The legal cannabis industry in the US grew by 90 percent last year, but growth is now expected to ease considerably in 2016, according to new research.
Industry analysis groups ArcView Market Research and New Frontier said that the industry was likely to grow by 25 percent this year, adding that votes in high-profile states could make 2016 a pivotal year for the US cannabis industry. Their research shows that the marijuana markets grew to $5.4 billion in 2015.
New Frontier Financials director of industry analytics John Kagia, who helped author a forthcoming 2016 market prospectus on the industry, told Agri Investor that ballot initiatives in Arizona, Nevada, California, Ohio and Florida will impact the US legal marijuana market in the years to come.
The new report, due to be published later this year, projects the US cannabis market to grow by 25 percent in 2016 to $6.7 billion.
The slowed growth is attributed to a lack of new major markets opening in 2015. However, researchers at ArcView and New Frontier are predicting 2016 victories for recreational marijuana initiatives in Nevada and California, which Kagia says could be a game changer: Nevada is home to one of the country’s biggest tourism destinations in Las Vegas, while California’s population, which includes sizeable medical and illicit marijuana markets, is the highest of any US state.
The report predicts passage of the California initiative in 2016, and the mobilisation of a legal recreational market in California by 2018. That could make the market legally consuming cannabis for pleasure larger than the medical-use market for the first time.
Kaiga also predicts that next year’s presidential election will increase national attention on the issue of marijuana legalisation.
“There’s going to be a national debate around marijuana legislation in a way that we have not had in this country in a generation,” said Kagia. “It may not rise to the level of the debate around national security, but I think it will be discussed throughout the campaign.”
Regulation, in particular, will remain an issue.
Despite the growing number of states that have passed laws permitting cannabis use, Kagia says regulatory bottlenecks remain a barrier to growth in the industry. Federal prohibition of cannabis makes it difficult for states to formulate cohesive rules, which in turn makes it difficult for producers to decide which products to invest in.
“I think that the regulatory environment is going to continue to be fragmented as long as the states are forced to operate in a vacuum,” he said.
Among the most surprising findings of the report, said Kagia, is the dramatic growth in solid edibles. New Frontier found that 113,000 units of edibles were sold in June of 2015 alone, compared with just 1,500 in July 2014. Edible and liquid cannabis products are popular with producers, said Kagia, because they have retained a processing premium even as sale prices for plants have fallen.
Demand for information
The report, which will be released in early 2016, is the first consolidated piece of research from New Frontier and ArcView Group. The scramble for information in the fast-growing market meant that last year ArcView published previous versions of the report using phone surveys and industry interviews, chief executive Troy Dayton told Agri Investor.
“We just had so many people asking so many questions, and wanting so much information that it was really beyond our capacity,” said Dayton of the decision to bring New Frontier onboard.