Recreational Marijuana Sales Are Up 184%. Is That A Good Thing?

In news that will likely be celebrated by cannabis advocates and marijuana industry stakeholders alike, a new report concludes recreational marijuana sales skyrocketed from $351 million in 2014 to $998 million in 2015 — a 184 percent increase. The data come from the fourth edition of "The State of Legal Marijuana Markets," a joint report from the research wing of the ArcView Group, a marijuana industry investment firm, and New Frontier, a cannabis analytics firm.

The fact that legal cannabis is one of the fastest growing industries in the country is a good thing, say marijuana supporters. It's proof, they say, that Americans are yearning for a safe, regulated way to consume a product that has long been unfairly relegated to the black market. But others aren’t sure such numbers are cause for celebration.

“If one of our long-legal drugs, alcohol or tobacco, had this kind of dizzying rise is sales, would there be a breathless, braggy press release about it?” said Keith Humphreys, a professor of psychiatry and behavioral sciences at the Stanford University School of Medicine who studies marijuana policy. “Americans have internalized culturally that explosive growth in adult tobacco and/or alcohol sales is a cause for concern, but not that explosive growth in cannabis sales is too.”

Thanks largely to the 2015 explosion in recreational marijuana sales, with 2-year-old adult-use industries in Colorado and Washington continuing to expand and a new recreational market launching in Oregon late last year, the new "State of Legal Marijuana Markets" report — which was the first time ArcView partnered with New Frontier on the endeavor — estimates the entire legal cannabis industry, which also includes medical marijuana programs in 23 states and Washington, D.C., is now worth $5.4 billion. That’s up from $4.6 billion in 2014. (The report’s market estimates are significantly larger than past editions — previously, the 2014 cannabis market was pegged at $2.7 billion, not $4.6 billion — because it now includes caregiver-patient transactions, not just dispensary sales, in its medical marijuana numbers.)

The report estimates the marijuana industry will grow from $6.7 billion in 2015 to $21.8 billion in 2020, with an average compound annual growth rate of 30 percent. By then, according to the report, recreational sales will entail 53 percent of the total market.

John Kagia, New Frontier’s director of industry analytics, is encouraged by such developments. “The explosive growth for the adult-use market in the test cases we have here suggest that consumers, when presented with a legal and well-regulated environment where they can purchase these products, will eschew the illicit market,” he said. Not only will the shift away from illegal cannabis markets curtail the costly and discriminatory impact of the country’s long war on marijuana, it will also provide marijuana consumers far more protections and control than they had in the black market, Kagia said. “The benefit of being able to purchase these products through a regulated market is that not only are there standard procedures that producers, manufacturers and retailers have to meet, there is also a lot more information presented to you with each product,” he added.

There are others who benefit from flourishing sales: investors and business owners. “It shows that the trajectory is strong in terms of profits, in terms of the ability to make a play at an early phase of a fast-growing industry,” said ArcView CEO Troy Dayton. “This is a generational opportunity. When you can catch one of these things at an early enough stage, it’s an incredible economic opportunity for creating jobs, for creating wealth, for shifting culture and being part of history.”

But while there is some indication that legal marijuana efforts are hurting drug cartels, there’s no hard data yet that growing recreational sales coincide with a commensurate decrease in illicit cannabis sales. In other words, no one is sure whether the booming adult-use market is being driven simply by users who would otherwise be buying on the black market — or whether these sales numbers also indicate a growing population of new users.

Not surprisingly, anti-marijuana advocates see this data as proof that marijuana use in general is going up. “Well, it's good to hear that Big Marijuana now admits their actions are resulting directly into more use,” said Kevin Sabet, founder of Smart Approaches to Marijuana, a major anti-legalization group. “This is great news for the bigwigs of the new marijuana industry, but it is devastatingly bad news for those of us who care about public health.”

Kagia, for one, doesn’t think the new market data suggests an upsurge in new users. “While it is fair to assume there have been some new entrants into the market from people who didn’t try it under prohibition, I don’t think it is fair to assume that that kind of consumer will become a major driver of industry growth,” he said. “I don’t think we have any data to suggest new users are the primary drivers of the strong demand in Colorado and Washington. This isn’t a market of people who are discovering marijuana for the first time.”

Plus, Kagia and Dayton point out there’s a difference between these skyrocketing marijuana sales and what would happen if we saw similar increases in tobacco or alcohol consumption.

So far, there’s little proof that the growth of recreational marijuana in Colorado and Washington, no matter whether it’s being driven by new or existing users, has been accompanied by major public health costs. “The social impacts so far have been pretty minimal,” Kagia said. “The sky hasn’t fallen.” What’s more, surveys suggest youth marijuana use isn’t going up as recreational markets expand. (Although, as marijuana critics point out, youth marijuana use in Colorado has remained largely steady while use in other states has dropped, meaning Colorado now leads the nation in monthly marijuana use among 12- to 17-year-olds.)

There are other unknown — but important — variables to consider with this market data: How does recreational marijuana use impact alcohol and pharmaceutical use? If it turns out that marijuana replaces alcohol use, leading to a reduction in liquor and beer sales, not to mention replaces painkillers and anti-depressants, rising cannabis sales would be cause for celebration, no matter if they’re being driven by existing or new marijuana users. That’s because the social gains of reducing these other drugs would likely far outweigh any negative impacts of expanding marijuana. “I think it is entirely plausible that increases in cannabis consumption may be a net benefit for society in general,” said Dayton. “That doesn’t mean cannabis is harmless and that people can’t misuse it.”

But if it’s the opposite — if marijuana complements other drug use, leading to increased alcohol or pharmaceutical sales — cannabis and public health advocates alike would have reason to worry. After all, the last thing that any of them want is Big Tobacco and Big Pharma celebrating a booming marijuana market, too.