‘Big Cannabis’ Takes a Page From Tobacco Playbook

Posted on February 27th, 2014
Posted in Drug Addiction

For many in the states of Colorado and Washington, the legalization of marijuana was a cause for celebration. But it isn’t just the hippies celebrating—much of the driving force behind the new laws came from clean-cut men and women in suits, and these successful people know a lucrative new industry when they see it.

If the wild success of the Colorado legal market and the medical marijuana programs in other states are any indication, there is a lot of money to be made in the cannabis market. Below are some figures that indicate the potential of this emerging industry:

  • More than 42 million Americans have tried marijuana at least once
  • With a current legal rate of over $200 per ounce, marijuana sold in Colorado is worth more by weight than silver
  • Taxes from marijuana sales are expected to increase Colorado’s state revenue by $130.1 million in the first year
  • The medical marijuana industry sold an estimated $1.43 billion worth of cannabis in 2013
  • In Colorado, the market for direct sales of cannabis is estimated to be approximately $600 million in the first year of legalization alone
  • Colorado’s 37 recreational marijuana outlets collectively earned $5 million in the first five days

An Industry Emerging from the Black Market

As the legalization movement gains steam, several pro-marijuana lobbying groups have appeared, including the National Cannabis Industry Association (NCIA). Critics claim that these groups, investors and the budding industry have the potential to become the Big Tobacco of the 21st century. One critic, Dr. Kevin Sabet of the anti-legalization group Smart Approaches to Marijuana, also claims that these pro-legalization groups are already starting to mimic the “tobacco playbook,” downplaying marijuana’s effect on health while finding ways to make it more addictive.

Activists from the NCIA and other groups, however, point out that few for-profit marijuana organizations exist, and that lobbying efforts are still in their infancy. Much of what these organizations are lobbying for is something that other, bigger industries take for granted, particularly operating without the risk of being shut down for breaking federal law. The marijuana industry in Colorado is in the unique position of existing legally on the state level, but remaining illegal on the federal level, which complicates business practices in more ways than one. Due to laws against money laundering, for example, banks refuse to work with these businesses, forcing them to work solely with cash.

Projected Growth of Marijuana Industry

Despite its small and rather shaky beginnings, the marijuana industry still has the potential to become an industry as large as Big Tobacco or Big Alcohol. Experts forecast that the market could surge to more than $10 billion in five years. Some businesses, such as marijuana-edibles manufacturer Dixie Elixir, are already developing brands and business models that could easily be scaled to the national level.

If Colorado and Washington’s experiment with legal marijuana goes as business owners and activists hope, the market in the coming decades is sure to gain both monetary and legislative power. Perhaps the market will be driven by large Marlboro-style corporations, or perhaps some of the market will be shared with small boutique businesses, similar to today’s micro-breweries. Either way, a substance’s move from the black market into the legal marketplace is something that hasn’t happed since the end of alcohol prohibition nearly 100 years ago.

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