Even in states where both medical and recreational marijuana are legal, medical marijuana spending outpaces recreational receipts by a three-to-one margin. That’s according to a recent 400-page study released by New Frontier Data, a Washington D.C.-based analytics firm specializing in the cannabis industry.
In The Cannabis Industry Annual Report: 2017 Legal Marijuana Outlook, New Frontier partnered with Baker Technologies, a CRM outfit, to examine some recent marijuana business trends in states such as California, Colorado and Oregon, while also making some predictions for the near to not-so-near future.
Why is this report important?
Data analysis across the marijuana industry remains in its infancy, but as the legal landscape changes and capital flows into the space, experts insist that understanding studies like New Frontier’s are essential to cannabis business successes.
"California offers the perfect example of why it is so important to understand trends in consumer behavior,” said New Frontier Data CEO Giadha Aguirre De Carcer. “The state's legal industry is forecast to grow from $2.8 billion in 2017 to $5.6 billion in 2020. That spending will be increasingly directed at products and retailers who understand and serve the market's evolving tastes and preferences. The market is changing, and the most successful operators will be those who adapt most quickly to the change.”
Medical versus recreational spending
Though medical marijuana versus recreational spending levels garnered most headline attention, the Annual Report is chock full of other helpful tidbits. For instance, while (in 2016) medical spends averaged $136 per transaction to a recreational average of $49 — helped by the fact that medical products tend to be pricier — medical users also shopped every 10 days as recreational consumers did so every 14 days.
How do consumers, you know, consume product?
New Frontier also shed light on a massively important insight into how consumers prefer to actually use marijuana. In the recreational market, demand for flower (smokable) products plunged from an 85 percent share in January 2016 to just 64 percent by the end of the year. On the medical side, it fell from 87 percent to 65 percent. If this trend holds steady, expect more investment in extraction methods and non-smokable product offerings.
The sky's the limit
The Annual Report estimates medical marijuana sales will hit the $5.3 billion mark this year, which would be 67 percent of the entire legal cannabis market. By 2025 the medical sales total will pass the $13 billion threshold in today’s currently legal states. When new states join the legalization roster, that $13 billion number is expected to grow accordingly. As for recreational, the 2017 forecast is $2.6 billion in sales, and $10.9 billion by 2025.
Tied to the marijuana boom, in the near and long term, is job creation. In one state alone, Oregon, New Frontier estimates that by 2020 legal cannabis will produce about 18,000 jobs. This number takes into account medical and recreational jobs, as well as those created by marijuana spinoff businesses.
This year’s Annual Report demonstrates the resilience of an industry freeing itself from decades-long stigmatization. In the words of John Kagia, Executive Vice President of Industry Analytics for New Frontier, “These markets are growing very, very aggressively.”