Consumer Products

Marijuana Sales to Reach Up to $6 Billion This Year

Retail sales of both medical and recreational marijuana are forecast to total $5.1 billion to $6.1 billion in 2017, rising to $11.9 billion to $17.1 billion in 2021, according to the just-released 2017 Marijuana Business Factbook. Recreational use sales are expected to post more sales than medical marijuana sales this year, rising from $1.8 billion last year to an estimated range of $2.6 billion to $2.9 billion, compared with 2017 medical marijuana sales of $2.5 billion to $3.2 billion.

Recreational sales are expected to get a boost from a July launch in Nevada, continued growth in Colorado, Oregon and Washington, and added sales in Alaska’s recreational market. Beginning with recreational sales in California next year, sales of marijuana for recreational use are expected to continue rising robustly. California’s recreational sales could total $4 billion to $5 billion by 2021.

A major concern in the industry is the level of intervention threatened by the Trump administration. Attorney General Jeff Sessions is a long-time opponent of marijuana use, either for medicinal or recreational purposes, and his recent memo instructing federal prosecutors to seek maximum penalties for all violations of federal law extends to violations of federal laws against marijuana.

In addition to uncertainty about federal intervention, the Factbook lists four additional key changes, some positive, some negative, facing the industry this year:

Investment deals are increasing in size, frequency and scope. Investors appear to be planning to put as much capital into the industry in 2017 as they have invested altogether in all previous years.

Business conditions for growers are getting worse. The cultivation segment of the industry is already saturated in more mature markets such as Colorado and Washington. Rising production is weighing on wholesale prices, putting pressure on growers. This is particularly true for indoor growing operations.

Recreational sales continue to surge. Sales in Colorado and Washington soared by a combined total of 66% year over year in 2016, and recreational use sales in Oregon tripled between February and August of last year. Sales growth so far this year indicates the surge in recreational sales will continue.

Profits are taking longer to realize. The Factbook notes that a year ago 70% of retailers said they broke even or made a profit in their first year of operation. That number fell to 55% in this year’s survey, and start-up costs have doubled in many markets over the past few years.

The Factbook forecasts the total economic impact of the marijuana industry in 2017 will reach $20.4 billion to $24.4 billion, indicating that the knock-on effect of the industry is about triple its direct sale impact.

The Factbook is available for purchase at the Marijuana Business Daily website. A free executive summary is also available.

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