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Medical Marijuana Industry Projected to Top $40 billion

Medical Marijuana Industry Projected to Top $40 billion
(Copyright DPC)

By    |   Monday, 21 March 2016 03:11 PM EDT

Remember that scene from “The Graduate” when Dustin Hoffman’s character is advised that “plastics” will become the next guaranteed U.S. growth industry? If that classic 1967 film were remade today, the same projection might be made for cannabis.

Two new economic analyses project the marijuana industry — for medical and recreational use — will top $40 billion over the next five to 10 years. And if cannabis becomes legal nationwide, the industry could hit $100 billion by 2050, by some estimates.

An analysis by Ackrell Capital — an independent investment finance bank focused on emerging growth industries — approximates the current U.S. consumer market for pot (both legal and not) is $40 billion.

Although marijuana is illegal federally, 39 states have legalized cannabis for medical or recreational use. That adds up to a $4.4 billion annual industry today, which is nearly comparable to Netflix sales, the U.S. florist industry, and the organic milk market. And that figure is rising higher every year, according to the Akrell Capital report.

“We believe that it is a question of when — not if — the federal prohibition on cannabis will end,” the report’s authors state. “In analyzing how the end of prohibition may affect the cannabis industry we have assumed that prohibition ends by 2020.

“However, even with federal prohibition, the cannabis industry today is large and dynamic… Once legalized federally, we estimate this market will grow to $37 billion within five years and $50 billion within 10 years.”

A second report, released this week by Marijuana Business Daily,  projects the industry will earn $44 billion by the year 2020, regardless of changes in legalization or decriminalization by the states or federal government.

In four years, the industry’s annual economic impact will rise from $14 billion-$17 billion in 2016 to $24 billion-$44 billion, the report estimates. Its authors add that every dollar spent on medical and recreational marijuana at the retail level leads to an extra $3 for the local economy.

“For example, a cannabis dispensary/store makes a sale for $100,” the reports states. “The business then uses a portion of that money to pay an employee, who in turn uses a portion of that money to buy groceries at the local grocer, and so on — a process that creates a ripple of economic value, most of which remains in the community.”

The primary drivers of industry growth are recreational sales in Colorado, Washington, and Oregon, which have moved to legalize marijuana. But new markets are also sprouting up in the 23 states that have legalized medical cannabis to treat health conditions, such as glaucoma, and more than a dozen others that have decriminalized its use.

The authors of the two new reports believe those sales are just the beginning of what’s likely to be much wider market for pot, particularly for medical applications. To date, scientific researchers have identified marijuana-based therapeutic applications for more than 40 health conditions, including cancer, arthritis, chronic pain, epilepsy, glaucoma, and HIV/AIDs.

“While this market will not develop until after the end of prohibition, we believe that the future cannabinoid-based pharmaceuticals market may ultimately exceed $50 billion annually,” the Ackrell Capital report states. “Therefore, we believe that there is a potential $100 billion market for cannabis.”

A second factor driving the projections: Marijuana is moving toward more mainstream acceptance as a respectable, above-board industry that is attracting investors and job-seeker, and creating new business opportunities across the country.

“We are indeed witnessing the rise of a new growth industry,” says John Kagia, director of industry analytics with New Frontier, a Washington, D.C.-based data analysis outfit that works with the cannabis industry.

Kagia tells Newsmax Health the legal market for pot is among the fastest-growing industries in the U.S., with an annual compound growth rate of 31 percent.

Larry Schnurmacher, managing partner with Phyto Partners — a private equity venture capital investment firm that specializes in helping businesses that operate in the cannabis industry — tells Newsmax Health the market for medical marijuana is poised for exponential growth.

“Yes the industry is growing, very rapidly, especially the medicinal marijuana industry,” he says, noting Phyto Partners has invested in nine cannabis-related companies. “I believe the biggest potential for growth for the industry is in the mostly untapped health, wellness, and pharmaceutical medicinal markets.

“New products are coming out daily that people are finding many uses for and replacements for their current drugs which are toxic, addictive, and have other negative side effects. I believe that the medicinal marijuana industry is comparable to the biotech industry as many new drugs will be discovered and cures for currently incurable diseases will be found in medicines derived from the cannabis plant.”

A recent Bank of America-Merrill Lynch report also projected strong growth for the marijuana industry, but estimated the market to be less expansive.

“The use of cannabinoids for therapeutic benefits has grown in popularity in the U.S. in recent years,” according to the report, issued in December. “About one million people are currently medical cannabis users in the U.S. Based on this figure, we estimate that medical marijuana is a $2.9 billion industry and could at least double if more states legalize use.”

Chris Walsh, managing editor of Marijuana Business Daily, cautioned that several factors could slow growth, such as the election of an anti-cannabis president. Industry watchers are also keeping an eye on several states that could legalize recreational cannabis in the November election, including California, Nevada and Massachusetts, while Florida and Ohio could legalize medical marijuana.

But Walsh said he believes such hurdles will not likely stop the momentum that is driving the marijuana industry’s growth.

“These would be huge new markets for the marijuana industry, propelling its growth for years to come,” Walsh said. “At this point, marijuana executives are holding their collective breath and hoping for a big November.”

© 2024 NewsmaxHealth. All rights reserved.

Two new economic analyses project the marijuana industry will top $40 billion over the next five to 10 years, primarily driven by growth in the use of cannabis for medical conditions.
medical, marijuana, pot, cannabis, legal, investment
Monday, 21 March 2016 03:11 PM
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