North Americans spent an estimated $53.3 billion on marijuana last year, but most of it was in the illegal market, according to ArcView Market Research, which released the report. Legal sales accounted for about $6.9 billion. Medical marijuana is legal in 29 states and Canada. Recreational marijuana is legal in Colorado, Oregon, Washington and Alaska. Last year California, Nevada, Massachusetts and Maine approved adult use, but commercial sales of recreational marijuana are not expected to begin until at least 2018 in those states.
MedMen managed indoor cultivation facility in Los Angeles
"It is clear that there is tremendous demand for the product," said Chris Ganan, chief strategy officer for MedMen, a Los Angeles-based firm that manages cannabis assets and deploys investment capital throughout North America. "The goal for our industry is to move that illicit trade into legal markets."
For that to happen, Ganan and other industry experts agree, two things need to happen. First, the laws need to continue to change to further legalize marijuana with clear guidelines and regulations. Second, the cannabis industry needs to evolve from its "legacy" roots to a modern institution with operational standards that assure patients and consumers they are getting a legal, safe and high quality product.
Two thirds of Americans live in states with some form of legal marijuana, but access to products are still limited in large part because of the lack of clear regulations and infrastructure. But as the momentum for legalization continues and investments pour into the legal industry, many predict the tide will naturally shift.
"Alcohol is legal today, and you'd be very hard pressed to find anyone buying moonshine," Ganan said.
Wall Street investment bank Cowen and Company predicts the legal market will be worth $50 billion within a decade. Cowen began coverage of the industry late last year, signaling the growing mainstream appeal of the marijuana industry. Ganan himself does not come from a cannabis background. His background is in private equity, investment banking, corporate restructuring and technology startups.
One of the key ingredients to shifting the illicit demand to the legal market, Ganan pointed out, is institutional best practices to normalize the industry and make it easier for responsible capital to invest in the space. It is an evolving process, he said, today's legal cannabis market is still highly fragmented through a patchwork of state and local regulations, but those who know how to navigate that landscape will have a leg up in the long-run.
Ganan sees tremendous future in legal cannabis, he said. "It is not often that you get a chance to build an entire industry from the ground up."