By Marijuana Business Daily staff
Retail sales of medical and recreational cannabis in the United States are expected to hit $5 billion-$6 billion this year and surge to as high as $17 billion by 2021, according to exclusive projections released today in the Marijuana Business Factbook 2017.
“The marijuana industry is primed and pumped for explosive growth in the foreseeable future, provided there isn’t a significant crackdown at the federal level,” said Chris Walsh (below), editorial director of Marijuana Business Daily, which publishes the Factbook. “The business opportunities that will emerge in the coming years are tremendous for both existing marijuana companies and new ones that start up.”
Sales in 2017 are expected to grow by roughly a third over the estimated $4 billion-$4.5 billion the industry racked up last year, with recreational possibly surpassing medical for the first time.
Rec shops are expected to generate $2.6 billion-$2.9 billion in sales this year versus $2.5 billion-$3.2 billion on the medical side, according to the Factbook. The recreational market will benefit from Nevada’s launch of early adult-use sales in July, continued strong growth in Colorado, Oregon and Washington state, and momentum in Alaska’s new recreational market.
The longer-term picture is even brighter.
The marijuana industry will get a major boost in the coming years when the 11 states that passed marijuana-related measures come online. These markets alone could generate more than $7 billion annually by 2021 – and possibly much more if they gain steam quickly.
The sales estimates include wide ranges to account for the unknowns inherent in the industry, such as delays in the launch of new markets, legalization in additional states and regulatory fluctuations. The low-end projections are particularly cautious, while the higher-end ones assume a more promising scenario in terms of legalization and growth.
California’s adult-use market will drive the lion’s share of growth through 2021.
The state could generate $4.5 billion-$5 billion in annual retail recreational sales by then, accounting for 76% of the total revenue potential for the new rec markets, according to the Factbook.
Other highlights from the Factbook:
- Roughly 50% of revenue-generating cannabis companies are either actively trying to raise capital or plan to this year. The situation for these businesses can vary – some are looking for capital to expand while others need cash infusions to pay the bills until they hit profitability – but a higher percentage of testing labs and infused product manufacturers are seeking funding than all other sectors of the industry.
- With average profit margins of 19%, dispensaries and rec stores are doing quite well in terms of profitability. Though such margins are high relative to businesses in the traditional economy, retailers actually have the smallest profit margins across all sectors of the marijuana industry.
“Given that annual revenue for a typical rec store/dispensary is nearly twice as high as their operating costs, retailers are obviously hindered by their inability to take the same tax deductions as a traditional business,” said Eli McVey, industry analyst at Marijuana Business Daily. “Should future tax code reforms address this issue, expect to see retailers’ profits surge.”
- A majority of infused product companies are manufacturing more than one type of good – typically edibles and concentrates – though less than a quarter are choosing to focus on a single category. For example, nearly half of all infused businesses are producing topicals, but only 6% are manufacturing topicals exclusively.
- On the employment front, the cannabis industry employs 165,000-230,000 full- and part-time workers.