Apr 20 2015
The Medical and Recreational Marijuana Stores industry has reached new highs, riding a wave of legalization to become one of the fastest growing industries in the United States. Despite a myriad of challenges, industry revenue is projected to grow at an average annual rate of 34.2% to $3.6 billion during the five years to 2015.
With all marijuana sales illegal according to federal law, the market for legal marijuana is heavily dependent on state regulation. Sales of medical marijuana make up the bulk of industry revenue, enabled by the various regulations across the 23 states and the District of Columbia where medical marijuana is legal. The aging population has driven demand at dispensaries in these states, as chronic illnesses for which medical marijuana is prescribed typically increase with age.
While California is the largest market for medical marijuana sales, the legalization of recreational marijuana in Colorado and Washington has made these states the focal point of the industry. In 2014, the first year of legal sales in these states, recreational marijuana stores generated nearly $400 million in revenue. Although recreational marijuana sales were inhibited by a variety of regulatory issues in these states, such as the dearth of store licenses issued in Washington, industry profitability rose on account of for-profit recreational sales. With the exception of Colorado, medical marijuana stores in all other states operate as nonprofit collectives.
Edibles and Outlook
The liberalization of regulation regarding medical and recreational marijuana is expected to ignite growth moving forward. Additionally, the development of edible cannabis products is expected to attract consumers who are unfamiliar with marijuana products or are averse to smoking. Already generating more than half of all sales, edible products are projected to be a growth segment for the industry in the coming years. As a result, industry revenue is expected to skyrocket at an annualized rate of 30.3% to $13.4 billion during the next five years.