A new report from Prohibition Partners has been released detailing the state of play for the burgeoning cannabis industry in the region of Oceania. Read this article for more information on the report and a summary of the key findings.
We note that the subject contained in this article represents illegal activity in certain jurisdictions. Whilst we do not condone any acts which are contrary to any such laws, we understand that readers in those jurisdictions which have decriminalised cannabis may find this article of interest.
Despite the economic uncertainty that lingers all around us, there is one industry in the Oceania region that is shaping to have a sizeable increase in revenue over the next 5 years. The legal cannabis market in Oceania could be worth up to $1.55B USD by 2024, according to a new report published by Prohibition Partners, a cannabis market intelligence and consultancy firm.
The Oceania Cannabis Report: Second Edition is the most extensive review of the burgeoning cannabis industry in Australia, New Zealand and the surrounding islands. Included in the report is information on the current stance and future development of these industries as well as detailed market forecasts, in-depth analysis and a guide to some of the key movers and shakers in this space.
If you're wanting to access the full report, then click here. For a quick summary of some of the key findings, scroll down.
The Oceanic Cannabis Industry
While the legal cannabis market was initially slow to start in this part of the world, Oceania is rapidly emerging as a global contender in both the medical and recreational cannabis industries. This is due in large part to the sub-tropical climate and agricultural expanses found within the region. Increasingly liberal attitudes towards cannabis use have also helped the industry to find a footing.
In 2020, the Oceanic cannabis industry is estimated to reach a value of $54.1M USD (approximately $82.4M AUD). Australia will account for a large majority of this market share, due to having the largest population and highest disposable incomes in the region. It is estimated that by 2024, the Australian cannabis industry will account for 79% of the overall market in Oceania. The growth of Australian companies not only domestically but internationally will strengthen their ability to compete with the Canadian giants of the industry.
Australia and New Zealand are both keen to establish domestic supply chains and future exports, attracting global investment in the Oceanic cannabis industry. In the future, this will also open up avenues into the nascent Southeast Asian market. Australia, in particular, has devoted significant resources towards domestic cultivation, as it attempts to create a global supply infrastructure and bring down the cost of prescriptions.
Governments, institutions and companies within the region have also invested heavily in clinical research. This research will enable a better understanding of cannabis and its potential which will make it easier to establish the required legislation and cannabis access systems. Another desired outcome from this is an improvement in the medical and public opinion towards cannabis, which comes from knowing more about the plant, the products that come from it and the effects that they can produce.
A shift in the reliance on imported products, as a result of domestic cultivation, will increase the revenue being generated within the industry over the next five years. This could potentially trigger a domino effect throughout the region as nations and states that are late to the party can evaluate the economic benefits of a legalised and regulated cannabis industry.
As the continents with established industries fight for dominance in the global supply hierarchy, the issue of oversupply is already affecting profit margins. Countries and companies within the Oceanic region that can deliver low-cost products and high clinical standards will have the best chances of entering and flourishing in the global supply game.
"As the cannabis industry is in its relative infancy, there is a very real opportunity for businesses to set the foundations for a flourishing, considerate, eco-conscious and socially intelligent industry."Stephen Murphy, Group Managing Director @ProhibitionPartners
At this stage, it is too early to understand the full impact that COVID-19 will have on the cannabis industry. Since the pandemic hit the region, the ASX has fallen 5.6% and cannabis stock prices have plummeted. Although a recession could be on the horizon, the production and supply lines for cannabis in the region appear to be unaffected.
The value of the Australian cannabis market is estimated to be worth $1233.9M USD in 2024, with medical sales accounting for $469.8M and recreational sales accounting for $764.1M.
In terms of current legal status, medicinal cannabis use has been legal at a federal level in all the states and territories of Australia since 2016. Recreational cannabis use is still illegal in all states and territories, except for one – the Australian Capital Territory (ACT). On the 31st of January 2020, the ACT became the first state in Australia to legalise recreational cannabis use, with adults being permitted to possess up to 50g of cannabis and grow up to 2 plants.
While this move was a progressive step for the Australian cannabis industry, it is one that has been contested by the federal government. Although the Australian Green Party and Labor Party are pro-cannabis, Scott Morrison, the Prime Minister, does not share the same sentiment. Looking at the US model would suggest that the Australian cannabis industry could encounter some teething problems in regards to access, research and commerce in the future. Public support is gaining momentum however, with a recent survey revealing that 42% of Australians support recreational cannabis legalisation, a number which has increased by 9% since 2015.
Although attitudes towards recreational cannabis use haven't changed at a federal level, the government is showing strong support for the medical sector. In 2020, the Australian government is investing $3M AUD in researching the effectiveness of cannabis in the treatment of pain, cancer and its related side-effects. There are also lots of clinical studies being conducted (more than 60 clinical trials currently) which are investigating the effectiveness of cannabis for conditions such as epilepsy, dementia, Tourette's and anxiety.
Currently, the only medicinal cannabis product approved by the TGA is Sativex however, this product isn't approved or subsidised by the Pharmaceutical Benefits Scheme (PBS). The lack of subsidies has created some barriers to patient access, with many being priced out of the market. While the cost of medications can vary the average cost per week is $61.20 USD however, the implementation of a domestic supply chain and the creation of cheaper products should alleviate this in future. The government has also streamlined the medical cannabis access system by removing cumbersome procedures and reducing application processing times.
Even though big international cannabis companies have seen the potential of the Australian market and are setting up large-scale facilities within the country, there also Australian cannabis companies which are growing rapidly. The report includes profiles of the companies to watch in this space, some of which include:
"Althea is an Australian licensed producer, supplier and exporter of pharmaceutical-grade medicinal cannabis. This company offers a range of education, access and management services to support eligible patients and healthcare professionals. The company currently imports its cannabis from Canadian partner Aphria however, it aims to produce its own cannabis once its Victoria production facility is operational, which will add a significant boost to margins."
"Botanix Pharmaceuticals is developing a range of therapeutics using cannabis that are designed to treat serious skin diseases such as acne, psoriasis and atopic dermatitis. The company completed a randomised clinical study on its Permetrex product to establish the mechanism of action of its CBD product in skin disease. Results showed that the product has significant anti-inflammatory and immune-modulating activity."
"MGC Pharma plays a large role in in the cannabis space both in Australia and in Europe. It is a 'seed to pharmacy' biopharmaceutical company specialising in the production and development of phytocannabinoid-derived medicines. Having progressed its proprietary CannEpil and MXP100 medicines from the research and development stages through to commercialisation, MGC Pharma reached another milestone in September 2019, when specialist doctors in the UK were then able to prescribe these products under the Early Access to Medicines Scheme."
The value of the New Zealand cannabis market is estimated to be worth $276.4M USD in 2024, with medical sales accounting for $96.5M and recreational sales accounting for $179.9M.
Much like Australia, medical cannabis is legal throughout the whole country, first being legalised in 2018. New Zealand could also be the next nation in Oceania to legalise recreational cannabis, due to the NZ Labour Party promising a cannabis legalisation referendum during the 2020 general election. The current date set for the referendum is Saturday, the 19th of September. A recent Horizon poll conducted in March of this year found that 54% of voters polled would vote to legalise recreational cannabis.
Sativex and CBD products that have minimal concentrations of other cannabinoids, such as Tilray oil, are the only medical cannabis products which doctors are currently able to prescribe. Just like in Australia, there are no subsidies for these products resulting in high costs and decreased patient access.
This could be about to change however as New Zealand rolls out a new Medical Cannabis Scheme which will launch in April 2020. This scheme aims to improve patient access and reducing suffering. It includes a licensing regime for the cultivation of medicinal cannabis and the manufacture and supply of medicinal cannabis products. This will in turn help to reduce the cost of cannabis-based medicines.
The biggest challenge for the New Zealand sector over the next 12 months is improving prescriber uptake. A survey released by Helius Therapeutics indicated that 22% of doctors felt informed enough to prescribe medical cannabis, with 89% saying they would be happy to prescribe medical cannabis if they felt that they knew enough.
Rest of Oceania
The value of the cannabis market in the rest of Oceania is estimated to reach $36.4M in 2024, with medical cannabis accounting for $31.9M and recreational cannabis accounting for $3.5M.
Outside of Australia and New Zealand, the opportunities to implement a cannabis industry in other regions of Oceania begin to dwindle. This is mainly due to conservatism being preferred to liberalism in certain areas. While cannabis is largely illegal at both a medical and recreational level in most parts of the region, there are some exceptions, such as Guam, Vanuatu and the Northern Mariana Islands.
"We must regulate this illicit drug that is the most widely used drug in our society. We have to take it and control it, monitor its use and effects, benefit from its medicinal efforts, and allow our people to live in a safer environment."Governer Lou Leon Guerro of Guam
The island of Guam is a US territory which first legalised medical cannabis in 2014 and recreational cannabis in 2019. The law in Guam allows adults over the age of 21 to possess up to one ounce (roughly 28g) of cannabis. Governor Guerrero stated at the time: "We must regulate this illicit drug that is the most widely used drug in our society. We have to take it and control it, monitor its use and effects, benefit from its medicinal efforts, and allow our people to live in a safer environment".
In Vanuatu, a 'Policy Direction on Cannabis' was approved that was designed to lay the groundwork for industrial hemp and cannabis production in Vanuatu. Before the legislation was even approved, a local doctor approved the importation of 4,000 bottles of cannabis-derived medicine to treat sufferers of diabetes. PLSI, the company who produced the products, moved from Colorado to Vanuatu to carry out the clinical trials.
The company agreed on a 25-year deal to become Vanuatu's sole provider of diabetic treatment and a deal was made with the Ministry of Agriculture which would allocate 5000 acres of land for cannabis cultivation. These deals may have been premature, however as no legislation was in place to allow the cultivation of cannabis on the island. As such Prime Minister Charlot Salwai rejected the partnership with PLSI ordered that further investigations be made into the validity of a cannabis industry on Vanuatu.
The Northern Mariana Islands, another US territory, signed a bill in September 2018 that legalised the sale of cannabis for recreational use for those aged 21 or older. This presented the beginnings of a fully legal cannabis market which is overseen by government regulators. Interestingly, the territory went straight to the legalisation of recreational cannabis first, without implementing a medical cannabis programme.
While the opportunity for growth outside of Australia and New Zealand is currently limited, the situation could quickly change, especially if Guam and the Northern Mariana islands show economic and medical benefits as a result of legalisation. There is also a fair way to go in terms of innovation, with the market being dominated by similar products, such as cannabis oil and tinctures. Although this is the case, we are seeing more research and manufacturing licences being handed out in both Australia and New Zealand, which could be the beginnings of innovation in the Oceania cannabis industry.
& Keep Up to Date
Get the latest pot stock recommendations, cannabis news
and industry updates straight to your inbox!