The U.S. medical marijuana market will reach $1.7 billion in sales this year, according to a report by See Change Strategy LLC.
The market, which nearly rivals Viagra’s $1.9 billion in sales, is expected to double in the next five years as the number of patients grows and more states adopt laws allowing the sale of marijuana for medicinal purposes, according to the report.
“We’re witnessing the beginning of a legal business ecosystem forming around medical marijuana,” said Ted Rose, editor of the report, during a phone call with journalists Wednesday.
Though the report focuses on measuring sales from businesses directly involved with marijuana, such as growers and dispensaries, Rose said there is a thriving secondary sector of companies that provide ancillary goods and services ranging from hydroponic equipment suppliers to real estate companies.
The report, which took more than six months to research, used a combination of surveys, interviews and financial modeling to estimate the market size.
See Change characterizes itself as an independent financial analysis firm that specializes in new markets, and said the report was largely self-funded. The firm is managed by Kris Lotlikar, founder of Renewable Choice Energy, which sells renewable energy credits and carbon offsets to homeowners and businesses seeking to lower their carbon footprints.
Lotlikar, a Colorado resident, formed See Change eight months ago to research the medical marijuana market after he decided that estimates of the sales and usage of medical marijuana weren’t backed by enough analysis.
“I didn’t think there was enough reliable data out there,” said Lotlikar, who hired researchers, analysts and an epidemiologist to gather data on patient populations, marijuana retailers and wholesalers, and forecast potential growth.
On the web site where it sells the report, www.medicalmarijuanamarkets.com, the American Cannabis Research Institute and DealFlow Media are listed as sponsors.
The American Cannabis Research Institute last year advocated against electing a California state attorney general candidate characterized as being opposed to medical marijuana, while DealFlow Media publishes its own medical marijuana newsletters and hosts conferences for the industry. Lotliker
Medical marijuana is sold in seven states, including California, Colorado, Michigan, Montana, Oregon, Washington and New Mexico. Five more will open this year in Arizona, Maine, New Jersey, Rhode Island and the District of Columbia.
– Article from The Wall Street Journal.
Marijuana called pot, grass, weed — and now investment?
by James B. Kelleher, Reuters
It has been called a lot of things over the years: grass, Mary Jane, wacky weed. Now, researchers are suggesting a new moniker for marijuana: alternative investment.
A report out this week on the U.S. medical marijuana market estimates the unconventional business already generates $1.7 billion in economic activity a year. But that market could grow fivefold in short order, researchers say, as the list of states that legalize pot for treating a variety of illnesses grows and as more patients try it — and switch.
The study, conducted by See Change Strategy for the American Cannabis Research Institute and Deal Flow Media, a financial research firm specializing in unusual assets, says that of the nearly 25 million Americans who are potentially eligible to use medical marijuana based on their diagnoses, fewer than 800,000 currently do.
That makes the nascent market a potentially attractive one for investors looking for an alternative to the more traditional investment alternatives like art, antiques, wine or coins, one with an upside potential that makes China’s current growth rate look anemic.
The opportunities, the authors say, aren’t confined to cultivation and distribution — the riskier parts of the business.
Many perfectly legal products and services, from software and security to hydroponic infrastructure to marketing, communications and consulting, will offer money-making opportunities in the coming years.
But the authors, who surveyed 300 medical marijuana industry insiders, point out that the fast-growing market faces a daunting number of hurdles. These include inadequate access to legal capital, unfavorable tax status, a lack of experienced executives, downward pricing pressure and a complex — and contradictory web — of state and federal rules. All this makes investing in marijuana a risky proposition.
There’s also the very real potential for conflict with the criminal gangs that control the much larger $18 billion a year illegal U.S. marijuana market. These conflicts with criminal gangs tend to get settled outside the judicial system.
Still, the study says the U.S. medical pot market could be nearly half the size of the illegal market — about $8.9 billion — in just five years.
“That’s assuming there are no obstacles,” said Ted Rose, the editor of the study. “I’m not weighing in on whether that’s likely or not. But that $1.7 billion is the real money that’s being made this year.”
To put that in perspective, Lipitor, Pfizer Inc’s cholesterol-reducing drug and the world’s best-selling pharmaceutical, had U.S. sales of $5.33 billion in 2010.
More than a dozen U.S. states and the District of Columbia have legalized the use of marijuana to help patients with chronic illnesses, including cancer, AIDS and multiple sclerosis.
The survey found that 34 percent of the medical marijuana businesses said regulatory compliance — not customer demand or securing supply — was the top challenge they faced. Another 24 percent said financing was the industry’s most pressing need.
But because the possession and distribution of marijuana remain illegal under federal law, the report’s authors point out that the market is rife with risk, including “the ever-present risk of being shut down or experiencing a property seizure without notice.”
– Article from Reuters.