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IBISWorld Industry Report OD4141Medical & Recreational
Marijuana Growing in the USNovember 2019 Cecilia Fernandez
New highs: Acceptance of medical and recreational marijuana is
expected to fuel industry expansion
2 About this Industry2 Industry Definition
2 Main Activities
2 Similar Industries
2 Additional Resources
3 Industry at a Glance
4 Industry Performance4 Executive Summary
4 Key External Drivers
6 Current Performance
9 Industry Outlook
11 Industry Life Cycle
13 Products and Markets13 Supply Chain
13 Products and Services
14 Demand Determinants
15 Major Markets
16 International Trade
17 Business Locations
19 Competitive Landscape19 Market Share Concentration
19 Key Success Factors
19 Cost Structure Benchmarks
21 Basis of Competition
22 Barriers to Entry
23 Industry Globalization
24 Major Companies24 Northwest Cannabis Solutions
24 Mindful Medical
24 Copperstate Farms LLC
25 Operating Conditions25 Capital Intensity
26 Technology and Systems
26 Revenue Volatility
27 Regulation and Policy
29 Industry Assistance
30 Key Statistics30 Industry Data
30 Annual Change
30 Key Ratios
31 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | [email protected]
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This industry’s establishments grow marijuana for medical and
recreational use. Most operators are nonprofit collectives that
provide medical marijuana to other collective members. Transactions
are typically conducted on a donation basis because the sale
and distribution of marijuana is illegal in most states that
permit medical marijuana. The industry also includes operators in
Colorado and Washington, who grow medical and recreational
marijuana on a for-profit basis.
The primary activities of this industry are
Growing marijuana for medical use
Growing marijuana for legal recreational use
11191 Tobacco Growing in the USOperators in this industry grow
tobacco leaf.
31214 Distilleries in the USOperators in this industry produce
spirits and other alcoholic beverages.
31222 Cigarette & Tobacco Manufacturing in the USOperators
in this industry produce cigarettes, cigars, smoking and chewing
tobacco and reconstituted tobacco.
32541a Brand Name Pharmaceutical Manufacturing in the
USOperators in this industry produce medication that treat various
diseases and illnesses.
Industry Definition
Main Activities
Similar Industries
Additional Resources
About this Industry
For additional information on this industry
www.cmcr.ucsd.edu Center for Medicinal Cannabis Research
www.mpp.org Marijuana Policy Project
www.thecannabisindustry.org The National Cannabis Industry
Association
www.fda.gov US Food and Drug Administration
The major products and services in this industry are
Hybrid marijuana products
Indica marijuana products
Sativa marijuana products
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% c
hang
e
4
-4
-2
0
2
2614 16 18 20 22 24Year
Per capita disposable income
SOURCE: WWW.IBISWORLD.COM
% c
hang
e
80
0
20
40
60
2511 13 15 17 19 21 23Year
Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2019)
54.1%Hybrid marijuana products
24.0%Indica marijuana products
21.9%Sativa marijuana products
Key Statistics Snapshot
Industry at a GlanceMedical & Recreational Marijuana Growing
in 2019
Industry Structure Life Cycle Stage GrowthRevenue Volatility
Very High
Capital Intensity Medium
Industry Assistance High
Concentration Level Low
Regulation Level Heavy
Technology Change Low
Barriers to Entry Medium
Industry Globalization Low
Competition Level High
Revenue
$8.1bnProfit
$935.6mWages
$2.1bnBusinesses
15,091
Annual Growth 19–24
12.7%Annual Growth 14–19
25.7%
Key External DriversRegulationPer capita disposable incomeNumber
of adults aged 50 and olderExternal competition
Market ShareThere are no major players in this industry
p. 24
p. 4
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON
PAGE 30
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Key External Drivers RegulationThe Medical and Recreational
Marijuana Growing industry has been significantly restricted by an
increasing amount of proposed regulations. In particular, medical
marijuana remains a Schedule I controlled substance under federal
law, despite state-level legalization. Following legalization in
many states during the 2016 election cycle, beneficial regulation
is expected to create an opportunity for the industry in 2019.
Per capita disposable incomeThe level of household income
determines consumers’ ability to purchase medical marijuana
products. The unconventional nature of the industry’s products
makes it subject to changes in disposable income. As a result, an
increase in disposable income will boost demand for medical and
recreational marijuana growers. Per capita disposable income is
expected to increase in 2019.
Executive Summary The Medical and Recreational Marijuana Growing
industry, which includes both employer and nonemployer
establishments that grow marijuana for medical and recreational
use, flourished over the five years to 2019. Watershed legalization
victories over recent years, most notably during the 2016 election
cycle, proved that the cannabis industry is one of the fastest
growing industries in the US. In 2016 alone, eight states passed
initiatives to legalize marijuana. Consumer attitudes are also
accelerating
legalization efforts at the state level. Gallup reports that an
estimated 80.0% of US citizens approve of legal access to medical
marijuana, while 60.0% approve of full adult use legalization. The
growing acceptance of medical marijuana is providing growers and
investors with unprecedented opportunities. As a result, industry
revenue is forecast to grow an annualized 25.7% to $8.1 billion
over the five years to 2019. In 2019, revenue is expected to grow
28.0% due to new legalization initiatives this same year.
In 2016, more states passed legalization laws than any prior
year. These legislative victories fueled strong growth for industry
operations and provided many opportunities for growth. The
licensing of commercial recreational marijuana growers in these
states contributed to industry revenue growth of 36.8% in 2016, as
new entrants flooded the market. In addition to the favorable
regulatory environment in these states, medical marijuana growers
have continued to benefit from the steadily aging population.
Chronic illnesses and cancer become more prevalent as individuals
age, and these ailments drive demand for medical marijuana products
in particular. As recreational marijuana continues to be legalized
and accepted by different states, profit for industry operators is
anticipated increase.
Over the five years to 2024, revenue is expected to increase an
annualized 12.7% to $14.7 billion. The future of the industry
remains uncertain, however, until the federal government
definitively rules to decriminalize marijuana. Until then, a
growing number of medical marijuana patients, and the recreational
cannabis legalization movement, will generate an expanding consumer
base for growers. Moreover, as surrounding nations, including
Canada and Mexico, legalize the drug, the US government will likely
be pressured to follow suit.
Industry PerformanceExecutive Summary | Key External Drivers |
Current Performance Industry Outlook | Life Cycle Stage
Legislative victories fueled strong growth for industry
operations and provided many opportunities for growth
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Industry Performance
Key External Driverscontinued
Number of adults aged 50 and olderIndividuals aged 50 and older
are more likely to require the medical marijuana products that this
industry provides since many health conditions that medical
marijuana is prescribed for, such as Alzheimer’s disease, are
prevalent among members of this age group. As the population ages,
demand for industry services will grow, resulting in revenue
growth. The number of adults
aged 50 and older is expected to increase in 2019.
External competitionMedical marijuana products struggle to
compete with conventional healthcare services and products due to
the alternative and unconventional nature of their treatment.
External competition from traditional drugs and healthcare
providers is expected to grow in 2019, posing a potential threat to
the industry.
% c
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e
2.5
0.5
1.0
1.5
2.0
2614 16 18 20 22 24Year
Number of adults aged 50 and older
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% c
hang
e
4
-4
-2
0
2
2614 16 18 20 22 24Year
Per capita disposable income
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Industry Performance
Current Performance
The Medical and Recreational Marijuana Growing industry grew
exponentially over the five years to 2019, bolstered by increasing
consumer acceptance and sweeping legalization victories across the
United States. More states legalized recreational or medical
marijuana, or both in certain cases, in 2016 than any previous
year. While cannabis is not legalized at the federal level, several
states have paved the road for market expansion. Currently, 33
states have legalized marijuana in some form, with 11 states
legalizing the sale of recreational marijuana as of October 2019.
Illinois became the eleventh state to legalize recreational
marijuana effective January 2020. The industry also includes
operators that grow both medical and recreational marijuana on a
for-profit basis in states that legalized recreational marijuana.
As a result, industry revenue grew precipitously over the five
years to 2019, increasing at an annualized rate of 25.7% to reach
$8.1 billion. In 2019, revenue is expected to jump 28.0%.
Establishments are defined as employer and nonemployer locations
that grow marijuana for medical and
recreational use. Most operators are either facilities that
cultivate cannabis for recreational shops, or nonprofit collectives
that provide medical marijuana to other collective members.
Colorado and Washington were the first two states to legalize
recreational marijuana, and largely pioneered the market landscape
for licensed, for-profit cultivators. Since then, several other
states have legalized recreational marijuana, taxing it at a rate
similar to alcohol and tobacco products.
% c
hang
e
80
0
20
40
60
2511 13 15 17 19 21 23Year
Industry revenue
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Medical marijuana spurs growth
Marijuana, in its various forms, can be prescribed medically to
treat a wide range of ailments. Since 1996, proponents of cannabis
lobbied for individual states to recognize marijuana as a pain
reliever or treatment for a range of illnesses, including cancer.
New medical research, and evolving public sentiment toward the
legalization and taxation of the substance, advanced these efforts
and contributed to the expansion of the industry over the past five
years. According to the US Government Accountability Office, under
state medical marijuana laws, symptoms and conditions that can be
treated by cannabis include Alzheimer’s disease,
anorexia, AIDS, HIV, glaucoma, cancer, arthritis, epilepsy,
nausea, pain, cachexia, Crohn’s disease, migraines, multiple
sclerosis and spasticity. Although all domestic marijuana
transactions were conducted under implicit or explicit prohibition
for many decades, states have recently moved to legalize marijuana
for medical purposes.
In general, the use of medical marijuana is increasing,
particularly among those with chronic illnesses and pain. BDS
Analytics, a marijuana market research firm, estimates that nearly
1.9 million Americans are regular users of medical marijuana. At
the same time, significant concerns continue to persist,
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Industry Performance
Recreational growth opportunities
The legalization of recreational marijuana spurred the
industry’s more recent astronomical growth. Recreational marijuana
users typically smoke to obtain a high, which affects the part of
the brain that influences pleasure, memory, sensory and time
perception, thinking, concentration and coordinated movement. At
the outset of 2014, legal recreational marijuana use became a
reality in Colorado, stimulating demand for industry products as
hundreds of retail stores opened throughout the year. Washington
followed in its implementation of its voter-approved law legalizing
recreational cannabis consumption, and recreational marijuana sales
began in the state in July of 2014. Since then, the number of
states that
have legalized recreational cannabis has risen to 11.
California, Colorado and Washington account for 27.0%, 20.0% and
11.0% of the legal marijuana market, respectively, according to BDS
Analytics. To meet consumer demand for marijuana, certain states
issued licenses for the cultivation of recreational marijuana.
Nonetheless, the legalization of recreational marijuana cultivation
in various states between 2014 and 2016 lead to an astounding 36.8%
jump in revenue in 2016 alone.
Strong demand growth caused more companies to enter this
industry
questioning the legitimacy and efficiency of medical
marijuana-based treatment. Organizations such as the National
Cannabis Industry Association continue to work toward increasing
the legitimacy of medical marijuana use by establishing industry
standards. Additionally, in August 2016, the federal government
loosened regulations concerning the study of the medical
applications of cannabinoids. These efforts, in turn, have aided
operators.
Proponents of medical marijuana have pushed individual states to
recognize marijuana as a treatment for a range of diseases. While
many states have laws permitting the use of medical marijuana,
certain states where medicinal cannabis
is legal do not have any dispensaries. These laws have been
adopted through public referendums and legislation. In late 2009,
the US Department of Justice instructed federal prosecutors in
states with medical marijuana laws not to prioritize prosecuting
individuals and businesses complying with state laws. In 2014,
President Obama signed into law historic provisions for medical
marijuana, prohibiting the Department of Justice from using federal
funding to limit states from implementing their own laws that
authorize the use, distribution, possession or cultivation of
medical marijuana. Consequently, these conditions have facilitated
strong industry performance over the past five years.
Medical marijuana spurs growth continued
Changing attitudes and rising incomes
The development of edible cannabis products, commonly referred
to as edibles, also generated greater consumer acceptance of
medical and recreational marijuana, increasing demand for marijuana
growers. Edibles can take the
form of food, extracts and oils, and range from
marijuana-infused mints and candies to baked goods and beverages,
among many other products. Edibles provide a more convenient and
familiar product to consumers, thereby
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Industry Performance
stimulating consumer demand for marijuana products.
The nature of medical marijuana treatment is rather
unconventional. Although expenditure on products essential for
health are less susceptible to fluctuations in consumer
expenditure, medical marijuana’s unique nature makes it subject to
changes in disposable income. The same is largely true for
recreational marijuana. Since industry products, both medical and
recreational, are paid out of pocket by consumers, growth in per
capita disposable income boosts demand and industry revenue. Per
capita disposable income is expected to increase at an annualized
rate of 2.4% over the five years to 2019. Rising income levels
bolstered spending on medical and recreational marijuana during the
five-year period.
Greater consumer acceptance of the industry’s products and
strong demand
growth caused more companies to enter this industry. A recent
Gallup poll indicates that 80.0% of Americans approve of
legalization of medical marijuana, while 60.0% approve of full
adult use legalization of both medical and recreational marijuana.
Demographic factors also play a significant role in driving demand
for medical and recreational marijuana. According to BDS Analytics,
the most frequent consumers are parents and baby boomers. As a
result, the political and social stigma surrounding cannabis is
beginning to erode, paving the way for more states to pass similar
legalization laws and generate tax revenue. Over the five years to
2019, the number of operators is expected to increase at an
annualized rate of 21.3% to 15,091, while the number of individuals
employed by the cultivation of marijuana is also expected to rise
an annualized 24.5% to 83,930.
Changing attitudes and rising incomes continued
Regulation and profit Regulation from all levels of government
presents the greatest challenge to medical and recreational
marijuana dispensaries, especially because state and federal
governments have conflicting regulations at times. The Controlled
Substances Act (CSA), passed as a part of the Comprehensive Drug
Abuse Prevention and Control Act of 1970, classifies marijuana as a
Schedule I controlled substance. Schedule I substances, such as
heroin and MDMA, are deemed by the federal government to have a
high potential for abuse. Furthermore, prescriptions for such
substances are illegal; in the case of marijuana, physicians can
assign a right to visit a company or cooperative that provides
medical marijuana. Despite the adoption of laws permitting some
forms of marijuana consumption or distribution for medical and
recreational use over the past two decades, the possession and
distribution of marijuana remains illegal under federal law.
Consequently, many businesses operate with the risk of being shut
down or experiencing a property seizure without notice. In
addition, industry operators cannot make standard deductions for
business expenses and have difficulty securing standard banking and
financial services.
The continued financial success experienced by states that have
legalized recreational cannabis provides incentive for other states
to legalize for-profit marijuana. In 2016, taxes from the retail
sale of marijuana totaled more than
Many businesses run the risk of being shut down or experiencing
a property seizure without notice
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Industry Performance
Regulation concerning recreational marijuana
The Medical and Recreational Marijuana Growing industry is
subject to heavy regulation from all levels of government, with
state and federal governments having conflicting regulations at
times. The Department of Justice (DOJ), through the Drug
Enforcement Agency (DEA), raids and prosecutes marijuana
dispensaries and growers in the United States. In 2014, former
president Barack Obama signed into law historic provisions for
medical marijuana, prohibiting the DOJ from using federal funding
to limit states from implementing their own laws that authorize the
use, distribution, possession or cultivation of medical marijuana.
Although the industry largely flourished under the Obama
administration, its future remains hazy under new leadership.
Nevertheless, the movement to decriminalize recreational
marijuana is expected to fuel the industry’s growth. In addition to
strong growth in recreational marijuana cultivation in Colorado,
Washington, Oregon and California, the industry is expected to
benefit from the
expected cultivation of recreational marijuana in newly
legalized states. For instance, Alaska’s measure is similar to
Colorado’s, and Oregon’s is modeled on the state of Washington.
Similar to the previous five years, rising demand will cause more
operators to enter the industry. Over the five years to 2024, the
number of operators is projected grow at an annualized rate of
10.3% to 24,589, while industry employment is forecast to increase
at an annualized rate of 12.0% to 147,868 million people.
The overwhelming successes of model states such as Colorado,
Washington and Oregon will potentially spur more states to legalize
for-profit marijuana. Between 2014 and 2016, combined retail sales
tax in legal cannabis markets in Colorado, Oregon and Washington
alone totaled
Industry Outlook
The Medical and Recreational Marijuana Growing industry is
poised to reach new highs over the five years to 2024. Although the
industry will continue to benefit from increasingly favorable
attitudes toward medical marijuana-based treatments, industry
growth will be led by consumer demand for recreational marijuana.
Combined with increasingly favorable consumer
sentiment and rising disposable incomes, IBISWorld forecasts
that revenue will continue to increase at an annualized rate of
12.7% to reach $14.7 billion during the outlook period. In
particular, increasing levels of discretionary income are projected
to support continued demand for industry products and growing
acceptance of medical applications of the drug.
The movement to decriminalize recreational marijuana is expected
to fuel the industry’s growth
$500.0 million in Colorado, Washington and Oregon alone,
according to BDS Analytics. The legalization of for-profit
recreational marijuana in participating states has already had a
positive effect
on industry profit. As a result of the growing number of
large-scale cultivators, industry profitability is expected to
account for 11.6% of revenue in 2019.
Regulation and profit continued
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Industry Performance
Regulation concerning recreational marijuanacontinued
over $771.0 million for recreation, according to BDS Analytics.
As a result, many more states are expected to follow suit,
legalizing for-profit cannabis to generate tax revenue. Due to the
legislative victories of the 2016 election cycle and a few special
elections, medical marijuana is now legal in 33 states, while 10
states currently permit the sale and usage of recreational and
medical marijuana (Alaska, California, Colorado, Maine,
Massachusetts, Michigan,
Nevada, Oregon, Vermont and Washington), with Illinois becoming
the eleventh state effective January 2020. These regulatory changes
are expected to increase demand for recreational products,
benefiting industry operators. Consequently, the sale of
for-profit, recreational marijuana is expected to comprise a larger
share of industry revenue over the five years to 2024. Moreover,
industry-wide profitability is projected to reach 12.0% in
2024.
Older population boosts demand for medical cannabis
A growing number of doctors and patients will turn to medical
marijuana as treatment for conditions such as arthritis, migraines
and Alzheimer’s disease. In particular, the rising number of US
adults aged 50 and older is expected to bolster demand for medical
marijuana products. Over the five years to 2024, IBISWorld
anticipates that this demographic will grow at an annualized rate
of 1.2% to 125.0 million, compared with the total US population,
which is forecast to grow at an annualized rate of 0.7% during the
same period. As the population ages, more healthcare services and
products will be required. This trend will lead to a growing number
of people with health conditions that can be treated with marijuana
(e.g. cancer and glaucoma), which increase in incidence with age.
Additionally, given that the median age of a medical marijuana
patient is currently 41.5 years old, demand will likely increase as
patients in their 40s enter their 50s.
The number of physician visits in the United States is expected
to rise in line
with the senior population, increasing at an annualized rate of
0.6% to 1.0 billion over the five years to 2024. Chronic health
ailments, such as obesity and diabetes, will augment healthcare
use, as these patients will increasingly require checkups. The
rising prevalence of these chronic diseases is also expected to
boost demand for medical marijuana. Although doctors cannot legally
prescribe marijuana to patients because the plant remains a
Schedule I substance, they can assign a right to visit a company or
a cooperative that provides medical marijuana to patients.
Therefore, while medical marijuana treatment is not covered by
insurance, as the number of physician visits increases, demand for
medical marijuana will grow accordingly.
As the number of physician visits increases, demand for medical
marijuana will grow accordingly
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Industry PerformanceThe industry is growing at a faster rate
than the US economy
The industry has stepped up efforts to increase its
legitimacy
Customer acceptance of industry products is increasing
The legalization of recreational marijuana has spurred
demand
The number of industry establishments is expanding robustly
Life Cycle Stage
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Industry Performance
Industry Life Cycle The Medical and Recreational Marijuana
Growing industry is in a growing life cycle stage. Over the 10
years to 2024, its industry value added (IVA), which measures the
industry’s contribution to the economy, is expected to grow at an
annualized rate of 18.1%. This rate is faster than the 2.1%
projected growth for US GDP, indicating the industry will make up a
larger share of the economy in the years ahead. The industry is
growing due to widening acceptance of its safety and legitimacy,
which is causing more people to use its products. Although an
increasing percentage of US citizens have been using medical
marijuana products to alleviate pain and to treat other health
conditions over the past five years, a large share of the
population still does not use them. This factor suggests that there
is significant room for growth in the industry in the years
ahead.
Organizations such as the National Cannabis Industry Association
have worked toward increasing the legitimacy
of medical marijuana use by working on creating industry
standards. This, in turn, has helped spur demand. Over the five
years to 2019, the number of industry operators has increased as a
result of rising demand and favorable legislation. Additionally, a
rising number of physician visits have also created opportunity for
potential market entrants. These factors will likely contribute to
further industry growth in the years ahead.
Moreover, the industry’s growth has been spurred by the growing
legalization of recreational marijuana. Beginning in 2014,
recreational marijuana cultivators began opening in Colorado and
Washington, making them the fastest-growing markets in the United
States. Moreover, the legalization of recreational marijuana in
multiple other states is expected to generate substantial growth
for the industry over the next five years as new operators set up
shop in these states.
This industry is Growing
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Products and Services
Products and services are segmented by the three strains of
marijuana that are primarily used in the United States. According
to Leafly, the top selling strains include Blue Dream, Girl Scout
Cookie, Sour Diesel and Gorilla Glue #4.
HybridHybrid, a combination of indica and sativa strains, is the
most popular category, accounting for 54.1% of Medical and
Recreational Marijuana Growing
industry revenue. Sativa-dominant hybrid tends to be uplifting,
while on the opposite, indica-dominant strains tend to be more
relaxing.
Indica cannabisPure indica marijuana can be used to treat
anxiety, chronic pain, insomnia and muscle spasms. In general,
indica provides more physical relaxation in comparison with the
second strain, sativa. Common indica strains include
Products & MarketsSupply Chain | Products and Services |
Demand Determinants Major Markets | International Trade | Business
Locations
KEY BUYING INDUSTRIES
42 Wholesale Trade in the US Wholesalers buy marijuana products
for resale.
99 Consumers in the US Consumers are members of medical
marijuana collectives and the primary market for medical
marijuana.
KEY SELLING INDUSTRIES
31191 Snack Food Production in the US This industry produces
snacks for consumption.
32531 Fertilizer Manufacturing in the US Some medical marijuana
growers use fertilizers to improve soil nutrient.
32532 Pesticide Manufacturing in the US Some medical marijuana
growers use pesticides during the growing process.
33511 Lighting & Bulb Manufacturing in the US Indoor medical
marijuana growing is heavily dependent on artificial lighting.
Supply Chain
Products and services segmentation (2019)
Total $8.1bn
54.1%Hybrid marijuana products
24.0%Indica marijuana products
21.9%Sativa marijuana products
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
Demand Determinants
Government regulationDemand for Medical and Recreational
Marijuana Growing industry products is primarily determined by
government regulation. The federal government regulates cannabis as
a Schedule I controlled substance and considers all marijuana
cultivation, sale and consumption illegal. In states that lack laws
legalizing the medical or recreational use of cannabis, marijuana
use is explicitly prohibited.
However, a total of 33 states across the United States and
Washington, DC have some level of legalization of medical
marijuana. Nonetheless, federal policy continues to limit some
consumer demand in states where medical marijuana is legal because
of pervasive fears of violating federal law. President Obama’s
December 2014 passage of an omnibus spending bill included a
directive preventing the Department of Justice from using federal
funding to impeded states from implementing their own state laws
that authorize the use, distribution, possession or cultivation of
medical marijuana. Over the next five years, the legalization of
medical and
recreational marijuana in a score of other states will likely
occur.
Income and demographicsHousehold income is a primary determinant
of consumers’ ability to acquire cannabis products. The
legalization of medical marijuana, and recreational marijuana in
some states, has created a market for high-quality cannabis, which
can be expensive. Furthermore, since medical marijuana is typically
not covered under health insurance plans, demand is largely
dependent on patients’ income levels.
Population demographics, particularly age, also dictate demand
trends for medical marijuana. Although adults aged 50 and older are
more likely to develop health conditions such as cancer,
Alzheimer’s, chronic pain, glaucoma and other diseases that can be
treated with medical marijuana, obtaining a medical marijuana card
is not difficult in many states. As a result, the average age of a
medical marijuana patient is 41.5 years of age. Moreover, changing
societal norms have made marijuana use much more acceptable
today.
Products and Servicescontinued
Granddaddy Purple, Bubba Kush, Afghan Kush, Blue Cheese and
Northern Lights. Some patients also use indica as a sleep aid
because it can cause sleepiness. Over the past five years, demand
for indica was relatively stable because it treats a wide range of
illnesses. In 2019, indica products are expected to generate 24.0%
of total revenue.
Sativa cannabisPure sativa marijuana is used as a stimulant to
improve appetite, relieve depression, migraines, pain and
nausea.
This is especially beneficial for patients suffering from eating
disorders, cancers and other debilitating diseases that cause a
loss of appetite. Sativa is also more popular for patients during
the day because it can increase alertness. Popular strains include
Green Crack, Alaskan TF, Jesus OG, Haze and Trainwreck. Again,
demand for sativa was relatively stable over the past five years
because it fits a wide range of uses and treats a wide range of
illnesses. In 2019, sativa products are expected to generate 21.9%
of total revenue.
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Products & Markets
Major Markets
The market for the Medical and Recreational Marijuana Growing
industry is heavily dependent on state regulation of cannabis.
Medical marijuana is used to treat many ailments, but it is most
commonly used to relieve pain. By contrast, the sale of
recreational cannabis is currently limited to the states that have
passed legalization laws for adult full use. Although the sale of
recreational marijuana only began in 2014, it will grow to command
nearly one-third of the customer market for legal marijuana in
2019.
Medical dispensariesMedical dispensaries are expected to account
for 46.2% of total industry revenue. Severe pain is the most
commonly cited reason for medical marijuana use. Severe pain can
result from a variety of chronic diseases and injuries. Medical
marijuana can help alleviate severe pain and help patients relax
and rest. On average, 52.2% of medical marijuana users used medical
marijuana because of severe pain.
Muscle spasms can be caused by multiple sclerosis, Lou Gehrig’s
disease, cerebral palsy, quadriplegia, cranial and spinal nerve
injuries and Tourette’s syndrome, among others. Since medical
marijuana is purported to help patients
relax and sleep better, it is estimated that 7.0% of industry
customers used medical marijuana because of muscle spasms.
A variety of diseases can cause nausea and migraines, including
digestive disorders. Medical marijuana can provide relief and
muscle relaxation, which helps alleviate nausea. IBISWorld
estimates that 5.6% of customers used medical marijuana because of
severe nausea.
Medical marijuana is used to help provide pain relief in a
variety of more specific diseases and conditions, such as patients
suffering from cancer and seizures. Cancer treatment can be
painful, and medical marijuana can help patients relax and rest to
accelerate the recovery process. Medical dispensaries demand has
remained fairly stable as medical marijuana has become more
accepted in society and accessible.
Recreational dispensariesRecreational marijuana dispensaries
account for 43.7% of total industry revenue in 2019. Recreational
marijuana users typically smoke in hand-rolled cigarettes
(“joints”) or in pipes or water pipes (“bongs”). They also smoke
marijuana in blunts, which are cigars that have been emptied of
tobacco and refilled with a mixture of marijuana and tobacco.
Major market segmentation (2019)
Total $8.1bn
46.2%Medical dispensaries
43.7%Recreational marijuana dispensaries
10.1%Wholesale distributors
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Medical & Recreational Marijuana Growing
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Products & Markets
International Trade The Medical and Recreational Marijuana
Growing industry does not participate in international trade.
Marijuana cannot be imported or exported because it is a controlled
substance at the federal level. Additionally, medical and
recreational
marijuana is only legal and regulated by participating states
and cannot be transported across state lines at a wholesale level.
Some states, however, such as Arizona, permit patients from other
states to bring medical marijuana across state lines.
Major Marketscontinued
Recreational marijuana users typically smoke to obtain a “high,”
which affects the part of the brain that influences pleasure,
memory, thinking, concentration, sensory and time perception and
coordinated movement. Currently, legal recreational marijuana use
is limited to the states of Alaska, California, Colorado, Illinois
(effective January 2020), Maine, Massachusetts, Michigan, Oregon,
Nevada, Vermont and Washington. However, recreational users’ share
of the market is set to expand rapidly over the next five years as
additional states permit the purchase of cannabis for recreational
use and pass legislation authorizing its sale. Moreover, the
expansion of recreational marijuana to the industry’s largest
market, California, will likely increase this segment of
revenue.
Wholesale distributorsMarijuana growers sell to wholesalers that
distribute marijuana to medical or
recreational dispensaries depending on the law of the state they
operate in. Considering that marijuana is still illegal at a
federal level, most states require a license to transport marijuana
products. This market segment ensures a product reaches retail
locations (or dispensaries) legally, from testing to taxation. For
example, in California, distributers, or a distribution license,
are required by law because cultivators or growers cannot sell
directly to retailers. As the retail market for recreational
marijuana products continues to increase, industry operators will
likely want to use a distributor to operate efficiently and
diminish regulatory problems. In 2019, wholesale distributors are
anticipated to generate 10.1% of industry revenue. However, this
share has been decreasing as laws continue to loosen up for the
industry, permitting cultivators to sell directly to retailers.
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Products & Markets
Business Locations 2019
MO0.0
West
West
West
Rocky Mountains Plains
Southwest
Southeast
New England
VT0.1
MA2.8
RI0.0
NJ0.1
DE0.0
NH0.0
CT0.1
MD0.1
DC0.1
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ1.2
CA42.1
NV1.1
OR0.8
WA12.5
MT0.3
NE0.0
MN0.1
IA0.0
OH0.0 VA
0.0
FL0.3
KS0.0
CO35.3
UT0.0
ID0.0
TX0.0
OK0.0
NC0.0
AK0.1
WY0.0
TN0.0
KY0.0
GA0.0
IL0.7
ME0.1
ND0.0
WI0.0 MI
1.3 PA0.0
WV0.0
SD0.0
NM0.1
AR0.0
MS0.0
AL0.0
SC0.0
LA0.0
HI0.1
IN0.0
NY0.2 5
67
8
321
4
9
SOURCE: WWW.IBISWORLD.COM
Mid- Atlantic
Establishments (%)
Less than 3% 3% to less than 10% 10% to less than 20% 20% or
more
Great Lakes
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Products & Markets
Business Locations Currently, medical marijuana is legal in 33
states, while 10 states legalized recreational and medical
marijuana (Alaska, California, Colorado, Maine, Massachusetts,
Michigan, Nevada, Vermont, Oregon and Washington). Illinois is the
eleventh state to legalize recreational marijuana, effective
January 2020. California, Colorado and Washington account for
27.0%, 20.0% and 11.0% of total cannabis expenditure, respectively,
according to BDS Analytics. The vast majority of industry
establishments are concentrated in the West and Rocky Mountains,
where there has been extensive marijuana legislation over the past
decade. Together, Colorado, California and Washington alone are
home to an estimated 90.3% of industry establishments and the
majority of industry revenue. According to Leafly, California leads
in outdoor and indoor cannabis production, while Washington comes
in second. Furthermore, there is a
region in Northern California named Emerald Triangle due to it
being the largest cannabis-producing region in the United
States.
%
60
0
10
20
30
40
50
Sout
hwes
t
Wes
t
Gre
at L
akes
Mid
-Atla
ntic
New
Eng
land
Plai
ns
Rock
y M
ount
ains
Sout
heas
t
EstablishmentsPopulation
Distribution of establishments vs. population
SOURCE: WWW.IBISWORLD.COM
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Cost Structure Benchmarks
Although the Medical and Recreational Marijuana Growing
industry’s two major cost categories are purchases and wages, costs
vary significantly across the industry because it encompasses a
wide variety of states with varying regulations. In some states
covered in this industry, medical and recreational marijuana are
both legal, while other states only permit the growth and sale of
medical marijuana.
WagesWages are estimated to represent 26.1% of industry revenue
in 2019. The high wage cost for this industry reflects the unique,
largely nonprofit nature of this industry, where the majority of
industry revenue is distributed in the form of wages to cover labor
costs. Not all industry operators participate in growing cannabis
on a full-time basis and many operate as nonemployers, thus
bringing down the annual average wage. Even so,
Key Success Factors Ability to attract community supportMedical
and recreational marijuana growers that lack community support may
attract federal raids due to complaints from neighbors.
Development of effective marijuana strainsGrowers that can
develop the most potent and effective strains can potentially
attract greater demand for their products.
Understanding government policies and their
implicationsMarijuana legislation is complicated at all levels of
the government. Successful operators must be able to navigate the
federal and state level regulatory landscape.
Fast adjustments to changing regulationsRegulations are
constantly changing. Growers must comply with the latest
legislation or risk fines or arrest, and they must be able to
adjust to changing regulation quickly and smoothly.
Market Share Concentration
The Medical and Recreational Marijuana Growing industry
currently has a low level of market share concentration. In 2019,
the four largest operators are expected to account for less than
25.0% of revenue. By law, in the majority of states where medical
marijuana is legal, industry operators must be a part of nonprofit
marijuana collectives (also known as dispensaries) to grow
marijuana. Industry operators are known as vendors and must also
possess medical marijuana cards for the state where they operate.
Additionally, since the sale of marijuana is still prohibited
everywhere except the 10 states that legalized recreational
marijuana, with Illinois
being the eleventh state effective January 2020, vendors in all
other states only provide marijuana to the collective in exchange
for donations. All vendors are independent and privately operated.
All vendors hold marijuana ID cards, and most grow their allocated
plant quota according to state law. In some states, however,
patients may designate a grower to provide medical marijuana for
them, resulting in some larger farms. Over the coming years, as the
market continues to be flooded with new entrants, IBISWorld expects
that commercial operations and the establishment of brands will
drive chain expansion.
Competitive LandscapeMarket Share Concentration | Key Success
Factors | Cost Structure Benchmarks Basis of Competition | Barriers
to Entry | Industry Globalization
Level Concentration in this industry is Low
IBISWorld identifies 250 Key Success Factors for a business. The
most important for this industry are:
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Competitive Landscape
Cost Structure Benchmarkscontinued
the industry relies on manual labor instead of heavy machinery
and equipment, keeping wages as a share of revenue relatively
high.
PurchasesPurchases make up a low expense for medical and
recreational marijuana growers, representing an estimated 2.5% of
total industry revenue. The primary goods purchased by this
industry include soil, fertilizer and seeds. Purchases have
increased as a share of revenue over the past five years, due to
increases in the prices of the raw materials necessary to grow
medical and recreational marijuana.
ProfitProfit, measured as earnings before interest and taxes,
varies greatly across the industry because of the myriad of laws
governing medical and recreational marijuana from state to state.
In the
states where medical marijuana is legal, operators in the
Medical and Recreational Marijuana Growing industry are required to
be a part of nonprofit marijuana collectives (also known as
dispensaries) to grow cannabis. Additionally, since the sale of
marijuana is still prohibited, vendors typically provide marijuana
to the collective in exchange for donations.
More recently, industry-wide profit has grown on account of the
legalization of recreational marijuana across the United States.
Beginning in 2014, both legal cultivation and sale of for-profit
recreational marijuana. In Colorado, for example, operators are
able to apply for licenses to cultivate and sell cannabis wholesale
to dispensaries. Since then, the number of states legalizing
recreational has grown to 10, with Illinois being the 11th state
effective January 2020. Consequently, industry profit is expected
to total 11.6% of revenue in 2019.
Sector vs. Industry Costs
n Profi tn Wagesn Purchasesn Depreciationn Marketingn Rent &
Utilitiesn Other
Average Costs of all Industries in sector (2019)
Industry Costs (2019)
0
20
40
60
Perc
enta
ge o
f rev
enue
80
100
SOURCE: WWW.IBISWORLD.COM
4.9 11.6
46.9
1.96.84.22.5
26.1
13.22.7 0.31.9
66.1
10.9
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Competitive Landscape
Basis of Competition Medical and Recreational Marijuana Growing
industry competition is very high since most industry operators
grow the same types of products, making it harder to differentiate.
Competition is further increasing as the legalization of
recreational marijuana sales in 2014 has led the licensing of
larger recreational marijuana cultivators. Likewise, in Oregon, the
licensing of larger recreational marijuana cultivators along with
the legal sale of recreational marijuana began in 2016. Today, 11
states have legalized recreational marijuana, making the industry
more attractive for new entrants.
Internal competitionIndustry vendors compete on product price
and quality. Marijuana can have diverse properties and qualities,
and only vendors that can consistently cultivate high-quality
marijuana will attract
demand from dispensaries. In addition, vendors must be able to
provide competitive prices or donation requirements. Dispensaries
can source marijuana from all members of their collective, making
it easy to only acquire products from the lowest-priced vendors.
Over the past five years, favorable state legislation paved the way
for a large number of new entrants to this industry.
External competitionIndustry operators experience competition
from pharmaceutical companies that manufacture drugs to treat
chronic pain, cancer, HIV and other illnesses that medical
marijuana helps relieve. Medical marijuana users, for example,
typically only turn to marijuana after other treatment has failed,
though, resulting in limited external competition from drug
manufacturers.
Cost Structure Benchmarkscontinued
DepreciationDepreciation is projected to account for an
additional 4.2% of industry revenue. These costs are associated
with investment into hydroponic techniques, temperature, lights,
humidity controls and other facilities necessary to grow
marijuana.
MarketingMarketing costs account for an estimated 6.8% of
industry revenue in 2019. Marketing costs are high due to the
sudden rise in the marijuana industry and overall acceptance by the
population. Considering that most industry operators are fairly
new, they need to increase their marketing efforts to attract
attention.
RentRent payments account for an estimated 0.4% of the
industry’s revenue in 2019.
UtilitiesUtilities are expected to account for an estimated 1.5%
of industry revenue in 2019. The cultivation of medical and
recreational marijuana in indoors, in particular, requires
significant spending on facilities and electricity to power grow
lights.
OtherOther costs include liability insurance and legal costs and
are expected to account for the remainder of industry revenue.
Level & Trend Competition in this industry is High and the
trend is Increasing
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Competitive Landscape
Barriers to Entry Medical marijuana growersProspective Medical
and Recreational Marijuana Growing industry operators contend with
minimal barriers to entry in terms of capital costs. However, the
classification of marijuana as a Schedule I controlled substance
and the possibility of federal prosecution contribute to medium
barriers to entry. Over the past five years, a large number of
operators entered the Medical and Recreational Marijuana Growing
industry due to favorable policy stances from the Obama
administration. However, in 2011, the Drug Enforcement Agency (DEA)
stepped up raids on marijuana dispensaries, which made prospective
operators more hesitant to enter this industry. More recently, the
industry has benefited from favorable regulatory decisions at the
federal level. In response to changing public sentiment, the United
States House of Representatives voted in 2014 to restrict the DEA
from using funds to target medical marijuana growers and
dispensaries. Although this amendment to the DEA appropriations
bill would need to be passed by the Senate to become binding, its
confirmation would materially alter the outlook for industry
operators. The omnibus-spending bill signed by President Obama in
December of 2014 included the historic provisions for medical
marijuana discussed above. The bill includes a rider to de-fund the
DOJ’s war on medical marijuana, preventing the agency from using
funding to “prevent [medical marijuana states] from implementing
their own State laws that authorize the use, distribution,
possession or cultivation of medical marijuana.”
State regulations have mixed effects. In general, increased
state regulation has benefited industry operators by legalizing
medical marijuana or providing more concrete regulation on
marijuana growing. Over the past five years, barriers to entry have
decreased because several states and Washington, DC passed
legislation legalizing some level of medical marijuana growing.
While states provide a legal avenue for growers to enter this
industry, regulations are extensive and costly for prospective
growers. For example, Colorado, requires every marijuana plant to
be registered with the state. Prospective growers are subject to
background checks, deposits and licensing and application fees.
Licensing and registration fees can total $500,000 or more.
Additionally, all growing facilities are under constant video
surveillance by law enforcement personnel from the state’s Medical
Marijuana Enforcement Division.
Additionally, due to the large number of small medical marijuana
growers, competition in this industry is very high. Marijuana
vendors must be able to grow high-quality plants while charging
competitive prices, which may push away prospective entrants. Over
the past five years, competition has increased, making it more
difficult to succeed in this industry.
Recreational marijuana growersMore recently, the legalization of
recreational marijuana in Colorado and Washington State has spurred
the entry of larger scale, for-profit growers in each state.
However, operators are required to obtain licensure from
appropriate agencies in each state, competition for which is high.
In Colorado, for example, recreational cultivation licenses are
expensive and difficult to obtain because
Level & Trend Barriers to Entry in this industry are Medium
and Increasing
Barriers to Entry checklist
Competition HighConcentration LowLife Cycle Stage GrowthCapital
Intensity MediumTechnology Change LowRegulation and Policy
HeavyIndustry Assistance High
SOURCE: WWW.IBISWORLD.COM
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Competitive Landscape
Industry Globalization
Marijuana is not traded internationally, resulting in a very low
level of Medical and Recreational Marijuana Growing industry
globalization. In addition to the United States, Canada has
legislation
permitting medical marijuana consumption. Other countries, such
as Argentina and Chile, permit patients to use medical marijuana,
though it is not formally regulated.
Barriers to Entrycontinued
of the high number of applicants. Individual licenses vary on
the size of growing facilities: type one stores, the smallest
level, can grow up to 3,600 plants combined in their cultivation
facilities; type two stores can grow 6,000 plants; and type three
stores can grow up to 10,200 plants. Moreover, state officials have
moved to limit the amount
individual operators can grow to prevent marijuana grown in
Colorado from entering states that ban the medical and recreational
sales and possession of cannabis. In Washington, recreational
cultivation licenses have been even more difficult to obtain as
state officials have lagged in their implementation of the state’s
recreational marijuana mandate.
Level & Trend Globalization in this industry is Low and the
trend is Steady
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Other Company Performance
Mindful Medical (Mindful) is headquartered in Denver, CO. The
company currently operates one 43,000-square-foot growing facility
that supplies medical and recreational marijuana, including
concentrates, exclusively to its own dispensaries. Mindful operates
one of the largest growing facilities in the Colorado, where
marijuana is grown with an air filtration system to contain any
smell.
Following the passage of legalization in other states, the
company has been developing contracts to build other large growing
facilities in states such as New York, and has successfully
expanded to Illinois. Since the company is privately held, it does
not disclose financial information. However, IBISWorld expects
industry-relevant revenue to account for less than 1.0% of industry
revenue in 2019.
Other Company Performance
Copperstate Farms LLC (Copperstate) is one of the largest
producers of marijuana on the West coast in terms of square footage
and area of the grow operation. According to New Cannabis Ventures,
Copperstate owns 1.7 million square feet of greenhouses in
Snowflake, AZ, with 348,000 square feet devoted to the
production of medical cannabis only. More recently, the company
was acquired by Liberty Health Sciences Inc. in 2018. Though the
company is privately held, and does not disclose financial
information, IBISWorld expects the company to generate less than
1.0% of industry revenue in 2019.
Other Company Performance
Founded in 2015 and headquartered in Olympia, WA, Northwest
Cannabis Solutions is one of the largest recreational marijuana
producers in the Pacific Northwest. The company operates a
production facility, extraction lab and full-service kitchen for
the production of
edibles. The company employs over 150 individuals and boasts
over 200 retail partners in Washington State, according to
Nanalyze. Northwest Cannabis Solutions strictly produces cannabis.
In 2019, the company is expected to generate less than 1.0% of
total industry revenue.
Other Companies The Medical and Recreational Marijuana Growing
industry has no major players, as producers primarily grow products
for local or in-state vendors. The legalization of recreational
marijuana in several states
between 2014 and 2019 is expected to create opportunities for
larger operators and commercial operations to establish an
increasing position in the Medical and Recreational Growing
industry.
Major CompaniesThere are no Major Players in this industry |
Other Companies
Northwest Cannabis Solutions Market Share: 0.2%
Copperstate Farms LLC Market Share: 0.1%
Mindful Medical Market Share: 0.1%
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Capital Intensity The Medical and Recreational Marijuana Growing
industry has a medium level of capital intensity. For every $1.00
spent on labor, operators spend an average of $0.16 on capital
expenditure, though the level of capital expenditures varies
between outdoor and indoor growers. Outdoor growers follow standard
cultivation techniques that other farmers use, which typically
require low capital expenditure. By contrast, indoor growers
require a slightly higher level of capital expenditures, which are
typically spent on hydroponic techniques, lighting and humidity
controls. The majority of industry revenue is allocated in the form
of wages toward labor costs, as marijuana cultivation requires
significant manual labor. Moreover, the nonprofit nature of
medical marijuana growing in most states means that earnings are
typically collected as wages, rather than profit.
Operating ConditionsCapital Intensity | Technology & Systems
| Revenue VolatilityRegulation & Policy | Industry
Assistance
Capital Intensity
0.5
0.0
0.1
0.2
0.3
0.4
SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of
capital intensity
Capital units per labor unit
Medical & Recreational
Marijuana Growing
Agriculture, Forestry, Fishing
and Hunting
Economy
Level The level of capital intensity is Medium
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Operating Conditions
Revenue Volatility Revenue volatility is high for the Medical
and Recreational Marijuana Growing industry. Regulatory changes in
favor or against the industry are the primary determinant of
revenue fluctuations. In addition to the growing legalization
movement for medical cannabis, during the current five-year period,
recreational cannabis has been legalized in 11 US states.
Consequently, revenue tends to spike following legislative
victories. This was exemplified after watershed legalization
measures passed in 2016, in particular.
Moreover, demand for medical marijuana growing is rapidly
expanding due to the growing acceptance of medical
marijuana in treating or alleviating symptoms in a variety of
medical conditions, including cancer and the Alzheimer’s Disease.
Consumers who use medical marijuana do so due to medical needs; as
a result, most use industry products regardless of the performance
of the economy. In addition, the aging population has led to an
increase in demand for a variety of medical services and
treatments, since senior citizens consume a disproportionately
large number of pharmaceuticals relative to the rest of the
population. The end result is a loyal and increasing customer base
for medical marijuana, which leads to steadily increasing
revenue.
Technology and Systems
The Medical and Recreational Marijuana Growing industry has a
low level of technology change. Outdoor growers primary follow
standard cultivation techniques used by other outdoor farmers.
Indoor cannabis growers require containers, lighting and humidity
control. Growers can also use hydroponic techniques, which have
experienced more technology change over the past five years.
Hydroponic techniques involve growing marijuana plants in water.
Growers require water filters, pumps, growing trays and
humidity control. Some industry operators also cultivate new
marijuana strains. This involves finding plants with desirable
characteristics then artificially fertilizing plants. However,
techniques used for developing new marijuana strains is similar to
general crossing techniques used for flowers and plants. As a
result, technology change is relatively low since the company does
not rely on heavy equipment or machinery to operate efficiently and
continues to depend on manual labor and human knowledge.
Level The level of technology change is Low
Level The level of volatility is Very High
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Operating Conditions
Regulation and Policy The Medical and Recreational Marijuana
Growing industry is subject to very heavy regulation from
governments at all levels. However, there is a great degree of
regulatory divergence at the state and federal levels.
Federal levelAt the federal level, cannabis is classified as a
Schedule I controlled substance under the Controlled Substances Act
(CSA), passed as part of the Comprehensive Drug Abuse Prevention
and Control Act of 1970. As defined by the CSA, Schedule I
substances are those deemed to have a high potential for abuse, no
currently accepted medical use in treatment and lack safe usage.
Under federal law, Schedule I substances may not be manufactured,
distributed or dispensed.
The scheduling of drugs is administered by the Department of
Health and Human Services (DHHS). The DHHS operates the National
Institute on Drug Abuse (NIDA), which conducts research on the
efficacy of marijuana for medical uses. The DHHS has the final say
on all drug scheduling.
The Department of Justice (DOJ), through the Drug Enforcement
Agency
(DEA), raids and prosecutes marijuana dispensaries and growers
in the United States. Over the past five years, regulation trends
were initially promising for industry operators. During the
presidential campaign of 2008, then Senator Obama promised to put
an end to the practice of raiding dispensaries by the federal
government. In 2009, Attorney General Eric Holder announced that
the DOJ will comply with the President’s statements during the
campaign. The “Ogden memo,” released by Deputy Attorney General
David Ogden later that year, reiterated this position by
instructing federal law enforcement organizations to refrain from
using federal resources to prosecute cannabis dispensaries and
growers that were in compliance with existing state laws providing
for the medical use of marijuana.
However, beginning in 2011, the DEA and the DOJ once again
ramped up their prosecution of cannabis growers and dispensaries.
This introduced greater uncertainty for industry operators,
resulting in higher operating costs from legal fees and risk
mitigation. In response to changing public sentiment, however, the
United States House of
Revenue Volatilitycontinued
Level & Trend The level of Regulation is Heavy and the trend
is Increasing
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Operating Conditions
Regulation and Policycontinued
Representatives voted in 2014 to restrict the DEA from using
funds to target medical marijuana growers and dispensaries.
Although this amendment to the DEA appropriations bill would need
to be passed by the Senate to become binding, its confirmation
would materially alter the outlook for industry operators. The
omnibus spending bill signed by President Obama in December of 2014
included the historic provisions for medical marijuana discussed
above. The bill includes a rider to de-fund the DOJ’s war on
medical marijuana, preventing the agency from using funding to
“prevent [medical marijuana states] from implementing their own
State laws that authorize the use, distribution, possession or
cultivation of medical marijuana.” In 2016, the federal government
loosened regulations regarding the study of medical applications
and effects of cannabinoids.
State regulationCurrently, 33 states have some regulation that
permitted the use of medical marijuana. In addition, 11 states have
permitted the legal sale of cannabis for recreational use. Illinois
became the eleventh state to legalize marijuana for recreational
use, effective on January 2020. However, since federal law
supersedes state law, the cultivation, sale and use of medical or
recreational marijuana remain illegal in the United States. While
Florida voters failed to pass an initiative that would have made
the sale of medical marijuana legal in the state, voters in Alaska,
Oregon and Washington, DC legalized the sale of recreational
marijuana during the 2014 elections, and many other states joined
the pact following the 2016 election cycle, including California.
Alaska’s measure is
similar to Colorado’s, and Oregon’s is modeled on Washington’s.
Washington, DC’s initiative legalizes marijuana possession but does
not establish a taxation system because voters are not permitted to
directly implement taxes themselves. Alaska, Oregon and Washington,
DC are expected to experience a boom in the legal sale of marijuana
for recreational use over the next five years.
California has the oldest and one of the most extensive
regulatory frameworks governing medical marijuana. In 1996, the
passage of the Compassionate Use Act (Proposition 215) legalized
the use of medical marijuana and prohibited physicians from being
punished for recommending medical marijuana to patients. California
Senate Bill 420, passed in 2003, further clarified the state’s
position on medical marijuana, legalizing organization of nonprofit
marijuana collectives where members can cultivate and provide
marijuana to one another.
In addition to California, the state of Colorado has some of the
most extensive medical marijuana laws. The use of medical marijuana
has been legal since the passage of Amendment 20 in 2000. In 2012,
the state further loosened marijuana restrictions by passing
Amendment 64, which legalized marijuana for recreational use. With
the growth of the edible cannabis products segment, the state has
moved to enact new regulations. Several high-profile incidents
involving edible cannabis products have spurred new rules, signed
into law in May 2014, concerning the packaging of edible marijuana
products, including improved information regarding serving
sizes.
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Operating Conditions
Industry Assistance Industry associationsThe Medical and
Recreational Marijuana Growing industry benefits from relatively
widespread support from industry associations. The National
Cannabis Industry Association is a trade association representing
industry operators. The organization lobbies lawmakers in
Washington, DC for more favorable marijuana legislation. These
include legislation on banking that permits marijuana businesses to
work with financial institutions. Currently,
banks are hesitant to provide services to marijuana businesses
due to the illegality of marijuana at the federal level.
The National Organization for the Reform of Marijuana Laws
(NORML) works to repeal marijuana prohibition at the federal level.
The organization supports the right of adults to use marijuana
responsibly, and champions state and federal reforms that are
favorable to marijuana users. NORML primarily lobbies Congress and
state legislatures to enact marijuana reforms.
Level & Trend The level of Industry Assistance is High and
the trend is Increasing
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Key StatisticsRevenue
($m)
Industry Value Added
($m)Establish-
ments Enterprises Employment Exports ImportsWages ($m)
Domestic Demand
Total recreation expenditure
($b)2010 973.0 395.5 3,430 2,454 11,267 -- -- 272.5 N/A
38,162.02011 1,179.5 389.8 3,566 2,552 11,708 -- -- 273.6 N/A
38,777.62012 1,228.8 443.0 4,155 2,973 13,794 -- -- 312.1 N/A
39,778.62013 1,476.8 580.4 4,730 3,385 16,088 -- -- 370.7 N/A
38,995.42014 2,567.2 1,157.8 8,027 5,745 28,052 -- -- 657.2 N/A
40,298.72015 2,823.5 1,111.8 9,637 6,897 34,925 -- -- 677.7 N/A
41,656.02016 3,862.7 1,554.7 11,246 8,048 41,898 -- -- 1,031.3 N/A
42,090.82017 4,745.8 1,980.2 13,020 9,318 50,107 -- -- 1,254.1 N/A
43,030.92018 6,299.8 2,639.6 16,810 12,008 65,831 -- -- 1,651.1 N/A
44,454.52019 8,065.9 3,377.6 21,152 15,091 83,930 -- -- 2,106.7 N/A
45,404.32020 10,099.1 4,223.9 25,790 18,366 104,137 -- -- 2,618.7
N/A 46,278.02021 12,054.6 5,031.2 30,055 21,368 123,324 -- --
3,106.1 N/A 47,056.92022 13,448.5 5,601.9 32,805 23,285 136,609 --
-- 3,445.6 N/A 47,933.42023 13,784.4 5,724.0 33,047 23,428 139,284
-- -- 3,516.8 N/A 48,846.32024 14,696.7 6,099.4 34,724 24,589
147,868 -- -- 3,736.8 N/A 49,830.6
IVA/Revenue (%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($’000)Wages/Revenue
(%)Employees
per Est.Average Wage
($)
Share of the Economy
(%)2010 40.65 N/A N/A 86.36 28.01 3.28 24,185.67 0.002011 33.05
N/A N/A 100.74 23.20 3.28 23,368.64 0.002012 36.05 N/A N/A 89.08
25.40 3.32 22,625.78 0.002013 39.30 N/A N/A 91.80 25.10 3.40
23,042.02 0.002014 45.10 N/A N/A 91.52 25.60 3.49 23,427.92
0.012015 39.38 N/A N/A 80.84 24.00 3.62 19,404.44 0.012016 40.25
N/A N/A 92.19 26.70 3.73 24,614.54 0.012017 41.73 N/A N/A 94.71
26.43 3.85 25,028.44 0.012018 41.90 N/A N/A 95.70 26.21 3.92
25,080.89 0.012019 41.88 N/A N/A 96.10 26.12 3.97 25,100.68
0.022020 41.82 N/A N/A 96.98 25.93 4.04 25,146.68 0.022021 41.74
N/A N/A 97.75 25.77 4.10 25,186.50 0.032022 41.65 N/A N/A 98.45
25.62 4.16 25,222.35 0.032023 41.53 N/A N/A 98.97 25.51 4.21
25,249.13 0.032024 41.50 N/A N/A 99.39 25.43 4.26 25,271.19
0.03
Figures are in inflation-adjusted 2019 dollars.
Revenue (%)
Industry Value Added
(%)
Establish-ments
(%)Enterprises
(%)Employment
(%)Exports
(%)Imports
(%)Wages
(%)
Domestic Demand
(%)
Total recreation expenditure
(%)2011 21.2 -1.4 4.0 4.0 3.9 N/A N/A 0.4 N/A 1.62012 4.2 13.6
16.5 16.5 17.8 N/A N/A 14.1 N/A 2.62013 20.2 31.0 13.8 13.9 16.6
N/A N/A 18.8 N/A -2.02014 73.8 99.5 69.7 69.7 74.4 N/A N/A 77.3 N/A
3.32015 10.0 -4.0 20.1 20.1 24.5 N/A N/A 3.1 N/A 3.42016 36.8 39.8
16.7 16.7 20.0 N/A N/A 52.2 N/A 1.02017 22.9 27.4 15.8 15.8 19.6
N/A N/A 21.6 N/A 2.22018 32.7 33.3 29.1 28.9 31.4 N/A N/A 31.7 N/A
3.32019 28.0 28.0 25.8 25.7 27.5 N/A N/A 27.6 N/A 2.12020 25.2 25.1
21.9 21.7 24.1 N/A N/A 24.3 N/A 1.92021 19.4 19.1 16.5 16.3 18.4
N/A N/A 18.6 N/A 1.72022 11.6 11.3 9.1 9.0 10.8 N/A N/A 10.9 N/A
1.92023 2.5 2.2 0.7 0.6 2.0 N/A N/A 2.1 N/A 1.92024 6.6 6.6 5.1 5.0
6.2 N/A N/A 6.3 N/A 2.0
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
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Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that new companies
struggle to enter an industry, while low barriers mean it is easy
for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital
(plant, machinery and equipment) with that spent on labor.
IBISWorld uses the ratio of depreciation to wages as a proxy for
capital intensity. High capital intensity is more than $0.333 of
capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICES The dollar figures in the Key Statistics table,
including forecasts, are adjusted for inflation using the current
year (i.e. year published) as the base year. This removes the
impact of changes in the purchasing power of the dollar, leaving
only the “real” growth or decline in industry metrics. The
inflation adjustments in IBISWorld’s reports are made using the US
Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within
the United States, regardless of their country of origin. It is
derived by adding imports to industry revenue, and then subtracting
exports.
EMPLOYMENT The number of permanent, part-time, temporary and
seasonal employees, working proprietors, partners, managers and
executives within the industry.
ENTERPRISE A division that is separately managed and keeps
management accounts. Each enterprise consists of one or more
establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an
enterprise, an establishment is a single physical location where
business is conducted or where services or industrial operations
are performed. Multiple establishments under common control make up
an enterprise.
EXPORTS Total value of industry goods and services sold by US
companies to customers abroad.
IMPORTS Total value of industry goods and services brought in
from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATION An indicator of the dominance of the top
four players in an industry. Concentration is considered high if
the top players account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services
(exclusive of excise and sales tax); subsidies on production; all
other operating income from outside the firm (such as commission
income, repair and service income, and rent, leasing and hiring
income); and capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed tangible assets
are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and
services produced by the industry minus the cost of goods and
services used in production. IVA is also described as the
industry’s contribution to GDP, or profit plus wages and
depreciation.
INTERNATIONAL TRADE The level of international trade is
determined by ratios of exports to revenue and imports to domestic
demand. For exports/revenue: low is less than 5%, medium is 5% to
20%, and high is more than 20%. Imports/domestic demand: low is
less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity
and decline. IBISWorld determines an industry’s life cycle by
considering its growth rate (measured by IVA) compared with GDP;
the growth rate of the number of establishments; the amount of
change the industry’s products are undergoing; the rate of
technological change; and the level of customer acceptance of
industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or
payroll, also known as nonemployers. These are mostly set up by
self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as
an indicator of a company’s profitability. It is calculated as
revenue minus expenses, excluding interest and tax.
Industry Jargon
IBISWorld Glossary
CANNABIS A drug produced from the Cannabis sativa (commonly
known as hemp) or Cannabis indica plant, which is related to
nettles and hops.
DISPENSARY/COLLECTIVE A medical marijuana collective comprises
patients that provide medical marijuana to each other on a
nonprofit basis. It is the standard legal organization for growers
in most states.
MARIJUANA The dried leaves and flowering tops of the pistillate
hemp plant that yield tetrahydrocannabinol and are smoked in
cigarettes for their intoxicating effect.
VENDOR A member of a marijuana collective that provides medical
marijuana to other collective members on nonprofit basis.
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Jargon & Glossary
VOLATILITY The level of volatility is determined by averaging
the absolute change in revenue in each of the past five years.
Volatility levels: very high is more than ±20%; high volatility is
±10% to ±20%; moderate volatility is ±3% to ±10%; and low
volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the
industry. The cost of benefits is also included in this figure.
IBISWorld Glossary continued
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