Are Even Better Days Ahead for Legalization and the Cannabis Industry?


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Written by Phil Clark
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Nobody can see into the future, but educated guesses can be made. ArcView Market Research and New Frontier’s recent report on marijuana included good news, bad news, and many future projections for legal marijuana. The overall impression being a good one.

For starters, the report found “a 92.8 percent chance that by year’s end a majority of U.S. states (26 or above) will have some form of legalized cannabis market,” that “demand is expected to remain strong in 2016 with legal markets projected to grow to $7.1 billion, a 26 percent increase over 2015,” and that “by 2020, legal market sales are expected to surpass $22 billion, with adult use sales comprising about 53 percent of the total legal market.”

As for states where marijuana is currently legal, “Washington is projected to have the largest adult use market by 2020 at $2.6 billion, followed by Colorado at $2 billion” and that the top five states for adult use of marijuana are collectively projected “to generate $10.5 billion in adult use sales by 2020, and account for 87 percent of the total adult use market.”

Speaking of Washington, the report noted that the Economic Revenue and Forecast Council projects the state will receive $636 million from legalization of marijuana in the next five years.

The fact that states are voting to legalize marijuana medically or across the board, but the federal government still classifies the plant as a schedule I narcotic is something that is not only confusing, but also potentially damaging to non-violent consumers and entrepreneurs. The report makes note of this with a bit of hope attached:

“Over the next year we anticipate even greater debate about the disconnect between federal and state cannabis policies on issues including the business challenges created by lack of clear regulation of banking for cannabis businesses, the high cost of federal cannabis enforcement in states where it is legal, and the problems with the tax code that cause cannabis business to pay a much higher effective tax rate than other businesses.”

One future projection in the report that nobody who has ever experienced marijuana in any way needed a crystal ball to predict was that wax/shatter, vaporizers, pills, edibles, and specialized strains of marijuana represent “some of the largest opportunities for new cannabis products.”

As far as the business side of legal marijuana is concerned, the report noted that “surplus production in Washington between summer 2014 and summer 2015 led to the average price per gram to dip below $10 for some strains by the end of the 2015.”

This is important to potential new marijuana businesses in the future because, according to the report, “as the industry matures and large-scale production ramps up, industry participants should be prepared for competitor efforts to capture market share through price reduction strategies.” This is “especially true as excess supply could lead to nervous producers attempting to offload inventory through fire-sale pricing.”

In California, its medical marijuana market is expected to shrink in the next few years due to “the combination of strict new medical regulations passed in 2015 and the legalization of adult use in 2016.” However, this market is still “expected to remain the largest market in the U.S. through 2020,” with the overall loss reportedly being a drop “from $2.7 billion in 2015 to $2.6 billion by 2020.”

With so many positive projections, it may be tempting to celebrate now, but remember that this future depends upon votes and investments making it a reality.

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