Few industries have grown at the pace of the legal cannabis industry in recent years. Cannabis research firm ArcView notes that North American sales catapulted higher by 33% to $9.7 billion in 2017, and they're on track to hit more than an estimated $47 billion in annual sales by 2027. That's the type of growth that investors and business owners have a very hard time overlooking, even if it's still an illicit drug at the federal level.
There's little denying that times are changing, with Canada on the verge of becoming the first developed country in the world to legalize adult-use cannabis, and 29 states in the U.S. having passed broad-based legislation on medical marijuana since 1996.
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This new cannabis-use survey is an eye-opener
However, the scope of change in the legal cannabis movement is none more apparent than in the latest results from the 2017 "Monitoring the Future" survey, which is funded by the National Institute on Drug Abuse.
In the 2017 survey, nearly 44,000 students in the eighth, 10th, and 12th grades were surveyed in 360 public and private schools from across the country. In particular, it was the responses of the oldest cohort, the 12th graders, that was the most telling about marijuana.
Between 1976 and 1979, the "Monitoring the Future" survey showed that just 15% of 12th-grade students believed their parents would not have disapproved of them using marijuana once or twice. Furthermore, only 8% said their parents wouldn't have disapproved of occasional pot use, while a meager 4% wouldn't have disapproved to regular cannabis use.
Now, let's fast-forward to 2017, where 23% of 12th-grade students now believe their parents wouldn't disapprove of them trying marijuana once or twice. Similar jumps were seen for occasional use and regular use, where 17% and 13%, respectively, of 12th graders responded that their parents wouldn't disapprove. All three of these comparisons for rare, occasional, and regular pot use offered statistically significant percentage increases over the last four decades.
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Three significant takeaways
So, what does this survey tell us? Indirectly, I see three important takeaways for the legal cannabis movement, businesses, and even investors.
1. The public's perception of marijuana is consistently improving
First, we're seeing a dramatic and consistent shift away from the negative rhetoric directed toward pot that was observed during the "War on Drugs" during the 1980s and 1990s. According to national pollster Gallup, favorability toward marijuana for all adults aged 18 and over has never been higher. Its October 2017 survey found that nearly two out of three respondents favored the idea of fully legalizing the drug.
Meanwhile, in 1995, the year before California became the first state to OK the use of medical weed for compassionate-use patients, Gallup's survey found just 25% support for legalization. As favorability improves, the pressure will mount for select state and federal lawmakers to reform existing cannabis laws.
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2. The younger generation is the future of the legal cannabis industry
Secondly, this survey adds even more evidence that the younger generation views cannabis in a considerably more positive light relative to older generations. For those of you who may have missed it, the independent Quinnipiac University released a poll back in April that asked adults aged 18 and over whether they would support the legalization of marijuana. Though 63% of respondents said yes, the standout figure was that 82% of 18-to-34-year-olds were in favor of legalization. In fact, support for cannabis tends to ebb with age, per Quinnipiac's poll.
What's the point, you ask? Namely, that it demonstrates the importance Generation Z and millennials will play for the legal weed industry in the years and decades to come. Even though legal marijuana dispensaries may have a nice mix of consumers in terms of age right now, it's the strong favorability of the younger generation toward pot that's liable to drive growth over the long run.
3. Tobacco and alcohol companies had better watch their backs
Third, it suggests that the tobacco and alcohol industries had better keep an eye on the rearview mirror, because the legal cannabis industry is closing in. Notably, the "Monitoring the Future" survey showed that the perceived disapproval among the parents of 12th-grade students for smoking a pack of cigarettes a day or weekend binge drinking rose modestly since 1976-1979. Some 92% of 12th-grade students believe their parents would disapprove of their choice to smoke a pack a day in 2017, up from 89% four decades ago, while 86% suspect their parents would disapprove of binge drinking, up from 85% between 1976 and 1979.
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In plainer English, whereas the negative stigmas associated with smoking tobacco and drinking alcohol are still present (if not more apparent in the case of tobacco) four decades later, the negative perception of cannabis has weakened to the point where consumers could begin to switch away from tobacco and/or alcohol consumption to marijuana instead.
This potential for product swapping is a big reason why Corona beer and spirits maker Constellation Brands (STZ 1.47%) ponied up approximately $190 million for a 9.9% stake in Canada's Canopy Growth Corp. in late 2017. Constellation Brands understands the dynamics of vice products and viewed an investment in Canada's most visible (and largest) cannabis company as the next logical step. Plus, Constellation and Canopy Growth Corp. are expected to partner on a number of products, as well as assist one another with regard their marketing and distributing their products -- at least in countries where cannabis is legal.
There's no longer any denying at this point that the cannabis landscape is shifting. The only question left to answer is whether Congress is paying attention.
