People in North America spent $53.3 billion on legal, medical, and illicit marijuana in 2016. That’s more cash than Americans blow in a year at McDonald’s and Starbucks combined.
According to a new report from Arcview Market Research, a leading publisher of marijuana market research, the black market is losing ground to its legal counterpart as consumers spend more money each year on legal cannabis. Progress is slow, however.
The North American legal weed market posted $6.7 billion in revenue in 2016, up 30% from the year before. The illicit market generated 87% of total pot sales, down from 90% in 2015.
The numbers suggest the legal marijuana industry is growing quickly, but it has a ways to go before it topples the black market, which has the lion’s share of revenue.
2016 was a big year for weed. Seven US states legalized cannabis in some form on Election Day. California, the sixth-largest economy in the world, became the biggest domino to fall with the passage of Proposition 64. Much of the West Coast is now a legal enclave for recreational pot.
Troy Dayton, CEO of Arcview Market Research, credits consumer spending on the black market with creating a runway for growth in the legal market.
“The enormous amount of existing, if illicit, consumer spending sets cannabis apart from most other major consumer-market investment opportunities throughout history,” Dayton said in a statement. Unlike other fast-growing markets, which include organic foods, home video, and mobile, “the cannabis industry doesn’t need to create demand for a new product or innovation — it just needs to move demand for an already widely-popular product into legal channels.”
In an interview with Business Insider earlier this month, Dayton said the sudden popularity of alternative ingestion methods — such as weed-laced topicals, sprays, and edibles — also fueled growth in the legal market. Consumers who would never smoke a joint are finding relief in other products, which offer a wide array of tastes, strengths, and experiences.
In Colorado, where cannabis has been fully legal since 2012, these alternatives grew from 30% of total legal sales in the first quarter of 2014 to 45% in the third quarter of 2016.
“It’s one of the major reasons that people are going to leave the underground market to go to the aboveground market. It’s about variety,” Dayton told Business Insider. “You just can’t get these products on the underground market.”
The so-called green rush shows no sign of slowing down.
Arcview projects legal sales will grow at a compound annual growth rate of 26% through 2021, when the North American market is expected to reach $21.6 billion.
By comparison, McDonald’s generated $35.5 billion in sales in 2015. Starbucks saw $13.3 billion in revenue that year, according to trade publication QSR Magazine.
Source: Business Insider