CALIFORNIA: Arcview Market Research, a leading publisher of cannabis market research, released its first ever estimate of the entire North American cannabis market, including legal, medical and illicit marijuana sales. The 5th edition of the State of Legal Marijuana Markets Report estimates consumers spent $53.3 billion on cannabis in 2016 across all markets.
This first of its kind report finds that legal regulated marijuana sales in North America totaled $6.9 billion in 2016, a 34 percent increase from 2015. Legal sales are projected to grow at a compound annual growth rate of 26 percent, from $6.9 billion in 2016 to an estimated $21.6 billion by 2021. The report also found that while all categories of legal cannabis products enjoyed healthy growth, the growth of alternative methods of consumption outpaced that of traditional flower sales, jumping, for example, from 30 percent of total legal sales in the first quarter of 2014 to 45 percent in the third quarter of 2016 in Colorado. The new legal market projections rely on a proprietary bottom-up point-of-sale foundation with millions of individual consumer transactions from dispensary partners in the largest legal cannabis markets across the country created by BDS Analytics.
An executive summary of the report was released at Arcview’s private Investor Forum in L.A. January 17th. The full 200+ page report will be released in a few weeks.
“The enormous amount of existing, if illicit, consumer spending sets cannabis apart from most other major consumer-market investment opportunities throughout history,” said Troy Dayton, CEO of Arcview Market Research. “In contrast to comparable markets with fast growth from zero to tens of billions in recent decades such as organic foods, home video, mobile, or the internet, the cannabis industry doesn’t need to create demand for a new product or innovation – it just needs to move demand for an already widely-popular product into legal channels.”
Other highlights of the executive summary include:
- Including the illicit market, consumer spending on cannabis in North America amounted to an estimated $53.3 billion in 2016, 87 percent of it still outside legal channels despite erosion of the illicit market in adult-use states. That was down from 90 percent of sales in 2015;
- Advances in legalization after four new adult-use markets (California, Massachusetts, Nevada and Maine) become active by 2018 will erode the illicit trade further, down to 67 percent of the market in 2021;
- Colorado’s illicit market has seen the steepest decline in percentage of overall sales
- In states that have not legalized even medical sales however, illicit market operators thrive on the “illegality premium” built into prices there with no competition from legal operators;
- In Q1 2014 when adult-use launched in Colorado, over 70 percent of legal sales came from dried flower; in Q3 2016, it was less than 55 percent. In contrast, concentrate sales were $20 million in Q1 2014, or 13 percent of sales. By Q3 of 2016 they had quadrupled to $80 million, and 22 percent of sales;
- By Q3 2016, Washington legal sales were already 21 percent concentrates, 9 percent edibles and 10 percent pre-rolled marijuana cigarettes, with flower accounting for only 59 percent. In Oregon where concentrates and edibles were only allowed for the first time in the adult-use channel in July 2016, the transformation in category and brand sales was almost overnight.
“This is the most dynamic market I have analyzed since the early days of the Internet in the 1990s,” said Tom Adams, Arcview Market Research’s new Editor-in-Chief. “Just one example: a huge surge in private equity investment in 2014 and 2015 helped drive the number of brands with concentrates in Colorado stores from 465 to 975 in one year. The largest brand grew its sales 84 percent in the first nine months of 2016, but several competitors posted triple digit growth rates such that it barely held on to its share of the market in a very crowded field.”