NEW YORK: The rapid growth of the legal cannabis industry could help spur the U.S. economy. According to a report from The Marijuana Policy Group, the legal cannabis market in Colorado alone created about 18,000 cannabis-related jobs in 2015 and generated about $2.39 billion in economic activity for the state. In 2016, cannabis-related companies employed an estimated 100,000 to 150,000 full- and part-time workers, as was indicated in a report by Marijuana Business Daily.Legalization of cannabis for recreational use in four states in 2016 will further fuel the growth of this market.
WASHINGTON: Arcview Market Research, in partnership with New Frontier Data, has released its Washington Legal Cannabis Market State Profile, which explores the recent significant changes to the state’s cannabis industry. The elimination of the medical system that was operating in parallel to the adult use market will lead to a significant contraction of the state’s medical market, making the adult use market the primary driver of the official Arcview Market Research projection of $2.4 billion in cannabis sales projected by 2020.
“The Washington market is maturing, but it has a long way to go to reach saturation. It will practically double by 2020. People really like cannabis and the regulated market is beating the underground market, as predicted,” said Troy Dayton, CEO of The Arcview Group.
“Over the past 18 months, Washington has undergone some of the most dramatic changes to any regulated cannabis program in the country, from lowering the tax rates to consolidating the medical and adult use markets into a single channel. These changes are intended to streamline the market and eliminate structural inefficiencies. However, it will be at least another year before we understand their full impact on product supply and consumer behavior,” said New Frontier Data Founder & CEO, Giadha Aguirre DeCarcer.
Washington’s combined medical and adult use sales are projected to grow from $1.2 billion in 2016 to $2.04 billion in 2020, a compound annual growth rate of 23%. After more than two years in operation, sales in Washington’s adult use market have continued to exceed expectations. In 2014, average monthly sales were $10.8 million. By 2015 average monthly sales increased five-fold to $51.2 million. This then doubled in 2016 to more than $111.6 million, with strong demand expected to continue in 2017.
The state has folded medical sales into existing retail cannabis stores, eliminating all stand-alone medical dispensaries. Additionally, the state increased the number of retail licenses that will be made available from 334 to 556, and under the new harmonized medical program, patients will be required to pay the 37% excise tax on cannabis, thereby eliminating a key benefit of being a medical cannabis patient relative to being an adult use consumer.
Some other critical issues related to Washington’s market explored in the report include:
- Adult Use Sales Continuing to Outperform Expectations
- Washington exemplifies the value of making cannabis industry data publicly available
- The growth of concentrates as the dominant non-flower product segment
- The state’s goal to expand the random testing program for pesticides
If you would like more information on Washington’s legal cannabis markets, you can download the 2016 Washington Legal Cannabis Market State Profile at www.ArcviewMarketResearch.com and the report can be ordered for $249.
The cannabis industry is still taking shape. Legislative and regulatory policies can have a profound impact on the direction the movement takes. There are many academic sources available, but what differentiates this report from others is that this author is able to combine economic rigor with direct industry experience. The author has a background in economics, experience in high tech business operations as well as a background in the cannabis industry as a chief operating officer, a governmental affairs officer and a compliance officer. These practical experiences in the cannabis industry has further enabled the author to take the next step and assess the impact policies have on the industry and to make policy recommendations to address them.
Front Runner, an agglomerated cannabis data website, commissioned Whitney Economics to conduct an analysis of the Washington cannabis market. The initial genesis of the project was to ascertain whether or not the 222 additional retail outlets proposed by the Washington Liquor and Cannabis Board were an appropriate number based on the BOTEC analysis.
Once the research commenced, the project extended beyond the initial scope and examined such topics as; the total demand forecast for the market, the total supply available to support the market, the elasticity of demand, taxation and how to maximize the conversion from the black market to the retail market. The data used in this report cites multiple sources, includes original analysis and forecasts, as well as data taken directly from the Washington Liquor Control Board (WLCB) and BioTrackTHC. The empirical data was analyzed and the findings contained herein are an interpretation the impact of policy decisions have on the Washington cannabis market.
The data assesses the empirical results from January 2015 through March 2016 and extrapolates into the 2016 fiscal year and beyond.The methodology was to examine specific aspects of the market to ascertain if the Washington market was able to be sustained at the proposed retail levels, whether the current policies support the development of the market, what policies need to be changed and what indicators to examine moving forward.
The conclusions derived from the data were meant to answer questions about the market that are fundamental to the foundation of economics. For if the data cannot support the most basic fundamentals of economic theory, then the data or policies must be viewed with skepticism.
The findings of this report are simple. The consumer is extremely price sensitive. The black market plays a large role in the marketplace and without a reduction in tax, the market will not realize its true potential. The level of demand is able to support the retail expansion, but without converting the demand over from the black market, the retail system will face challenges in growth. The allocation of the retail outlets can support the demand, but the allocation by county needs adjustment. The supply of product in the market is appropriate for now, however the amount of supply capacity is well in excess of what the market will bear. This, in turn will lead to further commoditization of prices, compression of retail margins and maintain a vibrant black market.
The insights contained in this report are much more applicable to an investor, a policy maker or a regulator than many previous works and that is what differentiates this report from others currently available.The report also provides a list of indicators to track on a regular basis that will allow the investor or regulator to ascertain the health of the industry and the success of the public policies as they currently exist.