While the current growth of Australia's medicinal cannabis industry is promising, the country remains in its fledgling stages compared with the United States and Canada. So what exactly does the future hold for the Land Down Under when it comes to cannabis?
On the 17th of October in 2018, Canada became the second country after Uruguay to federally legalize cannabis and the first G7 nation to do so. This made Canada an international torchbearer for the global cannabis movement, with many curious onlookers waiting to see how its legalization efforts would turn out.
Undeniably, there have been teething issues in Canada with regard to cannabis. Excessive red tape, an obscure "lottery system" used to determine who gets retail licenses, expensive cannabis due to undersupply, and a lack of retail stores, all fused together to create poor conditions for any cannabis industry. These conditions led to a persistent black market for cannabis whereby nearly 80% of cannabis consumers were still purchasing their weed from the black market, a year after legalization was enacted.
Though the industry has course-corrected many of these unideal circumstances. The "pot lottery" system is being scrapped, the undersupply of cannabis has been replaced with oversupply, thus lowering prices, (and creating some issues for pot producers, but we'll get into that) and overall monthly cannabis sales rose to $154.2 million in January 2020, up from $54.9 million the previous year.
Canada's medicinal cannabis market isn't doing too poorly either, which is estimated to grow from 40 million Canadian dollars in 2015 to over two billion dollars by the end of 2020. And this growth has been reflected in Canada's workforce, as employment in Canada's cannabis industry nearly quadrupled in 2019 according to Statistics Canada. Moreover, according to Bloomberg, Canada's cannabis sector contributed $8.26 billion to the country's gross domestic product as of July 2019.
Overall, while the regulatory framework could definitely have been better to begin with, Canada's cannabis industry has been positive for the nation.
Could Canada Provide the Roadmap for Australia's Cannabis Legalization?
Canada is similar in many ways to Australia, as both countries share a similar population size and density, and both have a focus on exports and agriculture. Though the countries are also starting to share another thing in common: cannabis.
While Canada legalized the use of medicinal cannabis products in 2001, Australia was much later to the game and only federally legalized medicinal cannabis in 2016. Australia's cannabis industry, like many of its predecessors, initially grew at a slow pace, and has only recently begun to show significant growth.
In June, Australia's Special Access Scheme Portal-B approvals for medicinal cannabis products hit an all-time monthly high of 4,630 approvals. When we spoke to Rhys Cohen, the Principal Consultant at Freshleaf Analytics, he stated this was a level of growth that Australia can expect to continue.
"June's figures were really encouraging. It's been a bloody tough year in basically every way you could imagine, but seeing patient access continuing to expand despite all the 2020 craziness gives me a lot of hope. FreshLeaf estimates there are currently >15,000 active patients in the Australian market today. And that's likely to grow to >25,000 by the end of the year."
Moreover, while Australia's medicinal marijuana industry is currently valued at roughly USD $40 million, Prohibition Partners predicts that number will skyrocket to USD $1.2bn in 2024, with medical sales accounting for $469.8M and recreational sales accounting for $764.1M. Assuming, of course, that the Land Down Under legalizes cannabis for recreational use before then.
Currently, Canada's recreational sales alone are estimated to generate USD $1.8bn for 2020, and there's no reason that Australia won't reach similar levels shortly after 2024. Australia is an agricultural powerhouse, and also has several benefits that Canada didn't have when it legalized medicinal cannabis. Firstly, there simply isn't the same stigma surrounding cannabis in 2020 as there was in the early 21st century that likely impacted Canada when it legalized medicinal cannabis. Additionally, Australia has the advantage of having witnessed Canada's cannabis industry, and creating more sensible legislation by comparison.
On the benefits of Australia's regulatory framework, Rhys Cohen told Stockhead:
"I think one thing Australia has done better than Canada and the USA has to do with our regulatory framework at a fundamental level," Cohen said.
"If you look at how the industry developed in Canada, the mainstream medical community didn't want a bar of it. So you've got this weird situation where someone sees a doctor, the doctor writes a medicinal cannabis recommendation and the patient contacts the drug manufacturer directly."
"Conversely, if you're an Australian, your cannabis is obtained the same as any other medicine; it's prescribed by a doctor and dispensed through a pharmacy, which I think is a better way to do medical cannabis."
The Future of Australia's Cannabis Industry
In the immediate future, Australia can look forward to seeing CBD being potentially available as an over-the-counter medicine in pharmacies sometime in 2021 and will continue to see consistent growth in medical cannabis patient numbers for years to come.
Australians may also bear witness to its neighbour New Zealand voting yes in the cannabis referendum next month. If New Zealand does indeed legalize cannabis following the results of the referendum, it will undoubtedly spark conversations in Australia about the potential for cannabis legalization over coming years.
Should Australia follow Canada's, and potentially New Zealand's lead, and legalize cannabis recreationally, the country would be wise to look at the other countries that have done so, and how effective they have been. Ensuring adequate supply levels, maintaining a low-cost product and a sufficient amount of retail stores, would all help Australia to capitalize on the existing cannabis use within the country.
Though in the meantime, there's still plenty to be optimistic about when thinking of the future of Australia's medicinal cannabis market.
One optimist when it comes to Australian medicinal cannabis is Dave Martyn, Founder of Compass Cannabis Clinics. Having established a successful network of holistic, medicinal cannabis clinics in Canada, Dave has brought Compass down under, positioning himself at the epicentre of what he believes will be an "explosive period of growth over the next 5-7 years."
"Australia's Patient growth has been record-breaking for the last year but it is nothing compared to where we see it going, likely in the range of 350,000 active patients per month over the next 5-10 years," Dave said.
"We see strong opportunities in the Australian product market, via white label agreements. Better product quality and improved pricing for patients will drive growth in patient counts and likely improve results for patients. Lastly, should CBD be reclassified in early 2021, that market will be huge and Compass Clinics intend to be in it. Over the counter CBD has already found big markets in the USA and UK, so there is no reason not to expect the same in Australia," Dave concluded.
Compass Cannabis Clinics is currently running a capital raise campaign on Birchal to expand their Australian operations.
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