Impact Lab


Subscribe Now to Our Free Email Newsletter
October 15th, 2018 at 12:03 pm

Great green hope: The big picture on legal marijuana

IMG_9374

The biggest unclaimed territory in the consumer discretionary universe is cannabis. Even though cannabis remains illegal under federal law, Americans spent $6 billion in 2017 on legal recreational and medical marijuana.

IL-Header-Communicating-with-the-Future

Why it matters: Americans may have spent a total of $50 billion on recreational cannabis last year, according to the best estimates. That leaves enormous room for the legal market to grow, even if cannabis consumption remains flat.

Early investments in growing cannabis have not necessarily paid off, with the price of “outdoor flower” plunging from about $3,000 per pound four years ago to as low as $250 per pound today, according to Drake Sutton-Shearer, the CEO of cannabis media shop Prøhbtd. Thanks to falling prices, marijuana sales in Colorado dispensaries actually fell in May 2018, compared to a year earlier.

  • The industry remains a legal minefield, with regulators involved at multiple levels from municipalities up to states and even the federal government. Opening a bank account for a cannabis business can be incredibly difficult; suing for trademark infringement in another state can be downright impossible.
  • The industry is also extremely fragmented, with more than 75,000 companies in the U.S. and Canada alone. There are zero national brands, very little brand recognition even at the state level, and dozens if not hundreds of competing retailers and distributors in every jurisdiction.
  • Many of the most successful entrepreneurs are working in ancillary areas, like vape-pen manufacturing, brand-consultancy services or conference organizing. (There were 172 business-to-business cannabis conferences last year.)

A lot of people, including stock-market speculators, assume that a legalized and branded future awaits, just as with coffee, alcohol, tobacco and pharmaceuticals. But even if that’s true, no one has a clue who the ultimate winners might be. (Remember that Juul came from nowhere to dominate the tobacco vape space.)

  • As a psychoactive substance, the effects of marijuana can vary wildly, and consistency of experience is much more important for cannabis brands than it is for, say, alcohol brands. It’s also much more difficult to ensure, across states and geographies.

The bottom line: Hundreds of billions of dollars are currently spent on alcohol, tobacco, opioids and pharmaceuticals that treat pain or stress. Legal cannabis could, theoretically, capture a significant part of that market. But picking winners is hard. And full legalization is hardly a foregone conclusion. Expect extremely strong opposition before that happens.

Via Axios 

IL-Header-Communicating-with-the-Future

Comments are closed.

Coworking 13