This infographic from Visual Capitalist, sponsored by High Hampton Holdings, outlines some of the challenges and revenue predictions for California’s legalized cannabis market.
The California cannabis market has evolved over the past 22 years from a medical-use market to now also include adult-use.
The market is being fueled by an aging population. Baby Boomers and Gen X spend the most on cannabis each month, with each group increasing spending 19 and 13 percent respectively between 2016 and 2017.
Aside from sales generated by the state’s residents, the market is fueled by cannabis tourists. California attracts approximately 273 million visitors each year and tourists spent approximately $1.32 billion in 2017. As the industry continues its growth, it may see similar trends as in Colorado, where tourists spent $98 million in canna-tourism in 2015, one year after legalization.
Following the legalization of its recreational market, one of the primary hurdles California is facing is considerable taxation on cannabis products. Heavy taxation has led to lower revenue projections from sales for the state. Analysts at New Frontier Data are now predicting a revenue of $1.9 billion in 2018 and $4.72 billion in 2025 for the state’s cannabis market.
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) provides the regulatory framework for California’s legal medical and adult-use cannabis market. It operates under a dual licensing structure that is governed by three government branches, each responsible for a different facet of the supply chain.
All cannabis companies need to apply for a local and state license in order to operate, regardless of the license. However, obtaining both licenses can be difficult as each jurisdiction has its own regulations that differ from others. As a result, cultivators are often required to move to jurisdictions that better support their business model.
Another development under MAUCRSA targets distribution. Prior its implementation, cultivators were required to go through independent distributors to transport their products to retailers. Now, small cultivators can directly transport their products to retailers. However, licensed distributors are still a necessary component to the industry as they are the only parties that can coordinate third party product testing for quality assurance, review product labelling and packaging, provide transportation for cannabis-derived products and collecting and remitting cultivation and excise taxes for the state.