California Marijuana: Already a Multi-Billion Dollar Industry

In 1996, California made history by becoming the first state to legalize medical marijuana. The state is on the verge of announcing a landmark ruling (pertaining to the Schedule I label associated with cannabis) which will change the landscape of the legal marijuana industry around the United States. The California NORML chapter recently analyzed the economic impact marijuana would have on the state. The chapter determined that legal marijuana in California would generate an additional $1.5 to $2.5 billion per year.

California marijuana market

According to a survey conducted by the National Household Survey on Drug Abuse, over 1.6 million Californians smoked marijuana within the past 30 days. The survey also found that 530,000 people use marijuana on a daily basis.

A study conducted by the Independent Drug Monitoring Unit found that the average daily marijuana user consumes two ounces of pharmaceutical grade marijuana a month, which is roughly 1.9 grams a day. This means that the California daily users consume nearly 1 million grams of marijuana every month, which is roughly 820,000 pounds per year.

A multi-billion dollar industry

The price of medical marijuana varies upon the strain and quantity purchased. The average price is between $10 and $15 a gram and $280 to $420 an ounce.

If the average selling price was $10 a gram, the 530,000 daily marijuana users in California would generate over $10 million in revenue per day! On an annualized basis, this equates to roughly $3.65 billion in revenue.

Legal & law enforcement costs

If recreational marijuana was legal in California, the state would save over $155 million per year in costs associated with its regulation. These estimates take arrests, prosecutions, and prison costs into account. We broke it down to a more granular level below.

• State prison: (1400 prisoners @ $25k per year) $35 million

• Jail costs: (est. 40% of prison population) $14 million

• Felony prosecution, court & probation: (9,900 felony cases, SF DA’s office estimates $9,250 per case) $90 million

• Felony arrests: (12,000 arrests @ $732/arrest) $8.7 million

• Misdemeanor court costs: ($100 court time/case, 48,000 cases) $4.8 million

• California Marijuana Suppression Program (OCJP): $3.8 million

Who stands to benefit?

The California marijuana market is largest marijuana market in the United States and it accounts for nearly one third of the revenue generated by the entire marijuana industry. The groups that stand to benefit the most from further deregulation are the cultivators, retailers and ancillary businesses.

Many companies have decided to operate in California due to the size of the marijuana market. A number of these companies are publicly traded. These include:

• Mentor Capital Inc. (MNTR)

• NEMUS Bioscience (NMUS)

• mCig Inc. (MCIG)

• Terra Tech Corp. (TRTC)

• Force Fuels Inc. (FOFU)

• GreenGro Technologies (GRNH)

• Vape Holdings Inc. (VAPE)

Summary

Although the marijuana industry is one of the most controversial industries in the United States, it is becoming more mainstream every year. Whether you are for or against its legalization, you must realize the financial benefits associated with the marijuana industry. Most states are cash poor and they need to find new revenue streams. It is only a matter of time until the federal government recognizes the benefits associated with marijuana and makes it legal.

http://www.canorml.org/background/CA_legalization.html

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Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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