RSS

The Bulletin

Is marijuana the next great American industry?

Posting in Uncategorized

The legal U.S. marijuana market is projected to grow 64 percent to $2.34 billion by 2014 and exceed $10 billion by 2018, making it one of the fastest growing industries in the country, according to ArcView Market Research.

The pace of growth is even expected to eclipse the expansion of the global smartphone market, ArcView Group CEO Troy Dayton said in the company's second State of Legal Marijuana Markets report released this week.

The recent legalization of marijuana use by adults in Colorado and Washington is largely what's driving the market expansion. Adult use in Washington and Colorado is projected to add $359 million and $208 million to their respective markets in 2014.

Fourteen more states including Alaska, Oregon, Hawaii, Maine, California and Arizona are expected to adopt legal adult use laws in the next five years, which would accelerate the market's growth rate, the report says.

California is already the largest state market at $980 million, according to the report. And the state doesn't even have an adult use law on the books. California only has a medical marijuana law.

This growth has put a downward pressure on retail prices. For instance, in Colorado, retail prices have fallen 30 percent in the past two years.

Despite the rosy projections there are considerable challenges—namely that the federal government still considers marijuana illegal—that could dampen growth. State laws haven't prevented federal regulators from limiting distribution operations. In the past three years, at least 150 dispensaries have been shut down in California because of federal enforcement actions.

But distribution and retail sales are not the only ways entrepreneurs are making money. The fastest growing sectors within the national marijuana market are ancillary. These companies—inventory management, point-of-sale software and security services—don't directly handle the cannabis plant or related byproducts, but serve those who do.

Companies that have developed alternative ways to ingest marijuana, other than smoking, also are growing. Application of nonsmoking technologies such as vaporization and infused products like edible, oral, mucosal and capsule formats are increasing as well, the report says.

One of the largest growing segments in the industry doesn't contain the same psychoactive compounds found in your standard joint. Interest in Cannabidiol-based products, a nonpsychoactive compound found in the marijuana plant, is soaring because it has demonstrated medicinal benefits, according to the report.

Graphic: ArcView Group; Photo: Flickr user Eggrole, CC 2.0

— By on November 8, 2013, 8:11 AM PST

Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure