Thursday, May 18, 2017
This afternoon brings two interesting new pieces about the state and fate of the marijuana industry from the business media. Here are the headlines, links and a few key passages from the articles:
From MarketWatch here, "Marijuana experts question how industry will mature as rapid growth continues but full legalization lags":
Right now the industry is experiencing growing pains.... Certain markets have become so crowded and competitive it’s gotten tougher for businesses to turn a profit. The Marijuana Business Daily, which conducts an annual survey of marijuana retailers, wholesale cultivators and infused product manufacturers, said about 55% of those queried said they had reached break-even or turned a profit within the first year of starting their business. That’s down from 70% who, when polled last year, said they achieved that first-year milestone.
Recreational sales of marijuana ballooned 80% to $1.8 billion in 2016, according to data from Marijuana Business Daily, and in 2017 recreational sales are expected to surpass medical sales for the first time. The industry currently employs anywhere from 165,000 to 230,00 people, according to data from Marijuana Business Daily.
Investments in the industry are increasing in size, frequency and scope. Major institutional investors are still steering clear of the market because it’s federally illegal, but individual investors are showing interest. Last year, private equity firm Tuatara Capital raised an industry record $93 million to invest in marijuana businesses.
From CNBC here, "How the Trump administration is affecting the multibillion-dollar marijuana industry":
Projections vary among industry analysts, but the numbers are substantial. Marijuana Business Daily predicts retail sales will hit $6.1 billion for 2017 and the industry could have a maximum economic impact of some $68.4 billion by 2021; GreenWave Advisors predicts $7.7 billion for 2017 and $30 billion by 2021 if recreational and medicinal cannabis is legalized nationwide.
Capital has also flooded into the space — nearly $1 billion from 2012 through 2016, according to GreenWave Advisors, citing data from Pitchbook. What's more, Marijuana Business Daily finds that investors report plans to increase the size of their investments this year. The average investor or firm involved in the industry has put around $450,000 in cannabis companies to date, with each investment coming in around $100,000. But this year, they plan to invest around $500,000 on average in marijuana businesses.
"The Trump Administration has not yet changed our strategy, because there's been a lot of rhetoric but not a lot of action," says Patrick Rea, CEO and co-founder of Boulder, Colorado-based Canopy Accelerator, an investment fund for early stage cannabis companies. It has invested over $6.5 million since early 2015 in more than 64 companies. "A lot of investors are becoming more aware that they have an impact on what the administration might decide or not decide to do based on how they present themselves as a business-friendly environment, creating jobs and having positive effects on society," Rea says.