Legal U.S. Cannabis Sales Up 30% This Year, With Room to Grow
America’s retail marijuana sales rose sharply this year, with signs that legislative reform is poised to boost the industry even further in 2018.
U.S. Sales Surge in 2017
Legal U.S. pot sales rose 30% in 2017, according to the Marijuana Business Daily’s annual report. Based on the Daily’s previous projections, that’s equivalent to $5.1 billion to $6.1 billion in total revenue. Sales are projected to reach between $6.7 billion to $8.8 billion in 2018 for a gain of at least 31%. Projections show the industry could top $17 billion by 2021, with sales largely concentrated in recreational pot. These numbers are in line with previous forecasts conducted by Arcview Market Research, which showed legal cannabis sales could top $20 billion by 2021.
The following chart illustrates the industry’s projected growth over the next four years.
Source: Marijuana Business Daily. Marijuana Business Factbook 2017.
Even with recreational sales surging, the medical sector is also expected to contribute to the expansion. The Daily has previously cited Maryland and Hawaii as positive contributors to the medical industry’s projected growth. At the same time, medical marijuana industries in Illinois, Nevada and New York appear poised for further gains as these markets mature.
Legalization Drive Boosting Sales
Marijuana sales are expected to rise significantly in the future now that several U.S. states have voted to legalize recreational pot. This likely explained the market’s robust expansion between 2016 and 2017, and why the industry is expected to surge well into the future.
Cannabis stocks have also been on a tear ahead of the planned legalization of recreational weed in the state of California. America’s most populous state was one of a handful of jurisdictions to vote in favor of recreational pot during the 2016 presidential election cycle.
California’s recreational cannabis market opens in January, with some analysts expecting wholesale weed to cost more than $500 a pound. Prices are expected to drop almost immediately because wholesale supplies will be limited. Only about 25-30% of the Golden State’s municipalities have agreed to support the industry.
Though business may be booming, tension between state and federal regulation is expected to weigh on the market. Under existing legislation, recreational programs like those administered in California are in violation of federal laws.
The Trump administration in recent months has been silent on the subject of recreational marijuana, but its first public comment on the matter implied greater enforcement of federal regulations. Federal legislation limits marijuana businesses in their quest for financing. It also creates uncertainty, which could limit business expansion and investment.
In addition to regulatory bottlenecks, wholesale growers face stiff competition from a saturated market, especially in more established markets like Colorado and Washington. The Daily reports that production in these states has outpaced demand despite a steady rise in consumption. This will likely keep wholesale cannabis prices subdued, making it more difficult for businesses to enter the space.
That being said, recreational weed has been described as a generational opportunity. In addition to the seven states that legalized marijuana during the 2016 election, several others are holding public debates on the matter. These states include Delaware, Rhode Island, New Jersey, Vermont, New Mexico, Texas, Missouri and Kentucky.
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