about cannabis reform.

New Frontier Data estimates that in

2019 the legal U.S. markets will generate nearly $13 billion in legal sales, growing to over $20 billion by 2022."


R E G I O N A L A N A LY S I S: C A R I B B E A N

$U

SD

BIL

LIO

NS

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5


$2.5

$0.8

$1.7


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN C ARIBBE AN ($U S D I N B I L L I O N S)

C A R IB B E A N

Since prohibition in the early 1900s, criminal laws for illegal cannabis possession and trafficking have been harsh in the Caribbean, but the region’s nations are now in the midst of cannabis reform. In 2014, the Caribbean Community (CARICOM), a coalition of 15 Caribbean nations coordinating economic policies and development planning for the region, created a commission to investigate cannabis reform to determine whether legalization would be beneficial to the region.

Six Caribbean countries have legalized cannabis for medical use, and six have decriminalized pos-session of personal amounts. No nation has yet legalized recreational use, though Jamaica (where cannabis is decriminalized) has one of the highest

allowances for personal use, at 2 ounces or 56 grams. In comparison, Uruguay, the first country to legalize recreational cannabis, permits its citi-zens to purchase 40 grams per month.

Among Caribbean nations currently reviewing cannabis reform bills are St. Vincent and the


1.0 million

LEGAL ADULT USE

COUNTRIES:

0


6


23


Grenadines, Antigua and Barbuda, and Barbados. After having decriminalized cannabis possession in December 2018 for medical and scientific purposes, St. Vincent and the Grenadines now have three additional bills in review: The Medicinal Cannabis Industry Bill, the Cannabis Cultivation (Amnesty) Bill, and the Permitted Use of Can-nabis for Religious Purpose Bill.

Similarly, Antigua and Barbuda decriminalized up to 10 oz. of cannabis through a law expected to be in effect by mid-2019. The island is also completing a draft bill for recreational use, “The Permitted Use of Cannabis for Religious Purposes Act of 2018”, under which all adults will be allowed to possess up to 15 grams and grow four plants for personal use. Barbados plans to hold a referendum to vote on the legalization of adult-use cannabis, though no date has yet been set.

The number of consumers in the Caribbean is comparatively small on a global scale, but the region has several advantages. Known as one of the most fertile regions in the world, the Carib-bean has a rich agricultural history, and low-cost production advantages that manufacturers have taken advantage of since the 1970s. While the domestic market is relatively small, the potential for production for export is extremely attractive in the context of future global cannabis trade. However, foreign companies interested in pro-ducing in the region should pay close attention to laws governing foreign investments. While coun-tries like Bermuda are lifting bans lifting bans on cannabis-related investments, other Caribbean governments have laws that require profit-sharing with the national government.

ILLICIT M ARKE T PRICES: AVER AGE PRICE PER GR A M ( A L L P R I C E R A N G E S S H O W N A R E I N $U S D)

Inexpensive (<$8.69/gram)

Moderate ($8.70-$13.05/gram)

Expensive (>$13.06/gram)

The Bahamas Trinidad and Tobago Bermuda

Antigua and Barbuda Curacao Cayman Islands

Dominican Republic Turks and Caicos Islands Virgin Islands (U.S.)

St. Lucia Cuba Dominica

St. Vincent and the Grenadines St. Martin (French) Sint Maarten (Dutch)

Jamaica St. Kitts and Nevis British Virgin Islands

Haiti Barbados Puerto Rico

Grenada Aruba

HIG

H P

RIC

E

LOW

PR

ICE



R E G I O N A L A N A LY S I S: L AT I N A M E R I C A

$U

SD

BIL

LIO

NS

$0

$5

$10

$15

$20


$16.3

$4.2

$9.8


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN L ATIN A MERIC A($U S D I N B I L L I O N S)

L ATIN A MER I C A

Recognizing the significant potential of a regulated industry, cannabis businesses within and outside Latin America are aggressively pursuing import and export opportunities in the region. Based on cannabis use rates, consumption volumes, and regional prices, New Frontier Data estimates that consumers in Latin America collectively spend $9.8 billion USD on cannabis annually (inclusive of legal, regulated, and unregulated markets as well as illicit markets).

Several countries in Latin America have more than 1 million cannabis consumers. Brazil, with a population of 209.3 million, is home to the largest population of consumers in the region, at 4.2 million. Although Chile has a much smaller pop-

ulation, the rates of use are significantly higher than most other countries in the region, with 13.1% of the population consume annually. Colombia, Mexico, and Argentina each are home to approx-imately 1.3-1.4 million cannabis consumers.


12.9 million

LEGAL ADULT USE

COUNTRIES:

1


8


20


Legal Markets

Many countries across the Latin American region are launching legal medical cannabis through highly regulated industries. Eight countries have legalized the medical use: Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay. The region’s only country to have legalized recre-ational use is Uruguay, though Mexico is expected to legalize an adult-use program this year.

Uruguay’s adult-use reform was enacted in 2014, and the country has since also established a reg-ulated medical cannabis program. Unlike many early legalization efforts in the U.S., which were spurred on by voter initiatives, cannabis policy reform in Uruguay was driven by the government. The stated goals of adult-use legalization were to reduce violence associated with drug trafficking and to promote public health. Uruguay’s govern-ment tightly controls the cultivation, processing,


L ATIN A MERIC A SHARE OF TOTAL ADDRESSABLE M ARKE T ( TA M) BY COUNTRY

19%24%

24%

15%

11%

7%


� Brazil � Chile � Colombia � Mexico � Argentina � Rest of Latin America

ILLICIT M ARKE T PRICES: AVER AGE PRICE PER GR A M ($USD)


Moderate ($$3.37- $6.55/gram)


Brazil Belize Venezuela, RB

Suriname Argentina Guyana

Guatemala Chile Mexico

Colombia Bolivia Nicaragua

Honduras Peru Ecuador

El Salvador Uruguay Panama

Paraguay Costa Rica


HIG

H P

RIC

E

LOW

PR

ICE


New Frontier Data estimates the value of total can-nabis demand in Europe to be roughly $69 billion. France, Italy, and Spain have the highest report rates of use in the region, with the three combined countries representing 16.9 million consumers.

and dispensing of both medical and recre-ational cannabis.

Colombia is positioning itself to be a global exporter of medical cannabis derivatives. With its inexpensive cultivation costs, ideal growing conditions, and experienced cultivators, Colombia is expected to produce cannabis at a fraction of the cost of exporters like Canada.

Medical cannabis is legal in Brazil, and posses-sion and cultivation of personal amounts are decriminalized. Despite the increasing number of registered patients, patient access is still determined on a case-by-case basis, which has constrained the pace of the program's growth. However, there are proposed changes in place that could significantly expand patient access and spur program growth in the near future.


EU RO PE


42.6 million

LEGAL ADULT USE

COUNTRIES:

1*


29


54

$U

SD

BIL

LIO

NS

$0

$10

$20

$30

$40

$50

$60

$70

$80


$78.7

$59.0

$68.5


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN EUROPE ($U S D I N B I L L I O N S)

*Multiple countries in Europe, including Spain and the Netherlands, do not have federally licensed distribution structures in place, but do allow for the use of recreational cannabis through private spaces, or social clubs.


R E G I O N A L A N A LY S I S: E U R O P E

Legal Markets

Europe has been at the forefront of cannabis reform, with nearly 30 countries in the region providing patients with access to some sort of legalized medical cannabis (whether through a regulated medical program, or by case-by-case granting of compassionate-use licenses by health officials). In 2018, Europe saw the former Soviet state of Georgia decriminalize personal amounts of cannabis, which resulted in a de jure legaliza-tion of adult use possession and consumption of cannabis, thus creating Europe’s only legalized adult-use jurisdiction. Many, if not most, of the remaining countries are actively reviewing draft legislation or assigning committees to review aspects of cannabis legalization.

Germany

Germany stands as an example of the region’s most mature medical market. With more than 16,000 registered patients, the country saw strong response from patients when medical cannabis was legalized in 2017, a distinguishing characteristic compared to other countries whose patient numbers dwindled for the first several years of legalization due to constrictive regulations.

In Germany, patients with physician prescrip-tions can access medical cannabis through pharmacies. While the pharmaceutical model is common in many legalized medical markets across Europe, Germany’s high patient partic-ipation rate may be attributable to its position as the f irst country to offer medical insur-ance coverage for medical cannabis through its universal health care system and through private insurers. Germany is now joined by Italy,



Moderate ($9.58- $14.73/gram)


Hungary Sweden Cyprus

Gibraltar Belarus Malta

France Macedonia, FYR Isle of Man

Liechtenstein Latvia Estonia

Monaco Turkey Channel Islands

Croatia Lithuania Norway

Belgium Czech Republic Iceland

Poland Germany Finland

Portugal Luxembourg Ireland

Bulgaria Andorra Armenia

Netherlands Switzerland Faroe Islands

Serbia Bosnia and Herzegovina Denmark

Azerbaijan Italy San Marino

Russian Federation Austria Greece

United Kingdom Romania

Moldova

Georgia

Slovenia

Montenegro

Spain

Slovak Republic

Ukraine

Albania

Kazakhstan

Kosovo


HIG

H P

RIC

E

LOW

PR

ICE


Since 2017, Italy’s Department of Defense has been producing medical cannabis with the goal of providing free cannabis-based medicines to 100% of patients in need through a heavily reg-ulated environment. Italy’s stands as one of the few regulatory models around the world where the government took complete control of cultivation, yet the program has been plagued with supply issues, and patients have been forced to rely either on the illicit market or importation of expensive products through one of seven licensed importers.

The Italian parliament is reviewing a bill to create a uniform medical cannabis framework, as well as draft legislations for full legalization. Opera-tors and investors should keep an eye on court decisions, however: If the country decides to implement a legal and functional adult use can-nabis market, it will be likely be heavily regulated similar to the existing medical market.

Denmark, Israel and Spain (with pharmaceuti-cal forms only) in offering insurance coverage for cannabis-based treatments.

Italy

Italy has 19 regions and two autonomous prov-inces, each of which hold local legislative power and maintain their own health systems (health services and insurance) for their respective resi-dents. Each region has authority to adopt medical cannabis laws and decide the terms of availability and reimbursement. While all of the local gov-ernments have legalized medical cannabis, the availability of cannabis-derived pharmaceutical products, the lists of conditions eligible for treat-ment, and the levels of governmental subsidies each differ across health systems.

$0

$2

$4

$6

$8

$10

$12

Czech RepublicPolandSpainUnited KingdomGermanyItalyFrance

$4.3

$2.5$U

SD

BIL

LIO

NS

$1.8

$10.5$9.5

$4.6

$9.7

Error bars shown depict range of uncertainty due to pricing

variation within region.


TOP 7 EUROPE AN C ANNABIS M ARKE TS WITH LEG AL MEDICINAL USE L A R G E S T TOTA L A D D R E S S A B L E M A R K E T VA LU E ($U S D I N B I L L I O N S)



S O C I A L U S E I N EU R O P E

Spain

Spain offers another unique cannabis distribution model through cannabis social clubs. Cannabis social clubs are private business establishments meant to provide space for patients to purchase and consume cannabis for medicinal use. The clubs are required to adhere to jurisdictional regulations on membership and cultivation. Aside from the pharmaceutical drugs Nabilone, Dronabinol, and Sativex, all other forms of cannabis sold in Spain are illegal. Given that the law does not distinguish between adult-use and medical-use cannabis, physicians are not permitted to prescribe cannabis to patients. Therefore, adult-use consumers (as well as patients) in search of cannabinoid-based

treatments look to the country’s well-known can-nabis social clubs for their supply of cannabis. Social clubs operate on a shared-consumption model operating under the country’s legalization of consumption and possession of cannabis in private spaces, along with cultivation of cannabis for personal use.

It is difficult to determine the exact number of social clubs in Spain (most accounts estimate 700 or more), and reports of clubs disregarding regulations has caused the clubs to come under judicial scrutiny in recent years. Political groups are working to create a medical cannabis bill that would provide a more regulated and transparent system for patient access to cannabis-based treatment.

Netherlands

Though the Netherlands is often mistakenly thought to have fully legalized adult-use can-nabis, the cultivation and purchase of personal amounts from licensed coffee shops are only decriminalized. Its medical market has been legal since 2000, and the Dutch Office of Medicinal Cannabis (BMC) through the Ministry of Health oversees the supply of medical cannabis to the country’s estimated 50,000+ patients. Bedrocan holds a monopoly on all medical cannabis prod-ucts, and medical cannabis patients are permitted to purchase and possess greater quantities than non-medical consumers: In medical transactions, patients may obtain up to 16 grams of cannabis with a prescription, while coffee shops limit con-sumers to 5 grams per transaction, however limits are generally difficult to monitor and enforce.

Though the Netherlands is

often mistakenly thought to have fully legalized adult-use cannabis, the cultivation and purchase of personal amounts from licensed coffee shops are only decriminalized.



Decriminalization to Adult-Use

As the region with the highest number of coun-tries where cannabis is decriminalized, Europe has the most potential for its countries to transition to full legalization. Relaxation of cannabis laws (commonly through decriminalization) is often a precursor to legalization, though time between the easing of prohibition and full legalization can take many years. Laying a path for increased social acceptance, decriminalization can happen prior to or concurrently with legalization, serving to ease the enforcement or implementation of new laws.

The recent wave of decriminalization in Europe builds on decades of decriminalization on the con-tinent. Spurred by the increase in the trafficking of hard drugs in Europe and internationally, recent decriminalization efforts have been based on two policy priorities: acknowledgment that strict drug laws for minor or soft drugs have proven ineffec-tive to curb use or arrests, and the need to ease the strain on the judicial system from the backlog and expense of prosecuting first-time offenders for minor violations.

GMP Standards in Europe

The European Union requires its member countries to enforce the European Union Good Manufacturing Practices (GMP), which detail the minimum standards that a medicines manufac-turer must meet in their production processes. The EU’s GMP are generally stricter than the WHO’s. Most countries not member to the EU keep mutual recognition agreements (MRAs) with EU countries, which each EU member state’s cannabis agency may interpret when transposing into national laws. Meeting the high European GMP standards can be a costly and resource-in-tensive process for cannabis companies, but it serves as guarantee for the quality of imported medical products.


R E G I O N A L A N A LY S I S: O C E A N I A

O CE A NI A

Oceania comprises Australasia, Melanesia, Micronesia, and Polynesia. It spans an area of roughly 3.3 million miles with a population of more than 40 million. Oceania is home to a diverse mix


3.7 million

LEGAL ADULT USE

COUNTRIES:

2


6


19

$U

SD

BIL

LIO

NS

$0

$2

$4

$6

$8

$10

$12


$11.8

$5.8

$8.7


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN OCE ANIA ($U S D I N B I L L I O N S)





Tuvalu French Polynesia Australia

Micronesia/FSM

American Samoa Guam

Vanuatu New Caledonia Fiji

Papua New Guinea Nauru New Zealand

Solomon Islands Samoa Northern

Mariana Islands

Kiribati Tonga Palau

Marshall Islands


HIG

H P

RIC

E

LOW

PR

ICE


R E G I O N A L A N A LY S I S: O C E A N I A

of economies, from the highly developed and globally competitive financial markets of Aus-tralia, New Zealand, and Singapore (all countries which rank high in quality of life and GDP per capita), to the much less developed island nations of Kiribati and Tokelau, remote islands in the north of the region which have among the world’s lowest GDP per capita values.

While Oceania is a large and culturally diverse region, attitudes toward cannabis are shifting across it. Australia and New Zealand anchor the region with the most progressive cannabis attitudes and highest rates of use, and as seen elsewhere around the world, the acceptance and adoption of legalization by these two developed countries will significantly influence the accep-tance and adoption of cannabis legalization throughout the region.

Australia commands the lion’s share of demand in the region, and has the most established medical cannabis market, albeit its industry is still in its infancy. More than 60% of Oceania’s popula-tion is in Australia, and approximately 12% of the country’s adult population consumes cannabis at least once per year.

The existing cannabis market across Oceania is worth an estimated $8.7 billion USD. Currently, nearly all of the estimated demand is being met by the illicit market. However, as the existing legal medical markets in the region develop, and new countries permit medical use, the medical market will be poised for growth as patients are intro-duced to its therapeutic use. As the legal markets emerge and mature in Oceania, they will begin to capture an increasing proportion of the $8.7 billion total available market.

A S I A


77.2 million

LEGAL ADULT USE

COUNTRIES:

0


2


44





Iran, Islamic Rep. Sri Lanka United Arab Emirates

Oman Vietnam Qatar

India Uzbekistan Japan

Bhutan Maldives Korea, Rep.

Palestine Lebanon Thailand

Bangladesh Iraq Turkmenistan

Lao PDR Jordan Hong Kong SAR, China

Timor-Leste Mongolia Bahrain

Syrian Arab Republic Cambodia Brunei Darussalam

Kyrgyz Republic Malaysia Singapore

Yemen, Rep. Afghanistan China

Myanmar Philippines Kuwait

Nepal Pakistan Saudi Arabia

Tajikistan Indonesia Macao SAR, China

Korea, Dem. People's Rep. Israel


HIG

H P

RIC

E

LOW

PR

ICE


Legal Markets

Asia lags relative to other countries in legal-ization momentum. Currently, only two Asian nations (Thailand and South Korea) have legal-ized medical cannabis, and both did so recently (in 2018). However, the speed with which both countries passed their medical laws may be a signal of coming change in the region.

China has a long history with cannabis, but while the country produces industrial cannabis on a vast scale for export to international markets, there has been domestic reluctance to embrace medical and adult use of cannabis. The harsh puni-tive enforcement of cannabis prohibition and the government’s tight control over information have effectively suppressed awareness about and use of cannabis in the country.

Though Asia has historically been known for having some of the world’s most restrictive cannabis pol-icies, the doors to cannabis-related opportunities are beginning to crack open.

The most densely populated of all the world’s regions, demand for cannabis in Asia equates to roughly $133 billion USD annually. Although in its nascent stages, as the global markets for cannabis takes shape, Asia has the potential to dominate future global trade through low-cost labor and rapidly advancing industrial sectors. While many are looking towards the E.U. for their market of choice, savvy investors and operators (such as those in New Zealand and Australia) are targeting Asia as an untapped market ripe for the picking should legalization policies advance.

$U

SD

BIL

LIO

NS

$0

$50

$100

$150

$200

$250


$218.2

$22.7

$132.9


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN A SIA($U S D I N B I L L I O N S)


R E G I O N A L A N A LY S I S: A S I A

Under the Chinese government’s criminal law, “individuals who smuggle, traffic, transport, or manufacture narcotic drugs are sentenced to either 15 years of prison, life imprisonment, or death, and suffer confiscation of property.” Because of such potential repercussions, even the growth of industrial hemp production has been impacted. The history of other drugs in China, including the Opium Wars of the early 1900s, has further slowed the social acceptance of cannabis. A general reluctance to engage in the canna-bis market notwithstanding, China represents a massive economic opportunity and is considered a long-term threat to cultivators worldwide.

Hemp in China

China is home to the world’s largest textile indus-try. Industry experts anticipate that hemp fibers, already a respectable portion of the market, will replace some of cotton’s market share in the domestic textile market and related sectors. China is also a potentially massive market with growing interest in hemp-derived CBD. Given each the role of cannabis in traditional Chinese medicine, that market’s familiarity with natural wellness products, and an immense and aging population, the country could see unparalleled consumer interest for the hemp-derived cannabinoid.

19%

76%

5%

CHINA' S $1.1 BILLION HEMP INDUSTRY, 2017 CONSUMER SALES


� Consumer Textiles � Hemp-Derived CBD � Food, Supplements, Personal Care, Industrial Applications & Other


R E G I O N A L A N A LY S I S: A F R I C A

A FR I C A

Total demand for cannabis in Africa is estimated at $37 billion USD. The lion’s share of the regional demand ($15.3 billion) is in Nigeria, which is the continent’s most populous country with the world’s highest cannabis usage rate, followed by Ethiopia ($9.8 billion), and Morocco ($3.5 billion). Almost the entirety of the region’s demand is cur-rently met through the illicit market, but attitudes are shifting towards legalization, making Africa a target for early-mover investors.

NOTE: In the first quarter of fiscal 2019, Canopy Growth acquired Daddy Cann Lesotho PTY Ltd. (also known as Highlands, a license holder in Lesotho), with rights to cultivate, manufacture, supply, hold, import, export and transport cannabis and its resin through a USD $28

million deal. The deal signifies one of a growing number of recent investments by international companies into the African market.

Despite pervasive cultivation and use of cannabis in Africa (and legalization discussions brewing in countries like Kenya), only three nations have


83.0 million

LEGAL ADULT USE

COUNTRIES:

1


3


54

$U

SD

BIL

LIO

NS

$0

$10

$20

$30

$40

$50

$60

$70

$80


$63.7

$19.0

$37.3


TOTAL ESTIM ATED VALUE OF C ANNABIS DEM AND IN AFRIC A ($U S D I N B I L L I O N S)



formally advanced towards legalization – South Africa, Lesotho, and Zimbabwe. While most can-nabis is produced for local consumption, countries like Lesotho and Morocco have served as major suppliers to the illicit markets of neighboring coun-tries and regions. In fact, cannabis cultivation and interregional trade is prevalent in many African countries, reflecting widespread use despite strict laws and harsh punishments, and serving as a vital revenue sources in many communities.

While South Africa is the only country to have formally decriminalized cannabis, many employ unofficial decriminalization schemes (such as Lesotho) where use and possession are tolerated or ignored by local law enforcement for reasons including religion, prioritization of trafficking, or preservation of tourism income.

Lesotho

In July 2017, after having long enjoyed tacit decrim-inalization within the country, Lesotho became the first African nation to legalize the cultivation of medical cannabis. Lesotho’s regulations only permit new license holders to grow one strain of cannabis to start, but permits use of others once a company has demonstrated its market viability.

The progressive medical law and welcoming envi-ronment of international investment has made Lesotho a primary target for cannabis inves-tors and businesses seeking to enter the African market. The country’s long history of cannabis cul-tivation, and its proximity to South Africa (one of the most developed countries on the continent), attracted millions of dollars’ worth of cannabis investments to the country in 2018 alone.





Senegal Burkina Faso Algeria

Rwanda Namibia Morocco

Liberia Eswatini Mauritius

Tanzania Cabo Verde Tunisia

Benin Sudan Ethiopia

Comoros Egypt, Arab Rep. Angola

Burundi Djibouti Cameroon

Togo Sao Tome and Principe Nigeria

Guinea-Bissau Cote d'Ivoire South Africa

Central African Republic Congo, Rep. Eritrea

Chad Mali Seychelles

Somalia Zambia Gabon

Sierra Leone Botswana Equatorial Guinea

Gambia, The Malawi Kenya

Uganda Lesotho Libya

Mozambique Mauritania Zimbabwe

South Sudan Ghana

Niger Congo, Dem. Rep.

Madagascar

Guinea


HIG

H P

RIC

E

LOW

PR

ICE



Zimbabwe

Zimbabwe legalized medical cannabis via a legis-lative amendment in 2018, allowing for the sale of fresh and dried herbal plants and cannabis oil. Zimbabwe’s medical program permits the use and sale of CBD oil and herbal cannabis, with medical products shipped directly to customers. Zimba-bwe is also contemplating implementing GMP and other international standards that are stricter than those of the legal Northern American markets.

Advocates in the country are advancing hemp legalization as a distinct sector from the medical cannabis market. While a law has not yet been proposed, public interest is quickly growing, prompting the likelihood of significant legislative action in 2019.

As Zimbabwe works to reintegrate with the global economy following decades of autocracy, the country is looking to medical cannabis as a way to establish new industry in an economy with high unemployment, while stimulating its struggling agricultural sector, and capitalizing on the coun-try’s fertile lands which once earned it the moniker ”the breadbasket of Africa”.

South Africa

On September 18, 2018, the South African Con-stitutional Court declared that possession and private use of cannabis is a fundamental right for South African citizens. The court gave lawmakers 24 months to create regulations for legal adult-use and medical cannabis markets. By October 2020, South Africa will be deploying the framework for a fully regulated market; should the country’s experience prove a positive one, it will likely influ-ence other African countries to take steps toward reform programs within their own borders.

Zimbabwe legalized medical cannabis via

a legislative amendment in 2018, allowing for the sale of fresh and dried herbal plants and cannabis oil."


• With more than 263 million estimated cannabis consumers in the world, significant demand exists for the plant’s medical, well-ness, industrial and recreational applications. The strength of demand varies by region, and is heavily influenced by the status of legalization, levels of social acceptance, and access to cannabis in each country.

• The value of the existing worldwide demand for cannabis is an estimated $344.4 billion USD, based on both the estimated consumption levels and current market prices for cannabis flower in each country. Outside of the few countries that have legalized recreational use of cannabis, nearly all of the global demand is currently being met by the illicit market.

• There are an estimated 1.2 billion people worldwide suffering from medical conditions for which cannabis has shown therapeutic value. Adoption of medical cannabis treat-ment by even a small proportion of that population would create a massive market. Furthermore, adoption of medical cannabis will accelerate as the global medical community becomes better informed about the most current science on medicinal cannabis, and begins to include it in their portfolio of therapeutic options.

• 55 countries have legalized cannabis for medical use in efforts to provide access to patients suffering from serious medical conditions. The stringency of the regulatory framework chosen varies by country (including rules governing qualifying condi-tions, physician participation, production and processing, and insurance coverage), and has a significant impact on the size, growth, and reach of each program.

• Six countries have legalized cannabis for recreational purposes, and are in the process of developing regulations to guide its distribution and sale. These countries have concluded that prohibition has been ineffective at curbing cannabis use for large proportions of their adult populations, cannabis is comparatively less harmful than other drugs, and the social coasts of prohibition outweigh the benefits to society. As such, through legalization they aim to transition illicit cannabis production and use to legal, regulated, and taxable markets.

• Cannabis Trade – Export/Import Markets: As governments in newly legalized markets are working to lay the foundations for their nascent industries, many have struggled to structure domestic cultivation and production to sufficiently meet initial

KEY TAKEAWAYS


K E Y TA K E AWAY S

demand for cannabis products, leading to a need for imported products. Canada, the country with the world’s largest federally legal adult-use cannabis market, has been the frontrunner in fulfilling such needs, exporting nearly 1,500 kilograms of dried cannabis in 2018 (3x the amount exported in 2017).

• While Canada has been first out the gate, other regions such as Latin America are poised to potentially compete in the export market with low costs of production and deep agricultural industries. Asia, while the slowest region to adopt legalization, also represents a wealth of opportunity in the forms of low-cost labor and a long history of hemp production.

The opportunity represented by legal cannabis is significant, but many countries limit the number of legal participants and have regulatory policies that are still evolving, leading to high overall risk and barriers to entry. Investors and operators in the space should take caution with deliberate planning for risks including delays and government interference, as well as disruptions and compli-ance issues due to shifting regulatory policies as markets evolve.

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