In case you haven't noticed, big things are happening with the legal marijuana industry. It's already growing at an impressive pace, and excitement surrounding the legal pot industry really took off following the legalization of recreational marijuana in Canada in October. Eventually, Wall Street is looking for the cannabis industry to generate $50 billion to $75 billion in sales by the end of the next decade.

Wall Street is especially intrigued about the long-term potential for global recreational marijuana sales. Although adult-use consumers are considerably more likely to purchase lower-margin dried cannabis flower, the pool of prospective consumers on the recreational side of the equation is much larger than the aggregate number of medical marijuana patients, providing a volume advantage.

So where are these adult-use sales coming from? According to the most recent round of quarterly earnings reports from pot stocks, three growers are clear leaders in the recreational space, one of which will likely come as a surprise.

A bearded man holding a lit cannabis joint by his fingertips.

Image source: Getty Images.

1. Canopy Growth: 71.6 million Canadian dollars in gross recreational sales

In mid-February, the largest cannabis grower in the world by market cap, Canopy Growth (CGC -0.28%), announced that it had racked up close to CA$98 million in gross sales (i.e., not excluding excise taxes paid) during its fiscal third quarter. Few pot stocks leaned more convincingly to the recreational side of the market during the first quarter of adult-use legalization in Canada than Canopy, with CA$71.6 million in gross sales, or about 80% of total cannabis-related revenue. 

Canopy has a number of clear advantages that have allowed it to launch out of the gate much faster than a majority of its peers. For starters, it's had few capital restrictions. It ended the most recent quarter with almost CA$5 billion in cash and cash equivalents, most of which is due to a CA$4 billion equity investment from Constellation Brands. Having ample cash on hand allows Canopy Growth to execute on its long-term strategy, as well as ramp up production.

Building on this point, Canopy Growth is also producing at a substantially higher run-rate than most of its competition. That's because it currently has more than 4.4 million square feet of cultivation space licensed for production out of 5.6 million square feet of growing space. When operating at full capacity, Canopy should be a top-2 producer, yielding north of 500,000 kilos per year.

Lastly, this is a company with the best-known weed brand throughout all of Canada: Tweed. Canopy's branding and marketing efforts are unparalleled, and it's translated into significant adult-use sales in the early going.

A dollar sign-shaped shadow being cast on a pile of cannabis leaves.

Image source: Getty Images.

2. OrganiGram Holdings: CA$30.7 million in gross recreational sales

Perhaps the biggest surprise is that Aurora Cannabis (ACB -0.69%), which projects to be the leading producer throughout all of Canada, isn't in the No. 1 or No. 2 spot in terms of recreational pot sales during the most recent quarter. Rather, the No. 2 spot belongs to the only major Atlantic-based grower, OrganiGram Holdings (OGI 1.66%).

Perhaps the biggest advantage for OrganiGram is that it's one of just three cannabis growers to have secured a supply deal with all of Canada's provinces. Although these may not be huge supply agreements with regard to aggregate commitment, simply having volume locked in should lead to consistent revenue, and it removes some of the pressure of finding a "home" for the company's production.

OrganiGram is also an efficiency leader among the top producers. With close to 490,000 square feet of aggregate production space at its Moncton campus, OrganiGram expects to produce 113,000 kilos a year, when at full capacity. This works out to more than 230 grams per square foot, which is well over double the industry average of closer to 100 grams per square foot. Already operating at an annual run-rate of 36,000 kilos, it's clear that OrganiGram had little trouble moving product in its most recent quarter.

As a whole, some 91% of OrganiGram's cannabis revenue was derived from the recreational market in the second quarter. This figure will likely decline a bit, as a percentage of medical sales, in the quarters to come. That's because OrganiGram is devoting 56,000 square feet of added space at Moncton to boost derivative production, which may or may not include a line of cannabis-infused beverages. But for the time being, it's the No. 2 recreational producer behind only Canopy Growth.

An up-close view of a flowering cannabis plant in an indoor greenhouse.

Image source: Getty Images.

3. Aurora Cannabis: CA$26.5 million in gross recreational sales

The third leading marijuana stock generating sales from the adult-use market is Aurora Cannabis, with CA$26.5 million in gross revenue in the fiscal second quarter, ended Dec. 31, 2018.

While it's probably a bit shocking that a relative tiny tot like OrganiGram bested Aurora in adult-use sales in the first 2.5 months of the post-legalization environment in Canada, it shouldn't be. That's because Aurora Cannabis has committed to focusing its efforts on medical cannabis consumers. Even though we're talking about a considerably smaller pool of customers, the fourth quarter National Cannabis Survey in Canada showed that, relative to adult-use consumers, medical pot patients use marijuana more frequently, purchase it more often, and are more willing to buy high-margin derivatives, such as oils. This should, ultimately, be a more profitable decision for Aurora.

Nevetheless, Aurora's sheer volume does favor an uptick in recreational weed sales. The company ended March with an annual run-rate of more than 150,000 kilos, which is tops among all growers, and management conservatively expects north of 500,000 kilos of yearly run-rate output by mid-2020. Yours truly is looking for Aurora to reach more along the lines of 780,000 kilos a year by 2022.

Long story short, don't be surprised if a considerably higher percentage of Aurora Cannabis's sales are derived from medical marijuana than its peers, but expect it to eventually surpass OrganiGram for the No. 2 spot in recreational marijuana sales.