Marijuana Industry Report by IBISWorld

New highs: Growing acceptance of medical and recreational marijuana fuels industry expansion

Medical & Recreational Marijuana Growing in the US

April 2015 by Dmitry Diment

The Medical and Recreational Marijuana Growing industry, which includes establishments that grow marijuana for medical and recreational use, has flourished over the five years to 2015. For decades, all marijuana transactions in the United States were conducted under implicit or explicit prohibition. However, states have increasingly moved to legalize nonprofit marijuana for medical purposes, as well as to implement regulations for organizations that sell cannabis. The growing acceptance of medical marijuana is providing growers and investors with unprecedented opportunities. There has been no shortage of demand in recent years, as the industry has benefited from the increased acceptance and legitimacy of medical marijuana products.

More recently, the legalization of recreational marijuana in Colorado and Washington has spurred demand for the industry. In 2014, the licensing of commercial recreational marijuana growers in these states contributed to industry revenue growth of 54.7%. In addition to the favorable regulatory environment in these states, medical marijuana growers have continued to benefit the steadily aging population. Chronic illnesses have become more prevalent as the population continues to age, driving demand for medical marijuana. Overall, the industry is expected to experience annualized revenue growth of 30.2% to $1.9 billion in the five years to 2015, including growth of 25.1% during the current year.

Industry revenue is estimated to increase at an annualized rate of 31.4% to $7.4 billion over the five years to 2020. The industry will remain at risk, however, until the federal government definitively changes its position on the legality of marijuana. Until then, a growing number of medical marijuana patients, as well as a burgeoning recreational cannabis legalization movement will spur demand for the industry. Rising demand is also forecast to widen profit margins, as is the success of the for-profit recreational marijuana business in Colorado and Washington. In particular, the next five years are expected to see the growth of large commercial cultivators, who will benefit from strong recreational demand across a number of states including Alaska, Oregon and the District of Columbia.

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