There has been a lot of buzz about the marijuana industry lately. Conversations run the gamut from federal legalization, banking and insurance issues, the nearly billion-dollar mergers and acquisitions occurring with increasing regularity, and how to level the playing field for those who have been most harmed by what has now turned into a lucrative and legal industry. We will be addressing those issues regularly on this blog. But occasionally we like to go back to the basics and take a look at where the industry stands and where it is going.
The marijuana industry is growing at a far faster rate than the U.S. economy—28.3% in 2018. In 2018, the marijuana industry boasted $6.4 billion in revenue, paid $1.8 billion in wages, and is comprised of 182,541 businesses. Comparatively, in 2017, the industry exhibited an annual growth of 26.1%, $4.6 billion in revenue, $1.2 billion in wages, and 172,563 businesses. This phenomenal growth is being driven by numerous factors, but three stick out: the industry’s increasing sophistication, the continued diversity of products and brands, and the general public’s increased acceptance of marijuana consumption.
On the sophistication side, large multi-state operators (MSO) have emerged and cemented their position in the market over the past year. These entities are producing and selling recognized, high-quality brands at reasonable prices. At the same time, diversity remains. Because of state-centric licensing schemes and federal prohibition, the majority of the industry continues to consist of local vendors creating local products. In fact, the four largest operators still generated less than 25% of the industry’s total revenue in 2018. An increasingly sophisticated yet diverse market is compatible with a public that is overwhelmingly accepting of marijuana. Gallup reports that 80% of U.S. citizens support legal medical marijuana and 60% support legal recreational marijuana. The Pew Research Center recently found 62% support for legalization generally. Marijuana legalization is one of the few issues that most Americans agree on.
What makes the marijuana industry so unique, however, is that despite the rapid expansion, the industry is not close to capacity. Recreational marijuana is legal in only ten states plus Washington D.C. California, Colorado, and Washington collectively are home to 89.8% of the industry’s establishments and corresponding revenue. Huge population states like Texas, Florida, and New York still prohibit recreational use, and millions of Americans live hundreds of miles from the nearest recreational dispensary. The Great Lakes, Mid-Atlantic, and the Southeast are particularly bereft of recreational marijuana options.
This data all points in one direction—substantial and sustainable growth. It’s okay to be excited.