Legal U.S. Marijuana Sales Hit $5.4 Billion in 2015

Saturday, February 06, 2016
(photo: Getty)

By Christine Hauser, New York Times


It’s not just nickel and dime bags anymore: Marijuana is getting some respect as legal sales take off.


This week two marijuana analysis and investment firms released a summary of a report that appeared to confirm that the industry has become a gold rush. National legal sales of cannabis grew to $5.4 billion in 2015, up from $4.6 billion in 2014, according to the firms, the ArcView Group, based in San Francisco, and New Frontier, based in Washington.


Demand is expected to remain strong this year, with a forecast of $6.7 billion in legal sales, the report said.


The promises and headwinds of the industry are potentially far-reaching and attracting notice on Wall Street. As more states legalize marijuana sales, analysts are weighing the stock market benefits of new businesses as cannabis goes corporate. Funds are considering the ethics of investing in marijuana. Parents are even debating whether to allow their children to buy the stocks.


And say goodbye to heat lamps in the closet and sandwich baggies. Lucrative legal side businesses are spinning off, like the climate systems for growers built by a company in Boulder, Colorado, and the FunkSac odor-proof and child-resistant marijuana bags produced in Denver.


“There is still a certain stigma around it,” said Brandy Keen, a co-founder of Surna, which makes technology for indoor cultivation. “This is an industry that came out of the basement. It grew out of closets and basements and hidden facilities in cinder-block buildings.”


Nonmedicinal adult use accounted for $998 million of the total sales in 2015, up from $351 million in 2014, according to the ArcView/New Frontier report summary. The estimates are based partly on state tax receipts and data on medical and recreational sales.


The report summary said that by 2020, legal market sales were forecast to be $21.8 billion.


The summary, released before a full report scheduled for the end of February, was one of the latest by market analysts to scrutinize the emerging marijuana industry. Merrill Lynch said in a report cited by in December that it expected the cannabis market and associated testing technologies to grow if legalized.


GreenWave Advisors said in its latest annual report in November that it estimated revenues of $4.8 billion in 2015, compared with about $3.2 billion in 2014. It expects further growth in 2016 and a “surge” in 2017 and 2018.


The latest report defined three types of legal marijuana use: adult recreational use; medical use of cannabis; and medicinal use of a cannabis product from which the compound that gets a consumer high has been extracted.


It said 2016 would be the “tipping point” at which a majority of states transition from cannabis prohibition to some form of regulated legal market.


John Kagia, New Frontier’s director of industry analytics, said he has spoken at investment meetings about legal marijuana where it was “standing room only” with investors trying to “figure out angles” given the regulatory climate.


Four states and the District of Columbia allow full adult use, and this year, seven more will vote on allowing it: California, Nevada, Arizona, Massachusetts, Maine, Rhode Island and Vermont.


Twenty-three states already permit medical cannabis use, and four others — Florida, Ohio, Missouri and Pennsylvania — are positioned to advance medical laws, the report said.


Some federal regulatory barriers are easing, and federal interest in research into medical marijuana use is growing. But there are headwinds, the report cautioned.


Cannabis businesses face a higher tax burden. They are also unable to use banks because of federal laws, which can hinder efficiency and pose security risks, forcing the businesses to invest heavily in security measures. Increased competition across state lines could pose new challenges as more states legalize the trade.


Marijuana stocks underperformed on the market in 2015 compared with the Nasdaq and Standard & Poor’s indexes, tempering some of the enthusiasm of investors, the report said.


Legalization is also a hot topic of national debate, making the industry vulnerable in an election year.


“Though public opinion is shifting toward embracing cannabis reform, presidential candidates are more reticent to support legalization,” the report said.


The plant’s business potential has deep and roots, as rapper Snoop Dogg, country singer Willie Nelson and actor Tommy Chong have demonstrated by leveraging their celebrity status to establish new brands in the market, the report noted.


To Learn More:

Colorado Raises more Money from Marijuana Tax than from Alcohol Tax (by Noel Brinkerhoff and Steve Straehley, AllGov)

Colorado High on Marijuana Revenue—Billion-Dollar Industry to Bring State More Than $100 Million in Annual Taxes (by Steve Straehley, AllGov)

Top DEA Agent Lands Job as Legal Advisor to Marijuana Investment Firm (by Noel Brinkerhoff and Danny Biederman, AllGov)

Marijuana Industry Begs to be Taxed (by Noel Brinkerhoff, AllGov)

Taxing Marijuana Would Earn California $1.4 Billion (by Noel Brinkerhoff, AllGov)


PhDScientist 8 years ago
This is a MORAL issue. It is IMMORAL to leave Marijuana illegal for even one second longer. Americans, including American Children, are suffering and dying -- needlessly -- because they are being denied the life saving medication they need. American Children have suffered and died when their lives could have been saved by Medical Marijuana. Medical Marijuana Saves Lives. It is a MORAL IMPERATIVE that Medical Marijuana be removed from Schedule 1 IMMEDIATELY. Marijuana has an unmatched safety profile as well. Google Marijuana Therapeutic Index.
Dkon 8 years ago
There are no "legal" sales of marijuana in America, it's still a federal crime. The current administration tends to pick and choose which laws, and on whom, they enforce......
Raddy 8 years ago
Very well written, I salute you Mr. Kelly and agree with you 1 BILLION percent.
Brian Kelly 8 years ago
The "War on Marijuana" has been a complete and utter failure. It is the largest component of the broader yet equally unsuccessful "War on Drugs" that has cost our country over a trillion dollars. Instead of The United States wasting Billions upon Billions more of our tax dollars fighting a never ending "War on Marijuana", lets generate Billions of dollars, and improve the deficit instead. It's a no brainer. The Prohibition of Marijuana has also ruined the lives of many of our loved ones. In numbers greater than any other nation, our loved ones are being sent to jail and are being given permanent criminal records which ruin their chances of employment for the rest of their lives, and for what reason? Marijuana is much safer to consume than alcohol. Yet do we lock people up for choosing to drink? Even The President of the United States has used marijuana. Has it hurt his chances at succeeding in life? If he had gotten caught by the police during his college years, he may have very well still been in prison today! Beyond that, he would then be fortunate to even be able to find a minimum wage job that would consider hiring him with a permanent criminal record. Let's end this hypocrisy now! The government should never attempt to legislate morality by creating victim-less marijuana "crimes" because it simply does not work and costs the taxpayers a fortune. Marijuana Legalization Nationwide is an inevitable reality that's approaching much sooner than prohibitionists think and there is nothing they can do to stop it! Legalize Nationwide! Support Each and Every Marijuana Legalization Initiative!

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