The new data from Arcview and New Frontier accounts for the passage of recreational measures in Arizona, California, Maine, Massachusetts and Nevada, and medical initiatives in Florida and Montana
If voters pass adult-use marijuana legalization ballot issues in five U.S. states and medical marijuana measures in Florida and Montana, those states will give a $7.8 billion boost to the legal cannabis industry by 2020, according to the latest market research report from the Arcview Group and New Frontier Data.
The market research firms will release the mid-year update to their comprehensive “The State of Legal Marijuana Markets” report of sales projections and trends in the legal marijuana industry on Thursday.
In turn, the 2020 projection was adjusted downward to $20.6 billion, from the previous estimate of $22.7 billion. The 2020 adjustment was attributed to the collection of more precise data, operational challenges in states such as Alaska and Maryland, lower-than-expected sales in states such as Illinois and New York, and clarification of states’ regulatory models, according to the report.
A good chunk — $7.8 billion — of that $20.6 billion figure accounts for the passage of recreational marijuana ballot measures in Arizona, California, Maine, Massachusetts and Nevada, as well as proposed medical measures in Florida and Montana. New Frontier and Arcview are projecting that California’s adult-use sales would account for $3.9 billion of that $7.8 billion.
“The scale of cannabis market expansion that would occur if all the proposed measures were to pass makes this November’s election the most consequential in the cannabis industry’s history,” researchers wrote in the report, which was provided exclusively to The Cannabist in advance of the release.
California, considering its sheer size, could act as a catalyst for broader domestic and international policy changes in marijuana, said John Kagia, New Frontier’s executive vice president of industry analytics. New Frontier and Arcview recently estimated that California’s total legal cannabis market could be $6.5 billion in 2020, if voters pass Proposition 64 in November.
In addition to state-by-state forecasts, the mid-year report included updates on key issues and trends in the legal cannabis industry, including the upcoming U.S. presidential election, federal regulations, new statewide legislation, technology advancements and prices.
Earlier this year, state legalization crossed the “majority threshold,” when Ohio adopted medical marijuana regulations, Kagia said. Now, 25 U.S. states have adopted medical marijuana regulations.
“With the addition of (Pennsylvania and Ohio), the broader debate spawned in terms of the advancement of legalization in states in which they don’t have the ballot process,” Kagia said. “We did find that quite striking.”
As more states legalize, there will be an even greater need for tracking “social outcomes” in areas such as highway safety, illicit drug use, racial and socioeconomic disparities in enforcement and youth consumption rates, according to the report.
The first eight months of 2016 also provided some clarity in how product mix has evolved, he said. While the industry continues to be one dominated by flower sales, data from Washington state show an “explosion” in demand for concentrates, he said.
Vaporizers, waxes, shatters and the like “are relatively new and innovative products that are coming onto the market based on a convergence of both the technology innovation as well as product innovation,” he said.
Referencing the latter, consumers want to try the latest-and-greatest technologies, he said, adding that public psychology around smoking and the discretion provided by forms of consumption such as edibles and vaping could be contributing to the sales increases.
The increases in the number of legal producers and the size of those producers have helped to drive down prices during the first half of 2016, he said. If new states adopt adult-use regulations, producers in those states need to adapt to an environment with price wars, he said.
Additionally, “it’s going to make for a very, very difficult period ahead” for urban warehouse-based producers who are competing with large-scale, greenhouse-based growers who have lower energy costs on the level of 70 to 90 percent, he said.
“We’re definitely seeing a commoditization of cannabis,” he said.