Despite the fact that medical marijuana is not yet legal in more than a dozen states in the U.S. and even fewer states have legalized adult-use marijuana, the country is still the leader in cannabis sales around the world. Even with Canada’s legalization of recreational cannabis last year, the U.S. will still retain its position as the global marijuana sales leader for the foreseeable future.

According to The State of Legal Marijuana Markets: 2019 Update by Arcview Market Research and BDS Analytics, the global cannabis market reached $12.3 billion in 2018 with the United States accounting for $10.5 billion of that sum. Of the remaining $1.8 billion, Canada made up $1.2 billion of it.

The report also reveals that by 2022, the global cannabis market is expected to soar to $31.7 billion. The U.S. will account for 85% of those sales, and together, the United States and Canada will make up 87% of global sales.

Similarly, Brightfield Group’s researchers predicted in its 2017 report, Canada and International Cannabis Markets, that despite growth trends in international marijuana markets and more countries legalizing cannabis, the United States will continue to dominate global marijuana sales well into the future.

I spoke with Bethany Gomez, Director of Research for Brightfield Group, in November 2017 to learn more about the barriers investors should understand before they venture into international cannabis markets, and her comments are as relevant now as they were then. Here’s what she had to say:

Cannabiz Media: What are the key differences between the U.S. marijuana market and international marijuana markets, particularly Canada? What are the biggest barriers for businesses that want to enter the marijuana industry in countries other than the U.S.?

Bethany Gomez: The biggest differences are that outside of the U.S., product types are extremely limited, and outside of North America, patient and other user access is much more limited. Edibles are nearly nonexistent outside of the U.S., and oils, tinctures and CBD dominant products are much more common (whereas in the U.S. they make up only a small percentage of the overall market). While international markets are opening up medical programs, acceptance of edibles is rare, which is certainly a barrier to entry for companies with this focus in the immediate term.

In Canada, in particular, a large difference is the level of consolidation of the market and the resources now behind the largest companies. Many of the licensed producers (LPs) in Canada are owned by the same company. With limited product differentiation in the immediate term and limited channels for distribution, it will be challenging for smaller brands to compete with the larger players.

Cannabiz Media: For investors who want to invest in international marijuana companies, what are the key factors they should understand before they make a decision?

Bethany Gomez: It’s important to have realistic expectations for the growth potential of the markets these companies are playing in and to be cognizant of how changes in the regulatory structures in those countries would affect the entrance of other businesses into the market.

Cannabiz Media: What are the biggest red flags or good signs that could be the same or different from what investors would look for in the U.S.?

Bethany Gomez: Understanding the pricing structure and how this relates to their profitability is vital in international markets. With such limited product differentiation, many of the products on the market become commoditized, and at present, the pricing of most medical marijuana products overseas is so high that it is discouraging patient uptake.

The Key Takeaways

The Brightfield Group highlighted a key takeaway from its research that is just as relevant now as it was in 2017: International marijuana markets are not like U.S. markets. There are differences in distribution models, product types, laws, and more that can limit the size and scale of marijuana programs in different countries.

If you’re thinking of investing in the cannabis industry outside of North America, it’s important to do your research and understand that many of those markets don’t have the population, product variations, infrastructure, or processes in place to keep pace with the U.S.  Every country is different, so the importance of doing your homework can’t be emphasized enough.

Originally published 11/21/17. Updated 5/3/19.