The latest gaze into the crystal ball puts the U.S. marijuana industry north of $24 billion by 2025.
New Frontier Data, a cannabis market research and analytics firm, gave The Cannabist a first look at its 2017 annual report, which aims to track the long-term potential for the industry. The report acknowledges external factors such as federal rescheduling or a full-scale crackdown could shake up the near-term.
By mapping out state-by-state sales to $24.5 billion in 2025 and projecting that cannabis industry employment could top 255,000 jobs within three years, New Frontier hopes to show that cannabis is not just a flash in the pan, said John Kagia, the firms executive vice president of industry analytics.
Its very hard to look at both the numbers and associated economic dynamics and envision that this genie could be put back in the bottle, he said.
Such prognostication should be approached with a fair share of caution, some industry analysts and economists have said.
This nascent industry is jam packed with unique factors, including varying regulations, disparate markets and lacking longitudinal data. So making predictions for eight months out, let alone eight years out, is a daunting if not impossible exercise, said Andrew Livingston, director of economics and research for cannabis law firm Vicente Sederberg LLC.
Livingston noted two quick calculations he made for Colorado sales in 2017: one using a linear extrapolation of sales data going back to 2014 and the other using average year-over-year growth rates. The resulting numbers of $1.618 billion and $1.783 billion, respectively, were about $165 million apart.
This is a fast-paced, changing market with varying different dynamics that have more to do based on governmental and regulatory dynamics than they do on consumer dynamics, Livingston said.
According to New Frontier, its researchers considered numerous elements in making their projections, including: changes in regulations, qualifying conditions for medical programs, what types of products are allowed, rates of illicit use prior to adoption of new laws, demographic trends, population growth, tourism levels and medical marijuana patient populations, among others, Kagia said. Researchers also obtained state-level data via public-records requests to examine patient numbers and cannabis business income statements.
Neither the report nor Kagia disclosed the formulas used or the weight ascribed to certain inputs.
We realize this is such a dynamic environment that even minor changes do have substantive (effects), he said.
By 2025, New Frontier estimates that the more than two-dozen states with medical marijuana programs, and the nine recreational marijuana markets (including Washington, D.C.) should be fully operational, with the goliath California accounting for more than $6.59 billion more than one-quarter of the national sales.
Colorado, the first state with legalized adult-use cannabis sales, is projected to reach $1.94 billion in medical and recreational sales by 2025, placing it fourth behind California, Floridas medical-only market ($2.51 billion), and Washington state ($2.14 billion).
New Frontiers eye on 25 shows that some of the newly recreational states will see some negative pressure put on medical sales; however, medical marijuana sales will continue to account for more than half of the $24.5 billion market.
New Frontiers tabulations have medical marijuana sales increasing at a 13 percent compound annual growth rate to $13.3 billion in 2025. Recreational marijuana is projected to grow faster at a 25 percent compound annual growth rate to $11.2 billion, according to New Frontier.
New Frontier also estimated that by 2019, the marijuana industry could be responsible for 255,000 direct and indirect jobs. The firm based its calculations on a 2016 Marijuana Policy Group report about the marijuana industrys economic impact on Colorado.
Words of caution
Officials with the Marijuana Policy Group have been critical of research methodology used to quantify the marijuana industry.
In general, almost all of those quick-and-dirty national estimates come from back-of-the-envelope calculations, and they are wrong by a factor of 2x or more, MPG economist Miles Light wrote in an e-mail to The Cannabist. For example, if you use the sales in Colorado, and then try to extrapolate those sales rates to (Los Angeles) County, you will be 2x too high. This is because L.A. County has many minorities (eg., Vietnamese, Indians, Iranians, etc.). The prevalence of drug use is much, much lower among those minorities, leading to a lower overall sales rate.
MPG, in its Colorado economic impact report, claimed that the long-term forecasts made by New Frontier and others in 2016 grossly overestimate potential sales.
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Full Article: State To Lead The Way As Cannabis Industry Reaches $24B
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