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.

Report Shows Teen Marijuana Use in California Has Declined

A statewide study in California has found that cannabis use by teens in the state has declined. Results of the California Healthy Kids Survey were released by the California Department of Education on Monday. The study is funded by the state’s health and education departments and is conducted every two years.

According to the research, 4.2 percent of 7th graders reported that they had used cannabis at any time between 2015 and 2017. That figure represents a 47 percent drop from the last survey when 7.9 percent of 7th graders reported using marijuana from 2013 to 2015.

Among 9th graders, 17.4 percent reported that they had used cannabis at some time during 2015 to 2017. That is a 25 percent decline from the 23.1 percent who reported using marijuana in the previous study.

Eleventh graders also showed a reduction in marijuana use. In the last survey, 37.9 percent of high school juniors said they had used cannabis between 2013 and 2015 while this year’s result for 2015 to 2017 recorded a 16 percent decline with 31.9 percent claiming cannabis use.

The percentage of teens who had used cannabis in the 30 days prior to the survey also declined. For 7th graders, the figure dropped from 5.0 percent in the last survey to 2.3 percent for the latest one. For 9th graders, the drop was from 13.4 percent to 9.5 percent, and for 11th graders, the number declined from 20.1 percent to 16.7 percent.

Will Legalization Affect Future Results?

The study’s authors noted that the survey was conducted prior to the legalization of recreational marijuana sales, which began in California at the beginning of 2018.

“How the recent legalization of marijuana use for adults in California [affects] the declining trend among youth warrants attention,” they wrote.

“The next biennial survey will be of particular interest to shed light on whether the change in state marijuana laws [affects] these findings,” researchers added.

Tom Torlakson, the State Superintendent of Public Instruction, said in a press release that educators have a role in making sure that cannabis legalization does not lead to increased use by young people.

“We must continue to be diligent in our efforts to prevent, or at least limit, marijuana use in light of the potential effect of the legalization for adults as a result of the passage of Proposition 64 two years ago,” Torlakson said.

Cannabis Activist Responds

Ellen Komp, deputy director of California NORML, said in a blog post from the advocacy group that the legalization of recreational cannabis is actually a factor in the decline of use by teens.

“These initial reports confirm that legalizing and regulating cannabis doesn’t increase youth marijuana use, but rather it has the opposite effect,” said Komp. “The fact that the biggest drop in reported use came from younger age groups is a particularly encouraging indicator of the success of regulation.”

Komp also said that sound cannabis policy reforms are the best way to keep California residents and their communities safe.

“It’s time to stop trying to ‘send a message’ to young people about drugs and instead implement sound, science-based policies that best protect our children and public safety, along with our privacy and human rights,” Komp said.

New York to Offer Medical Marijuana as Prescribed Opioid Alternative

New York is set to significantly expand access to its medical cannabis program. Building off a change that added chronic pain to the list of qualifying conditions in 2016, the Department of Health will now allow anyone with a prescription for opioids to use medical marijuana as an alternative. Officials expect the new regulation will help grow a program struggling with access issues. They also hope to get more patients off of prescription opioids.

If You Have an Opioid Prescription, You Now Qualify to Use Medical Cannabis in New York

Opioid deaths are skyrocketing in New York, which legalized medical cannabis in 2014. One investigation found a 135 percent rise in deaths between 2013 and 2016.

In 2016, the opioid death rate was 15.1 per 100,000 people, nearly two percent higher than the national rate. And in an effort to combat the rapid rise of opioid overdoses and deaths across the state, the New York Health Department is making a major change to its medical marijuana program.

Health Department officials hope the change will help reduce the use of prescription opioids. On Monday, State Health Commissioner Howard Zucker announced that anyone with an opioid prescription would be eligible to use marijuana as an alternative medicine.

“So that means if an individual is taking prescription opioids, they could take medical marijuana as part of the program that were are pushing forward to hopefully come off prescription opioids as well,” Zucker told reporters.

Studies have found that medical cannabis can effectively treat chronic pain, without the dangerous side effects and addiction opioids cause. Other studies suggest cannabis can act as a “reverse gateway drug,” helping people struggling with addiction wean themselves off drugs.

The Health Department hopes that allowing doctors to prescribe cannabis instead of opioids will reduce the number of patients who end up addicted to drugs like OxyContin, Vicodin and Fentanyl.

Offering Medical Cannabis as an Opioid Alternative Could Help Lift New York’s Struggling MMJ Program

Gov. Andrew Cuomo signed the Compassionate Care Act into law in 2014. Since then, New York has struggled to grow its medical cannabis program. A short list of qualifying conditions, and restrictions on the kinds of cannabis products patients could access, hurt participation.

In 2016, New York added chronic pain to the list of qualifying conditions. The Health Department also made it possible for nurse practitioner and physicians assistants to make a medical cannabis recommendation.

Now, New York has 1,688 licensed caregivers and roughly 59,000 registered patients. Yet the program has licensed less than two dozen dispensaries across the state. The program has grown, but not as rapidly as advocates and patients would like.

Zucker feels allowing those with opioid prescriptions to use medical marijuana “is another way to move the program forward."

NYPD Sergeants Union Criticizes Mayor’s Orders Against Cannabis Arrests

New York City has been relatively slow to change when it comes to cannabis laws, but recent activity from the mayor’s office could be shaking things up. Last week, Mayor Bill de Blasio promised to make potentially significant alterations to how the city enforces weed laws — and, unsurprisingly, not everyone is happy about it. In particular, the NYPD Sergeants Union is criticizing the mayor’s orders against cannabis arrests.

NYPD Pushes Back Against Mayor

The back-and-forth between de Blasio and NYPD leaders arises out of recent developments in NYC’s gradually-evolving approach to cannabis laws.

Last week, Mayor de Blasio announced that the city will create a new task force to prepare it for legalization. According to NY Daily News, the task force will have 30 days to review the NYC’s current practices regarding cannabis law enforcement. It will then make recommendations for ways to improve those practices.

But that’s not all. Mayor de Blasio went a step further. He directed the NYPD to stop arresting people caught smoking weed in public.

This change is the one that seems to be generating the most controversy. So far, the most outspoken critic is Ed Mullins, President of the NYPD Sergeants Benevolent Association.

Yesterday, he told the Wall Street Journal that the new change could put officers “in positions of conflict.” Mullins argued that such conflicts could arise if residents called cops to crack down on public weed-smoking, but then were not allowed to arrest offenders.

“You can’t just circumvent the law,” Mullins said. “If you want to not have enforcement of arrests, then you need to change the law.”

This isn’t the first time Mayor de Blasio has tried to change New York City’s approach to cannabis law. In previous years, he instructed NYPD to stop arresting people caught with small amounts of marijuana. In response, officers began writing simple summonses instead of issuing arrests.

Since going into effect, that change has led to a 40 percent drop in marijuana arrests. But data from recent years reveal ongoing problems. In particular, the city has seen persistent racial disparities in the marijuana-related arrests that are still being made. NYPD reportedly arrested 17,500 people for marijuana last year. A full 86 percent of those arrested were black and Latinx.

“The racial disparities have not changed one bit, and arrests are still too common in communities of color,” Councilman Donovan Richards said earlier this year. “If the administration is serious about changing this disparity, we’re not seeing it.”

Now, it seems that Mayor de Blasio may be taking Richards up on his challenge. The mayor’s office indicated that his latest order to stop arresting people for smoking weed is in large part intended to address these racial disparities.

Additionally, de Blasio has indicated that the change is part of a larger effort to prepare the city for legalization. Although de Blasio has voiced opposition to legalization, he now believes it will happen sooner or later.

In any case, the newest change will not go into effect until the end of the summer. It remains to be seen if the tensions between de Blasio and NYPD leaders like Mullins will intensify in the meantime.

Marijuana News: A Senate Bill To Decriminalize Marijuana At The Federal Level Is On Its Way

ut plainly, the cannabis industry is budding worldwide. Cannabis research firm ArcView Group has estimated that North American legal marijuana sales could explode from $9.7 billion in 2017 (which represented 33% sales growth from 2016) to more than $47 billion by 2027. Meanwhile, Cowen Group recently raised its global legal cannabis sales forecast from $50 billion by 2026 to $75 billion by 2030.

This article originally appeared in the Motley Fool. 

At the heart of these lofty sales estimates is a major shift in consumer opinion toward pot. What had once been considered a taboo topic is no more. Five national polls over the trailing one-year period -- CBS News, Gallup, Fox News, Pew Research Center, and the independent Quinnipiac University -- found support ranging from 59% to 64% for nationwide legalization. Furthermore, support for medical marijuana in the aforementioned Quinnipiac University poll from August hit an overwhelming 94%. 

Despite Changing Opinions On Cannabis, The U.S. Is Stuck In The Mud

Yet in the United States, the cannabis industry remains stuck in neutral. Despite the fact that 29 states have broad medical marijuana laws and nine states have OK'd the use of recreational weed, the federal government has entrenched its stance on cannabis being a Schedule I drug. This places weed on par with drugs like LSD and heroin, suggests it's highly prone to abuse, and means it has no recognized medical benefits.

In addition to being wholly illegal at the federal level, marijuana's Schedule I status can wreak havoc on businesses operating in the pot industry, as well as patients hoping to receive medical cannabis or cannabis-derived medicines.

For instance, marijuana companies often have little to no access to basic banking services, which constrains their ability to expand and hire. Also, the three-decade-old tax rule known as 280E disallows businesses that sell a federally illegal substance from taking normal corporate income-tax deductions. This means that profitable pot companies could pay an effective tax rate of as high as 90%! And, as noted, patients can suffer given the lengthy amount of red tape surrounding medical cannabis trials and research.

The industry is also challenged by Attorney General Jeff Sessions leading the Justice Department. Sessions is perhaps the most ardent opponent of cannabis in Washington, and he's tried on more than one occasion to upend state-level expansion. In May 2017, Sessions (unsuccessfully) requested that a few of his congressional colleagues repeal the Rohrabacher-Farr Amendment, which is responsible for protecting medical marijuana businesses from federal prosecution.

However, Sessions was successful in rescinding the Cole memo in January. The Cole memo provided a loose set of guidelines that states would follow in order to keep the federal government at bay. These guidelines included keeping grown cannabis within legal states and ensuring that adolescents didn't have access to marijuana. Its rescinding opened the door for state-level prosecutors to use their discretion in bringing charges against individuals or businesses that violate the Controlled Substances Act.

This Influential Congressional Leader Is Set To Introduce A Decriminalization Bill

But big changes could be on the way. Senate Minority Leader Chuck Schumer (D-NY) announced a little over a week ago his intention to introduce a bill to decriminalize marijuana at the federal level -- i.e., remove it from the controlled substances list.

In an interview with Vice News Tonight, Schumer had this to say:

The time has come to decriminalize marijuana. My thinking -- as well as the general population's views -- on the issue has evolved, and so I believe there's no better time than the present to get this done. It's simply the right thing to do. 

If this sounds somewhat familiar, it's because former House Speaker John Boehner, who once described himself as "unalterably opposed" to the idea of decriminalizing marijuana, announced his change of heart just days before Schumer made his own announcement about proposing a decriminalization bill. Said Boehner in a statement to CNBC on why he was joining a cannabis company's board of advisors:

Like that of millions of other Americans, [my thinking on cannabis] has evolved as I've learned more about the issue. I decided to get involved because of the struggles of our country's veterans and the opioid epidemic, after learning how descheduling the drug can potentially help with both crises. Descheduling will reduce the conflict between federal policy and state programs. 

However, Schumer's proposal wouldn't completely wipe out the ability of the federal government to enforce certain controls. Federal regulators would still be able to penalize instances of drug trafficking between legalized states and states that have not chosen to OK the use of legal weed. In addition, the federal government would retain authority over marijuana advertising so as to ensure that children aren't targeted. Ultimately, though, states would have the final say on whether or not cannabis is legal and how it's regulated.

Is Decriminalization A Real Possibility?

Of course, the $64,000 question is this: Does Schumer's decriminalization bill have a chance of passage in the Senate and/or House?

Based on the current make-up of Congress, I'd suggest it wouldn't pass. In Gallup's October 2017 survey, 51% of respondents who identified as Republican favored legalization, albeit this "majority" was still within the margin of error for the poll. Though this represented the first time in history a majority of the GOP was in support of legalization, Republicans still have a decidedly more negative view of weed relative to Democrats and Independents. With numerous big-ticket issues expected to be on the table in Congress this year, including healthcare reform and an infrastructure bill, the chance of a decriminalization bill gaining majority support seems unlikely. 

But things could change after the midterm elections in November. If Republicans lose their majority in the House and/or Senate, it may be possible to garner enough support to reschedule or decriminalize marijuana at the federal level.

Should the U.S. alter its stance on cannabis through decriminalization, it's probable that Canadian growers would rush in to stake their claims. For example,  Aphria (NASDAQOTH:APHQF) , which is expected to be a top-three grower by annual production in Canada (approximately 230,000 kilograms a year), announced its intention to sell off its passive U.S. assets in the wake of Sessions' repeal of the Cole memo. Aphria made good on this promise in February when it announced a divestiture of more than 26.7 million shares of medical cannabis company Liberty Health Sciences. If the U.S. reverses its anti-cannabis stance, Aphria would likely reenter the U.S. market, along with most of its peers. 

More importantly, decriminalizing marijuana in what could arguably be described as the most lucrative weed market in the world would likely remove any concerns about a marijuana glut in Canada. With some estimates suggesting that supply in Canada could outweigh domestic demand by over 1 million kilograms of dried cannabis, the ability to export to legalized countries will be paramount to supporting the margins of Canadian growers.

Personally, I don't believe this is an issue that'll be resolved anytime soon. Chances are that we're going to need to wait until a few months after the midterm elections before we get any clarity on whether a decriminalization bill has any chance of passage in the U.S.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

MedMen Dispensary Opens In New York City

With an eye on legalization in the Empire State, a new MedMen dispensary opens in New York City. New York’s newest dispensary, which opened its doors on 4/20, is located on Fifth Ave. Here’s an inside look at the luxurious dispensary that would make the likes of Don Draper proud.

Inside MedMen on Fifth Avenue

The 2,000 square foot flagship store is in good company on New York’s iconic retail street: Barney’s, Apple and Saks Fifth Avenue are mere blocks away. As MedMen CEO Adam Bierman told Business Insider, “It’s the prime retail shopping street in the world.”

The store’s design symbolizes Bierman’s anticipation for what’s next. “This store represents the future,” the CEO explained to a private party on Wednesday. Circular LED chandeliers, crisp walls and iPad displays line the store. Posters on the wall feature people with the subhead ‘Stoner’, crossed out.

MedMen dispensary opens in New York City with a sleek design, a prime location and an important mission: Make marijuana mainstream.

What This Dispensary Is Selling

Currently, MedMen is offering five strains in the form of vape pens, tinctures and capsules. Though California locations carry thousands of products, MedMen abides by New York laws, which are much more restrictive.

The iPad displays offer detailed descriptions of the five different categories: Wellness, Harmony, Awake, Calm and Sleep. They even recommend strains, based on what you’re looking to treat. The display also lists THC and CBDratios.

Need more information? MedMen has a whole staff of pharmacists. No matter what you’re hoping to treat, this dispensary will find the strain and delivery method that’s right for you.

Not Everyone Can Shop At MedMen (For Now)

A MedMen dispensary opens in New York, though most New Yorkers can’t legally buy weed. At least, not yet.

Though you’re more than welcome to explore the dispensary, MedMen only currently caters to medical marijuana users. Until recreational marijuana becomes legal in New York, shoppers will need to provide a medical marijuana card and a doctor’s note before purchasing.

This slims down the market. Out of about 20 million residents, only 33,000 New Yorkers hold medical marijuana cards. Senior vice president of MedMen Daniel Yi explains, “We’re positioning ourselves for what we will believe is going to happen in New York.”

If legalization passes later this year, MedMen, the third dispensary to open to New York City, will be poised to take over the luxury cannabis industry.

The Future of Legalization In New York

Earlier this month, Gubernatorial candidate and Sex and the City star Cynthia Nixon announced that she supports legalizing recreational marijuana.

On Twitter, Nixon explained her position. “There are a lot of good reasons for legalizing marijuana,” she said, but for me, it comes down to this: We have to stop putting people of color in jail for something that white people do with impunity.”

In light of newly released statistics showing racial disparities in New York marijuana arrests, constituents are taking note of Nixon’s critique of racial injustice. Support for marijuana legalization in New York is growing.

So much so that New York’s current governor, and Nixon’s opponent, Andrew Cuomo just changed his mind on cannabis. Just a day after Nixon came out in support of legalizing recreational marijuana, Cuomo reevaluated his position.

“The facts have changed,” explains the Governor, undermining his history of opposing legalization. Once, he even went so far as to call weed a “gateway drug.”

Final Hit: MedMen Dispensary Opens In New York City

MedMen’s arrival on Fifth Ave symbolizes that times are changing when it comes to smoking weed in the Big Apple.

As politicians and big business work towards legalization, the Empire State is poised to become the biggest new marijuana market in the country.

MedMen only has to bide its time.