Justice

The Marijuana Market Is Going to Be Even Bigger than You Expect

February 3rd 2015

By:
Alex Mierjeski

​2014 was a good year for legalized marijuana.

And according to a new study, it could've been the best one yet. 

Even though it remains illegal on a federal level, voters across the country turned out to pass landmark measures in 2014: two more states––Oregon and Alaska (as well as voters in Washington, D.C., though sales are currently banned there)––approved measures legalizing recreational use, bringing the total number to four states allowing residents to use marijuana more or less like alcohol. It's a small number, but a significant one nonetheless: according to researchers from the ArcView Group, a Oakland, Calif. based marijuana investment and research outfit, the U.S. market for legal weed grew by nearly double what it was in 2013, jumping from $1.5 billion to $2.7 billion. 

A bull market

Over the course of seven months, researchers tracked legal medical- and recreational-centric businesses, as well as "independent" cultivators and businesses. The report also examined state agency data, as well as non profits and private companies within the marijuana industry for a comprehensive assessment of the current marketplace.

"The Report is the essential primer for anyone seriously interested in following our great American tradition of entrepreneurship and investment in this fascinating, explosive, rapidly evolving new industry," anti-pot campainer-turned-investor New York State Assemblyman Steve Katz said of the report. (Katz, a Republican who sits on the state committees for Alcoholism and Drug Abuse, as well as Higher Education in his state, was ticketed for a small baggie of pot last year while speeding. "He was," according to the arresting officer, "alone and cooperative.")

But as much as the report focuses on past market analyses, it importantly forecasts some promising numbers: not only is this year's market expected to grow at a clip of 32 percent, but by 2019, when the report predicts 14 more states will have legalized marijuana, the overall U.S. market will be in the ballpark of $11 billion. At a time when some traditional markets are slumping (think housing, steel, auto, etc.), this could mean a big boost for states coping with diminished economic importance of once-heavy hitting industries. According to researchers, 1.5 million shoppers patronized medical and recreational marijuana retailers in 2014, and in Colorado and Washington alone, people buying marijuana products generated $370 million. Oregon and Alaska are expected to contribute $275 million as both states roll out infrastructures this year. 

Forthcoming ballot initiatives

While the report's findings regarding market growth and continued legalization measures are predictions, they are certainly grounded in legitimate numbers and figures. Right now, around ten states are expected to host ballot and legislative initiatives legalizing recreational marijuana for the coming year, and already-demonstrated numbers support some of those lofty market predictions. Arizona, for example, where medical marijuana is legal and a recreational initiative is expected in 2016, had the fastest-growing major market last year, expanding by more than $120 million in a year to reach $155 million. Five states already have markets that exceed the $100 million mark, according to the report. 

To put things in perspective, 2014's legal marijuana market outpaced in seven months the market growth of industries such as building equipment contractors (11 percent), lumber products manufacturers (17 percent), and real estate agents and brokers offices (17 percent) over a 12-month period.

The report comes at a time when loosening drug laws are already paving the way for a drastically different landscape fitted to the contours of a drastically different marketplace. The report predicts that in the event of all 50 states legalizing recreational marijuana, the marijuana market could prove to be at least $3 billion more valuable than the entire behemoth organic food industry. The only block to that would be states who come down hard on keeping existing bans on recreational use, but even Obama's predictions resonate with the report's findings.

"What you're seeing now is Colorado, Washington, through state referenda, they're experimenting with legal marijuana," the President told YouTube personality Hank Green in an interview recently. "The position of my administration has been that we still have federal laws that classify marijuana as an illegal substance, but we're not going to spend a lot of resources trying to turn back decisions that have been made at the state level on this issue. My suspicion is that you're gonna see other states start looking at this."