By John Schroyer
This is the first entry in a three-part series looking at key marijuana business developments in 2015 and examining what lies ahead for 2016.
The past 12 months have been a whirlwind for the cannabis industry, with new business opportunities popping up regularly in the United States and abroad. A half-dozen new markets came online, scores of cannabis businesses expanded across state lines, the nation’s largest MMJ market finally passed regulations and the future of the industry brightened considerably.
Yet for all the progress, the marijuana sector experienced several setbacks as well.
As 2015 comes to a close, here’s a look back at some (though certainly not all) of the major marijuana milestones, developments and defeats that have made this year one to remember.
New markets emerge
An impressive number of states were able to get marijuana sales up and running in 2015, continuing the industry’s march across the country.
On the medical side of the equation, the first dispensaries launched in Delaware, Illinois, Massachusetts, Minnesota and Nevada. On the recreational side, Oregon surprised everyone and started sales early via existing MMJ dispensaries.
The addition of these new markets will help the industry generate hundreds of millions of dollars in additional revenue, and each is expected to grow exponentially in 2016.
Business booms in existing rec, MMJ markets
The nation’s first three recreational cannabis states posted eye-popping sales growth, while most medical marijuana markets grew as well.
Legal cannabis sales – including both medical and recreational – will likely top $1 billion in Colorado alone for 2015, up from $700 million the previous year. Washington State’s rec shops surpassed $300 million in revenue in their first full calendar year of operation, while its medical marijuana industry raked in an estimated $200 million.
Oregon rec revenues hit $12 million in just the first week of sales, showing the potential of the newest recreational cannabis state.
The medical marijuana industry is also booming in Arizona, Connecticut, Michigan, Montana, New Mexico and Washington DC. More dispensaries opened in New Jersey, and Connecticut added new dispensary licenses (as did Delaware).
Investment climate improves
Businesses looking for capital to fund expansion plans or just to get started had a much easier time in 2015 than ever before.
Million-dollar deals became almost commonplace, and larger investment firms such as Privateer Holdings and Tuatara Capital raised tens of millions of dollars to deploy into the industry.
Additionally, more investors started putting money into cannabis-touching firms, indicating that the risks of investing in the industry have subsided significantly.
Expansion across state lines
The past 12 months also saw numerous companies and entrepreneurs expand into multiple states.
This was especially true in the infused products sector, where some bigger players began selling their branded edibles in several markets. Dispensaries/rec stores – including Harborside Health Center – also successfully expanded beyond their home base.
Up-and-coming markets advance
A handful of states that previously legalized medical marijuana made progress on the regulatory and licensing fronts, setting the stage for even more new markets to come online in 2016 and beyond.
New York and New Hampshire awarded MMJ business licenses, while Maryland finalized regulations and started its licensing process. Delays are certainly still possible, but these states are in a good position heading into 2016.
Meanwhile, dozens of Native American tribes began taking a serious look at getting into the industry.
Legislative & regulatory wins
Hawaii – which legalized MMJ long ago but only allowed home growing – pushed through legislation that sets up a framework for the commercial cultivation and sale of medical cannabis to patients.
Similarly, lawmakers in Louisiana – which legalized medical cannabis decades ago but never provided a way for patients to get it – passed a measure to allow cultivation sites and dispensaries. Although the law as written is largely unworkable, it still represents progress.
Perhaps the biggest news of the year came in California, where lawmakers finally approved a framework to establish regulations for the state’s enormous MMJ industry. This will upend the nation’s largest medical cannabis market but also hopefully stabilize it.
And let’s not forget Michigan, where lawmakers in Detroit passed regulations on medical marijuana businesses, which could help pressure legislators to enact statewide MMJ rules.
International markets develop
This past year also saw some landmark changes across several other countries outside the United States – so much so that in another year or two, the U.S. may not be the industry leader in cannabis that it is today.
The biggest highlight was the Canadian elections, which saw a sweeping victory for Prime Minister Justin Trudeau and his liberal party. Trudeau promised on the campaign trail to legalize recreational marijuana, and his administration has already begun making moves to implement that promise.
The recreational market in Uruguay, which legalized in late 2013, is starting to get underway as well.
All of this adds up to a lot of business opportunities for established companies.
Hurdles and regression in some areas
Not all of 2015 was roses and champagne. There were plenty of problematic developments as well.
A few of them:
- Multiple banks that were set to begin serving the cannabis industry changed course and declined to do so. That list includes Oregon-based MBank, which announced its pullout in April, and First Security Bank of Nevada, which reversed course in May after starting to work with the cannabis industry in 2014.
- Then in October, the Federal Reserve entered the banking fray, declaring in a court filing that it will not accept money from marijuana businesses due to the plant’s status as a Schedule I narcotic. That threw up another obstacle for businesses trying to obtain banking services.
- Lloyd’s of London, a major insurance marketplace for a lot of cannabis companies, ceased serving marijuana-related companies in May, also citing marijuana’s federally illegal status.
- The flip side of that coin occurred less than two months later, when an audacious campaign to legalize both medical and recreational cannabis in Ohio fell flat on its face, losing by the biggest margin of any cannabis ballot measure in recent years.
- One Native American plan to open a first-of-its-kind cannabis resort in South Dakota was put on ice indefinitely until the tribe could ensure that it’s on sound legal footing, both with the state and federal governments. The project has been viewed by many as a test case for tribes, since the Department of Justice released the Wilkinson Memo in December 2014.
- In two new MMJ markets, Minnesota and Illinois, anemic patient counts have raised concerns about how those respective programs may survive in the long run.
- In Washington State, a move by lawmakers to roll the medical cannabis industry into the same regulatory system as rec is expected to drive many dispensaries out of business. But at the same time, the changes could also bring new opportunities to other companies, so it’s a mixed bag.
John Schroyer can be reached at [email protected]