Wall Street Analyst Estimates US Cannabis Market Will Reach $47 Billion

For years, “$20 billion by 2020” was an oft-heard refrain from market analysts who saw a bright and prosperous future for the legal cannabis industry. Now, with that horizon fast-approaching, analysts are setting their sights on what the next decade has in store. And one analyst, RBC Capital Markets’ Nik Modi, is seeing green.

Analyst Says Concentrates and Edibles Could Propel Sales To $47 Billion Annually

RBC Capital Markets, an investment bank that’s part of Royal Bank of Canada, issued a memo to clients outlining the rapid growth of the U.S. marijuana sector. The memo, authored by Nik Modi, shows how cannabis sales in the U.S. are gaining ground on beer and wine sales.

Projecting a compound annual growth rate (CAGR) of 17 percent, Modi estimates that the legal cannabis category could reach $47 billion in sales annually in the United States within the next decade, according to Business Insider.

Yet the cannabis market in the U.S. faces uncertainties that Canada does not. Regulatory environments are constantly and rapidly shifting as states implement legalization and adopt different approaches to dealing with federal prohibition. Investing in the industry still carries risk.

But RBC Capital Markets analyst Nik Modi brushed off concerns about the unpredictability of legal cannabis in the U.S.. Instead, he drew clients’ attention to a shift in consumer trends that is already having a major impact on domestic retail markets.

Data from BDS Analytics, included in Modi’s memo, shows that the margin on cannabis flower has steadily declined since the beginning of recreational sales in Colorado in 2012. That’s indicative of a larger national move away from flower and toward cannabis edibles and concentrates.

In Colorado, flower made up 70 percent of legal sales when shops opened in 2014. By the end of Q4 2017, flower accounted for just 46 percent of total sales. Picking up the slack were edibles and concentrates. Both are surging in popularity everywhere, and Modi thinks those forms of cannabis can propel total sales beyond $47 billion a year by 2027.

Including Illegal Cannabis Sales Drastically Shifts Financial Forecasts

Another eye-catching aspect of Modi’s analysis is another BDS Analytics chart showing the estimated U.S cannabis market size. The chart compares cannabis sales to spirits, wine, cigarettes, and beer. From spirits at $58 billion to beer $117 billion, all four categories best cannabis at $50 billion. But interestingly, the chart includes total legal and illegal cannabis sales to arrive at the $50 billion figure. It’s unclear what proportion of that amount is made up by illegal sales.

Other cannabis market analysts say that illegal sales still account for the majority of total marijuana purchases in the U.S. But as legalization continues to channel consumers into the legal market, illegal sales are slowly declining.

While access to legal cannabis expands nationwide, the size of the illegal market remains difficult to measure. So does predicting how much of it will move aboveboard in the coming years.

RBC Capital Analyst Praises Big Investment in Canadian Cannabis

The letter RBC Capital Markets sent to clients also lauded Constellation Brands’ recent $4 billion investment in one of Canada’s largest medical cannabis producer Canopy Growth Corp. Constellation Brands is the firm behind the popular beverage companies Modelo, Corona and Svedka. The company has been moving incrementally into the Canadian cannabis market, upping its stake each time. Nik Modi says he’d like to see more companies make similar moves in the cannabis space.

Marijuana's margin, like alcohol, is going to be captured in the end product, investor says

• When looking to the future of cannabis, Navy Capital founder Sean Stiefel says the marijuana industry will look a lot more like the alcohol industry, than big tobacco.
• Insofar as the alcohol industry has distinctive branding, different product lines and end product-based margins, the marijuana industry could be quite similar.
• In the short-term, Steifel anticipates Canada's impending nationwide legalization will drive marijuana prices way up.

There's going to be a massive undersupply of pot: Marijuana investor  5 Hours Ago | 04:23

Navy Capital founder Sean Stiefel says for the burgeoning marijuana industry, the profit isn't in the plant — it's in the end product.

"We're talking about vapes, oils, edibles, topicals, sprays -- all of that stuff is coming, and as science catches up to marijuana, you'll see more and more of those end products," Stiefel said on CNBC's "Closing Bell."

Stiefel founded New York-based investment firm Navy Capital in 2014. In 2017, the firm launched Navy Capital Green Fund, which invests in public equities in the global legal cannabis industry.

In Denver, where recreational marijuana has been legal since 2014, Stiefel said sales of the cannabis plant don't dominate the market, so much as products derived from the plant. And that's where the big money is.

"Look on the other side of it, the cosmetics and some of the more luxury items -- you can't keep them on the shelves," he said.

As for the future of the burgeoning industry, Stiefel thinks marijuana will look a lot more like the alcohol industry than big tobacco, but will likely share traits with both.

Insofar as the alcohol industry has distinctive branding, different product lines and product-based margins, the marijuana industry could be quite similar. And while Steifel does not consider cannabis purely a commodity, like tobacco, he does hope the cost of the actual plant will decline considerably.

"We actually would like for the price of raw marijuana to come down, because we are believers that the margin, like alcohol, is going to be captured in the end product," Steifel said. "You don't necessarily know the price of grain or potatoes going in the vodka or beer, but you know the price of the beer, and there's tremendous margins to be captured when you make products for the end user."

In the short-term, however, Steifel anticipates Canada's impending nationwide legalization will drive marijuana prices way up.

Medical Marijuana Legalization Stalls in Michigan, South Dakota

Ann Arbor imposes moratorium on new marijuana dispensaries

ANN ARBOR, Mich. (AP) — Ann Arbor is temporarily halting new medical cannabis dispensaries after more than 30 recently applied for permits to operate in the city.

The Ann Arbor News reported that the City Council voted unanimously Monday, April 16, 2018, to impose a 60-day moratorium on issuing new permits as it considers limiting the number of dispensaries allowed in the city. Dispensaries that have already received zoning approval or that have applications currently under consideration will be exempt.

Ann Arbor officials say the high interest in setting up dispensaries warrants taking time to review the city’s regulations. Council members cited concern over the effect medical cannabis facilities could have on the community over time.

The Jackson Citizen Patriot reported that petitioners in Leoni Township, 31 miles west of Ann Arbor, were also calling for a moratorium on medical cannabis application approvals until the effects and environmental impact are thoroughly examined.

Effort to bring medical marijuana to public vote fails

SIOUX FALLS, S.D. (AP) — Supporters of allowing medical cannabis in South Dakota have failed to bring the matter to a public vote.

A petition to put medical cannabis legalization on the November general election ballot was rejected because it didn’t have enough valid signatures.

South Dakota Secretary of State Shantel Krebs said a random sampling determined that the petition with about 15,000 names had only about 9,500 valid signatures — far short of the 13,871 required. The rejection can be challenged in court.

New Orleans is About To Get Its First Medical Marijuana Dispensary

The Big Easy is about to pass a major milestone in the ongoing expansion of Louisiana’s medical marijuana program. Thanks to a come from behind victory from the second-generation owner of a father-son pharmacy that’s been in business since the sixties, New Orleans is about to get its first medical marijuana dispensary.

Louisiana Awards Dispensary Permit To New Orleans Pharmacist With Roots In The Community

On Tuesday, the Louisiana Pharmacy Board awarded Ruston Henry, pharmacist and owner of H&W Drug Store, with a permit to operate one of the state’s first ten medical marijuana dispensaries.

Founded in 1961, H&W Drug Store has changed hands and changed locations a couple of times over the years. But the pharmacy has always been a fixture of New Orleans’ 9th Ward, serving the community for over half a century.

Ruston, the son of Sterling J. Henry, took over the family business from his father in 1999. And in a last-ditch effort to win the permit, he appealed to that sense of tradition.

Henry’s testimony certainly worked. Because going into the advisory panel’s discussion, a subcommittee of the Pharmacy Board had ranked H&W Drug Store fourth out of five applicants for Region 1. Region 1 includes New Orleansand neighboring cities.

The board ultimately rejected the subcommittee’s first recommendation, The Rx Greenhouse, because of a poor choice of location that raised concerns among some members. The Rx Greenhouse, which operates another dispensary in Maryland, planned to set up shop in an existing building near an indoor playground area.

Seizing the opportunity, Henry made sure to convey to the board his pharmacy’s long-standing roots in the community. The board voted unanimously, at 9-0, to award the permit to H&W.

Louisiana Will Approve At Least Nine Medical Marijuana Dispensaries This Week

State health officials have divided Louisiana into nine designated healthcare regions. According to the state’s medical marijuana law, each region will initially get one dispensary. The Pharmacy Board plans to issue additional permits on an as-needed basis.

On Tuesday, the board approved permits for dispensaries in Regions 1 through 4. Located in Region 1, New Orleans is about to get its first medical marijuana dispensary, along with cities in the other three regions. The board will award permits to pharmacies in Regions 5-9 on Wednesday.

But restrictions built into the medical marijuana program will shape the kinds of products dispensaries can sell.

Louisiana law prohibits the sale of cannabis in any kind of smokable form. However, medical cannabis patients in Louisiana will be able to access the drug in pill, oil, spray and topical forms.

As in other states, patients will need a recommendation from a physician registered with the state’s medical marijuana program. Qualifying conditions include chronic, severe, debilitating diseases, like cancer, Crohn’s disease, and epilepsy.

Medical marijuana dispensaries in Louisiana will also face restrictions governing the source of cannabis products they can sell.

The raw, medical-grade cannabis can only come from agricultural centers at Southern University and Louisiana State University. And vendors under contract with those universities are the only ones that can process and manufacture non-smokable medical cannabis products.

The Final Hit: New Orleans is About To Get Its First Medical Marijuana Dispensary

Sales should begin a couple of months after the Pharmacy Board approves the initial round dispensaries for operation.

According to the current timeline, that means patients in New Orleans could access legal medical cannabis products as early as June.