America’s Independent Cannabis Business Resource Marijuana … · 2020. 6. 8. · Marijuana vs. Cannabis We use these terms pretty much interchangeably. Cannabis is the scientific

Marijuana BusinessFactbook 2014Financial Data • Legal Info • Market Research • Useful Stats

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Excerpt Includes:• Letter from the Publisher• Executive Summary: 9 Key Charts & Findings• Complete Table of Contents

America’s Independent Cannabis Business Resource

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A Letter From the Publisher

Welcome to the second edition of our bestselling Marijuana Business Fact-book, brought to you by the editorial team behind Marijuana Business Daily and the 3rd Annual National CannaBusiness Conference & Expo.

What’s new? The industry has changed so much in the past 12 months – particularly in the wake of the Aug. 29 Cole Memo (see more about this in the executive summary) – that we had to literally rip our last edition to shreds

and start over. The vast majority of charts and data contained in this second edition are new, as the financial data alone is very different than it was a year ago.

Other enhancements: the inclusion of financial data for dispensaries with grow facilities versus those without, information about testing labs, consumer demographics for the new recreational market, and an in-depth look at business fundamentals for ancillary companies. Additionally, we’ve broken out information for wholesale cultivation operations and caregivers (last year we lumped them all together) and have a whole new section dedicated to investment data.

Despite the recent media frenzy surrounding cannabis, it’s still difficult to get non-biased, in-dependent financial research, business data and market research outside of these pages. We are proud to be the first source to answer questions such as:

• How long does it take each type of cannabis company to achieve profitability?• How much do typical angel investors pump into the industry?• Which U.S. states are the safest to do business in, and which ones have the biggest

opportunities?• What do patients and consumers really want to see on retailers’ shelves?

Entrepreneurs, investors and expanding businesses need the answers to these questions at their fingertips to make smart, informed decisions.

Much of the information in this Factbook, particularly the state-by-state stats, is surprisingly arduous to research. Even public databases don’t reveal useful information easily. Other information simply doesn’t exist elsewhere; for example, this report is about the only source for consumer




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market research. So we created exclusive studies to gather and update the data for you. These include:

• Our 2nd Annual Cannabusiness Professionals Survey We surveyed more than 650 owners and executives in the key sectors (dispensaries, culti-

vation, edibles/infused products, professional services, and more) to gather exclusive data. I’d like to thank the readers of Marijuana Business Daily who participated in this annual ground-breaking survey.

• Our 3rd Annual Cannabis Consumer Survey For our third annual in-depth look at what cannabis consumers really want from their

retailers, covered in Chapter 5 of this Factbook, we surveyed 870 U.S. cannabis patients and recreational users about what inventory, pricing and even “atmosphere” they strongly prefer in a dispensary. This information is equally valuable to retailers and dispensary owners and to the businesses that supply and serve them.

I’d like to thank consumer-facing organizations who helped us spread the word about our market research survey - including Dixie Elixirs and Edibles and The Weed Blog - as well as many of our Marijuana Business Daily readers who circulated the survey to their customers.

Many thanks also to the cannabusiness executives and organizations that have given us their input and advice with this edition of the Factbook, in particular: Aaron Justis, Becky DeKeuster, Bob Carp, Dick Evans, Doug Banfelder, Eileen Konieczny, Genifer Murray, Hilary Bricken, Jeffrey Kahn, Joe Brezny, Kerry Blasdel, Kris Krane, Len Goodman, Matthew Abel, Toni Fox, Travis Howard, Troy Radunsky, the Marijuana Policy Project and Quantum 9. We’d also like to thank the Oregon Health Authority and the Colorado Marijuana Enforcement Division.

One final note – As business journalists, we’ve done our best to make this edition of the Factbook as accurate as possible. However, local regulations change quickly in this industry, and we are NOT lawyers, so don’t depend on this Factbook as your sole source of legal advice. Always check with your own attorney. For a state-by-state list of lawyers specializing in cannabis business regulations, see Marijuana Business Daily’s free Industry Directory online at our site.

Enjoy!

Cassandra Farrington, Publisher




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Editor’s Introduction

If you’re looking for facts and figures to help drive your decision-making, launch a cannabis-related business, invest in the industry or simply beat back the competition, you’ve come to the right place. Scratch that – you’ve come to the only place where this sort of information has been researched and gathered comprehensively.

This Factbook provides a detailed overview of the U.S. cannabis industry from a business, financial, market research and regulatory perspective. It’s

aimed at the everyday business owners, entrepreneurs and investors who make this industry tick.

How to use this Factbook:

Dispensaries and Recreational ShopsSee Chapter 4 to learn how your company’s financials compare to the norm. This year, we included stats for dispensaries with associated grow operations vs. those without (the differences can be substantial) as well as some initial data and projections for the recreational market. This will help you get a better idea of how you stack up to the competition.

Next, review Chapter 5 in depth for the latest market research on what your customers really want – and what would make them switch to a competitor. This could be key in helping you grow revenues and beat the competition.

Cultivators, Infused Products Manufacturers & Service/Equipment Providers If you serve more than one state, or plan to expand into more markets, see Chapter 3 for regional data, including which states are the most stable versus those that offer the biggest opportunities. They are not always the same.

Then, review Chapter 4 for financial facts and figures for your own peers and your business cus-tomers and prospects. Lastly, check out our market research findings in Chapter 5, as they might apply to your business (especially if you run a testing lab.)

Entrepreneurs Considering New LaunchesWe recommend that you read the first two chapters in their entirety. The first is a review of major developments in 2013 to give you context for the industry’s growth. The second is a must-read overview of the entire industry, including a section about investors.

Next, review legal and statistical data in Chapter 3 for the state(s) you are targeting. Finally, look over the niche profiles in Chapter 4, paying special attention to the financials and advice for the industry segment you intend to do business in.




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InvestorsFocus on Chapter 2, which contains new data specifically for investors in the industry (from those who run private equity funds to those who invest in individual cannabis stocks). Also use the financial data and legal information throughout this Factbook as a guideline when you’re evaluat-ing pitches from particular businesses. Now, you don’t have to fly in the dark.

Reporters & Researchers You may use any or all of the charts, tables and analysis from our Executive Summary in your ma-terials for public consumption, as long as you give proper attribution to the Marijuana Business Factbook 2014. If you publish online, we would also appreciate a link to http://MarijuanaBusinessFactbook.com.

If you have questions about the Factbook data – or about cannabis industry news – please submit your query via our online contact form at http://MMJBusinessDaily.com/contact-us/ so we can get back to you as quickly as possible. (We do have staff manning the contact center full-time.)

Aside from the Executive Summary, however, please do not use any of the data, stats or analy-sis from this Factbook in any form or format without first requesting explicit permission. This Factbook is copyright protected, and it is a significant part of our livelihood. Much of the data and all of the analysis and estimates contained herein are our own. We appreciate you respecting our copyright.

Our research dates and methodology:

Many of the charts contained in this report use data from our two annual surveys. Our third an-nual patient/consumer survey and our second annual survey of business executives were con-ducted separately online in January 2014. You can find more details on how these surveys were conducted in the introductions and methodology sections of Chapters 4 and 5.

Other facts and figures throughout this Factbook are the result of intensive research, extrapola-tions based on available data and our extensive, behind-the-scenes interviews with industry insid-ers. Keep in mind that there are almost no hard numbers out there about the industry, so many of the datapoints in this Factbook reflect our best estimates.

Our industry revenue and growth projections are our own and are somewhat cautious – some might even say too much so. However, we’ve been reporting on this industry long enough to know that both positive and negative unexpected changes are always around the corner. We do not see our role to be industry evangelists; rather, it’s our goal to provide a non-biased reality check.

You can’t make good business decisions without solid numbers to back them up. That’s why we never “puff ” the numbers. We’re trying to present the most accurate picture of the industry pos-sible, even if that means going against conventional wisdom or the methodologies used by others.




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Notes on industry nomenclature:

Just as with any niche industry, marijuana business insiders use terminology. We have included a full glossary at the back of this edition. Here are a few of the more common terms we use in this Factbook:

Marijuana vs. CannabisWe use these terms pretty much interchangeably. Cannabis is the scientific name for the plant, from which THC, cannabidiol and hemp products are derived. Historically, the word “marijuana” has had a pejorative meaning and therefore some industry insiders prefer to use the term canna-bis solely.

Medical vs. Recreational/Retail Marijuana

We use the term medical marijuana (MMJ) for state-legal cannabis – and derived products – that are sold for medicinal purposes to consumers who are at least nominally “patients.” Recreational or retail cannabis (also termed “adult-use” cannabis within the industry) is marijuana sold to con-sumers 21 and over – regardless of their health status – via licensed stores. Neither medical nor recreational marijuana are legal federally.

Businesses vs. NonprofitsIn some states, such as California, dispensaries and cultivators are required by state law to operate as nonprofits. We tend to use “business” as an umbrella term that includes these nonprofits.

Finally….Given the nature of the cannabis industry, all of the data and information we present here are subject to change. We publish a fully revised edition of this Factbook annually. To keep up with changes in between, I urge you to subscribe to our free daily newsletter – the industry’s most trusted, independent and non-biased news source – and to consider attending our annual con-vention, the National CannaBusiness Conference & Expo, which scheduled to be held next in Las Vegas from Nov. 12-14. You can find information on both at http://MarijuanaBusinessDaily.com.

And be sure to send me your feedback, news and notes so we can make sure next year’s Factbook is even more useful for your business.

Thanks,

Christ Walsh, Editor




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Executive Summary: 9 New Key FindingsChart: Updated U.S. Cannabis Retail Sales Projections: 2013-2018

$1.4-$1.6 $1.6-$1.9 $1.9-$2.3

$2.5-$2.9 $3.2-$3.5

$3.6-$4.0

$0.6 -$.07

$1.2-$1.4

$1.8-$2.0

$2.3-$2.5

$3.8-$4.2

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

2013 2014 2015 2016 2017 2018

U.S. Marijuana Sales Estimates 2013 - 2018in Billions of U.S. Dollars

Medical Recreational

$1.4-$1.6 Total$2.2-$2.6 Total

$3.1-$3.7 Total

$4.3-$4.9 Total

$5.5-$6.0 Total

$7.4-$8.2 Total

© 2014 CannaBusiness Media, a division of Anne Holland Ventures, Inc.. All rights reserved.

Take a look at the growth curve above – it’s impressive. All the stars are finally aligning for can-nabis businesses, and we believe the industry is on the verge of going mainstream.

To put this forecast in perspective, last year we estimated 2014 sales at $2.5 billion-$3 bil-lion and 2018 sales at $4.5 billion-$6 billion. Now that we’re in the reality of 2014, we’re happy to report that our near-term forecast was pretty much on target. In addition, the cannabusiness climate has improved dramatically since the government issued the so-called Cole Memo in Au-gust 2013, indicating that it would take a hands-off approach to the industry as long as businesses comply with local laws and state regulation/oversight is strict. As a result, we predict even greater growth through 2018 than we initially projected in part because of that favorable guidance by the feds. In fact, you could call it the $2 billion memo.

The memo was just the first of several signs that the feds are finally – though cautiously – backing away from their previously ever-present threats to stop the cannabusiness industry in its tracks. See Chapter 1 for more of our analysis on the memo along with other recent industry changes that caused our future projections to soar.

Three keys to understanding our projections:

• Conservative: As an independent, non-biased publication, our goal is to bring you the real numbers,

rather than inflated cheerleading. Our forecasts therefore are conservative-to-moderate at best by industry standards.

To be clear: We are bullish on the industry given recent trends and growth rates. This forecast does assume the industry continues on its current trajectory, with no massive road bumps. So even our projections qualify as sizable growth. However, we also attempt to be more conservative than some of the more optimistic professionals and groups out there. The feds have changed their mind repeatedly in the past, and the U.S. has a presi-




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dential election coming up in 2016 – the results of which could change the environment for cannabis businesses. When it comes to the marijuana industry, the only thing you can confidently expect is the unexpected.

• Tip of the Iceberg: These sales forecasts are only for cannabis and infused products sold legally to consumers

at dispensaries and retail stores. The industry’s overall sales are far larger than that, includ-ing everything from the revenues wholesale growers generate selling to infused products makers and retail stores to the vendors who sell technology, products and services to these businesses. From commercial landlords to security specialists, dozens of niches benefit from the flourishing cannabis industry. Their revenues are not included in this particular sales forecast, although we do go into detail about many of their financials in Chapter 4. And it’s worth mentioning that all these ancillary companies pay standard business taxes.

• Based on Multiple Sources: Very few states release data on cannabis sales (or even track it in the first place). And only

a tiny slice of cannabusinesses release their financials for public scrutiny. So you can’t rely on government data or financial filings to create projections.

We use multiple sources, double-check the information and then cross-check it all to come up with estimates. Sources include official data from state governments, results from our surveys, interviews with business owners and the statistics/political analysis reported in our sister publication Marijuana Business Daily. Then our reporters, who talk to can-nabis executives every single business day of the year, run the final estimates past their gut and, on occasion, their sources.

Which States Are Best for Cannabis-Related Businesses – and Which Are Worst?

In Chapter 3 of this Factbook, you’ll find profiles for each of the 21 U.S. states with medical cannabis laws - plus the District of Columbia – complete with an overview of local regulations, business stats and financials. For most states, market data such as annual industry revenues, num-ber of dispensaries and customer totals are non-existent. Therefore, we developed solid method-ologies to make our own research-based estimates for you.

You’ll also find our cannabusiness ratings for each state:

• Stability Rating:

This rating tells you how safe we think a particular state is to run a cannabusiness in for the next year. Factors evaluated include the likelihood that local regulations will change, in-state attitudes toward the cannabis business, lawsuits that could affect the industry and any major expected developments on the horizon.




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• Opportunity Rating:

This rating tells you how strongly we think cannabusinesses can grow in each state. A state could be very stable but have fairly static growth, or vice versa. Factors evaluated include regulatory considerations as well as the current amount of competition, estimated market demand, market maturity, etc.

Both of these ratings are based on a typical school grading system, ranging from A to F, with A+ being the best. Here’s a snapshot:

Table: State Stability & Opportunity Rankings

Example: 2014 State Rankings For Cannabusiness Stability & Opportunity

Stability OpportunityColorado A A+Washington, D.C. B+ DMichigan F D


• Colorado is one of the strongest marijuana markets in the country, both in terms of stabil-ity and opportunity, because of its thriving MMJ industry as well as its new recreational cannabis program.

• Washington D.C. is a fairly stable medical marijuana market, but its program is so restric-tive – particularly when it comes to who can qualify to buy MMJ - that the business op-portunities are miniscule at this time.

• Michigan has a large medical marijuana patient population, but it ranks poorly in both stability and opportunities due to local crackdowns, unfavorable court rulings and the unregulated nature of the industry.

How Quickly is the Cannabusiness Industry Growing?

When we first launched our sister event – the National CannaBusiness Conference & Expo – in 2012, the majority of our 400 attendees had been in the industry for at least several years, and most of them knew each other to some extent. At last year’s event, attendance nearly doubled to hit 750, and the roar of attendees introducing themselves to each other during breaks was a high-light of the event. This coming year, we’re conservatively anticipating attendance nearly doubling again to 1,300, but given the way new companies are joining the industry, we reserved capacity to accommodate many more.




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How quickly are new companies joining this space? Insanely quickly. You know how it seems like everyone in Los Angeles has an idea for a screenplay? These days it seems like everyone in Denver – the epicenter of the marijuana industry – has a cannabusiness idea they’re mulling over. But the startup excitement goes beyond Colorado: We’ve heard plans from would-be entrepre-neurs in every state of the nation, even those that have not legalized yet.

Here’s an idea of recent startup activity:

Chart: Year Cannabis Businesses Launched

In Startup Mode30%

Launched Prior To 2012

45%

Launched 20124%

Launched 201321%

New Entrants Vs. The Old Guard


What’s responsible for this growth? The Cole Memo, for one. That guidance has made it some-what safer to start a cannabusiness, though of course risks remain. Secondly, the otherwise stag-nating U.S. economy has spurred interest in the cannabis sector, which is one of the few industries that is growing rapidly and has relatively few established market leaders. Entrepreneurs who in past decades might have thrown their lot in with the dot-com revolution are interested in can-nabis now. The intense media attention foisted onto the industry these past 12 months has also helped move the marijuana business from the dark old days of stigma into the light of legitimacy.

Finally, private equity is starting to take a serious interest in backing cannabis companies. From wealthy individuals to specialist investing firms, the money is coming to the table (though there’s still a long way to go). Heretofore, even as recently as last year, if you wanted to start or expand a cannabusiness, you basically had to reach into your own pockets for capital.

How does this rush of newcomers affect the industry as a whole, and what niches are they focusing on? Look to Chapter 2 of this Factbook for some answers.




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Investors’ Favorite Types of Cannabusinesses to Fund

In past years, the very few investors who were willing to fund a cannabusiness startup or expansion focused nearly entirely on ancillaries – businesses that do not touch cannabis in their normal course of operations, such as packaging manufacturers and inventory software providers.

As you can see below, that has changed dramatically:

Chart: Preferred Areas For Investors To Contribute Funds

63%

58%

53%50% 48%

44% 42%

0%

10%

20%

30%

40%

50%

60%

70%

CultivationOperation

Medical MarijuanaDispensaries

Legal RecreationalRetailers

Ediblies/InfusedProduct

Manufacturer

Services Firms Ancillary Products Fully Legal HempProducts

Investors' Favorite Types Of Cannabusinesses

Respondents could choose multiple answers.© 2014 CannaBusiness Media, a division of Anne Holland Ventures, Inc.. All rights reserved.

Until recently, outside investors looking at this market were willing to put money only in ancillary businesses. Thanks to the Cole Memo and the increased legitimacy of the industry, an increasing number of investors are now willing to go where they perceive they will get the biggest bang for their buck: producers and sellers of cannabis.

This does not hurt the ancillary industry. Many of these companies are funded by internal operations – for example, an existing accounting firm that launches a cannabis-specific practice. Plus, potential investors are entering the industry in ever-increasing numbers, so the overall fund-ing pie is much bigger and ancillary companies are still getting a large slice.

As we mentioned earlier, the investment side of the cannabis industry is still developing, and raising money remains difficult for many companies. But it’s improving quickly, and the flood-gates could open soon.

To learn more about how investors find the companies they finance, what they look for when considering which businesses to fund and how much their typical investment is, see Chapter 2.




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If you are an investor (or putting together a business plan to impress one) and want to know how profitable different types of cannabusinesses are, as well as how long the runway to profitabil-ity typically is, see Chapter 4.

What Are Typical Cannabusiness Startup Costs?

How much does it take to get a marijuana business up and running? It depends on many dif-ferent factors, including the type of business, local and state regulations and the overall size of the operation. But there are some common threads running throughout each niche in the industry.

Here’s one example of the niche-by-niche charts covering startup costs you’ll find in Chapter 4:

Chart: Startup Costs For Growers – Wholesale Vs. Caregiver

0%

33%

14%

19%

5%

19%

10%

47%

53%

0% 0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

Less than $10,000 $10k-$50k $50k-100k $100k-200k $200k-500k $500k-$1 million More than amillion

Cultivation Startup Costs: 2011 OnwardWholesaler Caregiver


This year we segmented out wholesalers versus caregiver growers in our study because the scale of these two types of operations are so different. Caregivers typically are fairly small operations that grow at home for a limited number of MMJ patients or, in some cases, also sell to dispensa-ries. Wholesalers sell large volumes of cannabis to dispensaries and infused products manufactur-ers and are generally much larger than caregiver cultivation sites.

In future years, we expect startup costs for wholesalers to increase due in part to stricter regulations in many states but also because of competition. Increasingly, it’s not enough to merely grow cannabis, or even to grow the “best” strains. Cultivation efficiencies, economies of scale and professionalism will matter more in the long run.




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Efficiencies allow growers to lower wholesale prices, which in turn can boost sales in a com-petitive market. For example: some growers in various markets have been driven out of business when operations using optimized space and technology launched in their areas. Professionalism includes growing greater quantities while guarding against the ever-present risk of plant disease that can devastate a crop. These large-scale operations require the skills of a professional botanist rather than an enthusiastic amateur.

What are the biggest costs for a cultivation startup, and how soon can you expect to be profit-able? Turn to Chapter 4 for answers.

How Much Money Can a Cannabusiness Make?

Business revenues vary widely across the industry, as well as within niches and states. In part, these variances stem from differing regulations and market dynamics, though the ambition of individual owners plays a role as well.

There are three main types of marijuana businesses as far as revenues are concerned:

1. Local mom-and-pops generating less than six figures per year

As the market becomes more competitive and professional, the best of these will survive, either because they are beloved local institutions or are located in a small region, or they serve a smaller niche that the larger players don’t think is worth branching into.

2. Mid-sized regional players generating less than a million per year

Often these entrepreneurs are bucking at a ceiling. They may have the desire to be larger, but their ambitions are hampered by regulatory restrictions or natural marketplace size. Some, how-ever, have only been held back by lack of access to capital. We expect the best of these to graduate to the next tier in coming years. Others are happy with their current size and may either continue on their current path or be takeover targets for larger players.

3. Top dogs and national brands generating millions per year

Federal laws restricting cannabis trafficking across state lines have artificially limited growers and retailers/dispensaries to only doing business in their home state. But some businesses have become giants in their respective states, capturing a huge share of the local market. And a handful of enterprising dispensaries and edibles companies have found legal ways to expand across state lines by taking ownership positions in other businesses, franchising or licensing their products and processes. These organizations can make millions of dollars, particularly if their core business is a market leader in a large cannabis state such as California or Colorado. Additionally, many ancillary businesses that don’t touch cannabis have expanded to multiple states and are develop-ing national brands, as they are not handcuffed by federal laws.

This Factbook contains 2014 revenue data for six different industry niches, ranging from grow-ers to ancillary firms. An example:




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Chart: Annual Dispensary Revenues – With Vs. Without Associated Grow Facilities

13%

7%

18%

14%

32%

16%

36%

14%

27%

5%

9% 9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Less Than $100k $100k-$250k $250k-$500k $500k-$1 Million More Than $1 Million More Than $3 Million

Dispensary Annual RevenuesWith Associated Grow Dispensary Only


The average dispensary without a grow generates just over half a million dollars per year, whereas dispensaries with associated grow operations bring in about twice that annually on average. However, as you can see from this chart, the average does not tell the whole story. Many dispensaries are mom-and-pops, some are mid-sized and a smaller number are very large.

Worth noting: We’ve seen an increase over the past year in dispensaries (both those with and without grows) that generate seven figures. This signals the emergence of large businesses that operate multiple locations in one state or have benefited from industry consolidation.

How Many Cannabusinesses Are Profitable Now?

Aside from revenues, one of the key indicators for assessing the opportunities in any industry is profitability. We have extremely good news on that front: The cannabis business is very profit-able one.

More than 80% of cannabusinesses reported they are running in the black, with 54% saying they are modestly or even very profitable, according to our survey of professionals.

We don’t know of another emerging industry with such high profitability levels. In fact, in general roughly 60-70% of new businesses go belly up within five years, largely due to losses. Not so in the cannabis industry. The profitability breakdown is particularly impressive given that so many cannabusinesses are relatively new ventures.




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The results also carry an unexpected message of year-over-year stability. Our 2013 data showed that 83% of responding cannabusinesses were in the black. That one percentage point slip is out-standing given how many new companies have joined the fold in the past year.

Chart: Profitability Of Marijuana Businesses

Significant Losses3%

Losing Some Money15%

About Breakeven28%

Modestly Profitable38%

Very Profitable16%

How Profitable Is Your Cannabusiness At This Time?

© 2014 CannaBusiness Media, an Anne Holland Ventures, Inc. publication. All rights reserved.

How Long Does it Take to Reach Profitability?

Although profitability timelines differ by niche, most marijuana businesses reach breakeven fairly fast, often in less than a year.

However, this may be in part because businesses have not invested enough of their revenues in aggressive growth. Entrepreneurs who want to reap millions over time need to put more money over a longer period into every aspect of their business. The key question: Are you looking for short-term income or a longer-term win?

Investors considering backing cannabusinesses should also bear this in mind. Don’t go by “industry standard” profitability timelines for businesses you might fund. Your investment may be better as a three-year project – rather than a one-year play.

Here is a sample chart from Chapter 4 where we detail typical profitability patterns for various major cannabusiness niches.




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Chart: Time To Profitability For Infused Product Makers

A Few Months31%

6-12 Months31%

1-2 Years31%

More Than 3 Years6%

Infused Product Manufacturers: Time To Profitability


What Does Market Research Reveal About Cannabis Consumers?

The lack of market research in the cannabis space is overwhelming. Sure, there are tons of opinion polls on Americans’ feelings about legalizing marijuana. But when it comes to what cus-tomers in legal states really want from the dispensaries and retailers that serve them … the silence is deafening.

That’s why we launched our annual survey of patients/consumers in 2012 and have continued to expand its scope each year since. This year’s survey, conducted in January 2014, covered ev-erything from décor and pricing to how many strains customers want dispensaries to offer. We also ask about edibles and infused products such as topicals as well as paraphernalia and ancillary services (think massages).

Perhaps most important for the fate of the industry as a whole, though, is the question: “How much do you spend on cannabis per month?” After we annualized typical answers, we discovered that the average is surprisingly high compared to what consumers spend on other goods, such as coffee or holiday presents.




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Chart: Average Amount Consumers Spend On Cannabis Vs. Other Purchases

$165

$700

$1,270

$1,542

$1,869

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

Coffee

Christmas Presents

Beer

Pet Expenses (dog owners)

Cannabis Products

Average Annual Consumer Spend

Figures reflect average data for American consumers who buy these products (not for all Americans in general). Sources: CannaBusiness Media's 3rd Annual Patient Survey, Time magazine, Statistics Brain, Survey Analytics poll Jan. 2014


At nearly $2,000 per year, each customer is highly valuable to a dispensary or retailer. In com-petitive markets, shops must provide strong customer service, compelling inventory and rewards programs to ensure customer loyalty. A key business success metric, after all, is the percentage of first-time customers who turn into repeat buyers.

Worth noting: These answers were from states where cannabis is sold legally in dispensaries and/or in recreational stores. So although some of this cash is certainly still flowing to the black market, not all of it is. In fact, when we asked consumers if they preferred to shop legally vs black market, the answer was very strongly in favor of legal retail – even if the price was higher.

In general, our data also indicates that MMJ patients are not highly price sensitive. Anecdotal evidence from the first few months of recreational retail in Colorado indicates that adult consum-ers, buying for personal vs. medicinal use, may be even less price sensitive.

When they can, many Americans are willing to spend disposable income on cannabis. If legal-ized completely to adults across the U.S., we predict cannabis would be a $40 billion-$45 billion industry in retail sales alone (not counting associated or wholesale revenues). Although it’s a lot smaller than the U.S. beer market at $96.8 billion (while cannabis users spend more money an-nually than beer drinkers, there are fewer of them in the general population), it’s a heck of a lot larger than the $11.7 billion coffee market.

Whether you joined the cannabis industry because you are a natural health evangelist, a fan of the plant or just a forward-looking entrepreneur, these kinds of revenues – along with associated tax dollars – are what may assure your business a strong future. Financial backers and politicians alike can move mountains when billions of dollars are at stake.


Grab Your Complete 209-page Copy Now at:MarijuanaBusinessFactbook.com

The bestselling annual Factbook from the editors of Marijuana Business Daily includes:

• 114 Tables & Charts

• Financial data on retail,

growing, edibles & ancillaries

• 22 State profiles with business

opportunities

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Published April 2014 byCannaBusiness MediaISBN 798-1-938219-13-9

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Table of Contents

IntroductionA Letter from the PublisherEditor’s IntroductionExecutive Summary: 9 New Key Findings

Chapter 1: The Year in ReviewWatershed Department of Justice AnnouncementProgress in First Recreational StatesCannabis Crackdown Ebbs3 States Pass MMJ Bills3 Existing MMJ States Approve DispensariesPublic Support SoarsChart 1.1: Marijuana Legalization PollDr. Sanjay Gupta Reverses Stance on MarijuanaNew MMJ States Make ProgressIncrease in Investment/Financing ActivityNational, International ExpansionMore Turbulence in CaliforniaLooking Ahead

Chapter 2: Cannabis Industry OverviewCannabis Marketplace Size & ForecastsChart 2.1: U.S. Marijuana Market Estimates 2013-2018Table 2.1: Cannabis Market Vs. Other Industries Other Industry/National DataTable 2.2: Cannabis Market Vs. Other IndustriesTable 2.3: Estimated Number Of Workers In MMJ IndustryTable 2.4: Average Annual Revenues By Business Type As

Reported By Cannabusiness Owners Table 2.5: Estimated Number Of Cannabis Businesses By

Niche In U.S.Chart 2.2: Cannabusiness Entrepreneurs Project Their Growth

For 2014Chart 2.3: Typical Age of a Cannabis CompanyChart 2.4: Which Cannabusiness Niches Are Most Popular For

StartupsChart 2.5: Cannabis Entrepreneurs Name Their Biggest Chal-

lenges in 2014 Table 2.6: Cannabusiness Entrepreneurs’ Biggest Challenges

By Industry Niche In 2014 Chart 2.6: Consumer Preferences - Buying Consideration For

Black Market Vs. Legal RecreationalThe 8 Personal Attributes of Successful Cannabis Entrepreneurs

The 5 Biggest Mistakes Cannabis Entrepreneurs Make9 Key Risks for Marijuana BusinessesMedical Marijuana Patient Data & DemographicsTable 2.7: Demographic Stats On Medical Marijuana PatientsRecreational Marijuana Consumer Data & DemographicsTable 2.8: Demographic Stats On Recreational Marijuana

ConsumersLegislative OverviewOverview of Cannabusiness FinancialsTable 2.9: Average Annual Insurance Costs For MMJ Busi-

nessesCannabusiness Funding & Investing Chart 2.7: Interest Rates On Friends And Family Loans For

Cannabis-Touching BusinessesChart 2.8: Percentage Of Industry Entrepreneurs Funding

Privately-Held CannabusinessesChart 2.9: Types Of Investments Being Made In Cannabusi-

nessesTable 2.10: Typical Investment AmountsTable 2.11: Typical Investment Amounts By Investor TypeChart 2.10: Investors’ Favorite Types Of CannabusinessesChart 2.11: How Outside Investors Find Private Cannabusi-

nesses To FundChart 2.12: Top Considerations For Outside Investors Funding

Private Cannabis BusinessesChart 2.13: Biggest Mistakes Entrepreneurs Make When

Seeking Funding According To InvestorsChart 2.14: Cannabusiness Entrepreneur Exit StrategiesChart 2.15: Cannabusiness Entrepreneur Exit Strategies By

Business TypeChart 2.16: Industry Entrepreneurs Investing In Cannabusi-

ness StocksChart 2.17: Reasons Cannabusiness Entrepreneurs Don’t

Invest In Cannabis StocksMethodology & Assumptions

Chapter 3: State-by-State: Legal Facts, Market Stats and Outlook

IntroductionTable 3.1: State Stability and Opportunities RankingsMap 3.1: US Marijuana Laws and Dispensary NumbersAlaskaArizonaCaliforniaColorado




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ConnecticutDelawareHawaiiIllinoisMaineMarylandMassachusettsMichiganMontanaNevadaNew HampshireNew JerseyNew MexicoOregonRhode IslandVermontWashington, DCWashington State6 States That Could Legalize MMJ, Recreational Marijuana in 2014Methodology

Chapter 4: Niche-by-Niche Overview of the Cannabis Industry

IntroductionMedical Marijuana DispensariesData 4.1: Average Dispensary Startup CostsChart 4.1: Breakdown Of Dispensary Startup CostsChart 4.2: Largest Startup Costs For DispensariesChart 4.3: Funding Sources For DispensariesData 4.2: Average Annual Dispensary RevenuesChart 4.4: Breakdown Of Dispensary Annual RevenuesChart 4.5: Breakdown Of Dispensary ProfitabilityChart 4.6: Profitability Of Dispensaries With GrowsChart 4.7: Profitability Of Dispensaries Without GrowsChart 4.8: Time To Profitability For DispensariesChart 4.9: Estimated Time To Profitability For Unprofitable

DispensariesChart 4.10: Projected Dispensary Business Growth For 2014Chart 4.11: Expansion Plans Of DispensariesRecreational Marijuana Retail StoresChart 4.12: Cannatourism StatsChart 4.13: Fastest Growing Segment Of The Cannabis

MarketChart 4.14: Factors Consumers Consider When Deciding

Between Legal Stores And Black Market

Cultivation OperationsData 4.3 Average Cultivation Startup CostsChart 4.15: Breakdown Of Cultivation Startup CostsChart 4.16: Largest Startup Costs For CultivatorsChart 4.17: Funding Sources For Cultivation OperationsData 4.4: Average Annual Wholesale Cultivator RevenuesChart 4.18: Average Annual Revenues For Wholesale CultivatorsChart 4.19: Profitability Of Established Wholesale CultivatorsChart 4.20: Time To Profitability For Established CultivatorsChart 4.21: Estimated Time To Profitability For Unprofitable

CultivatorsChart 4.22: Projected Cultivation Business GrowthChart 4.23: Expansion Plans Of Wholesale CultivatorsInfused ProductsChart 4.24: Percentage Of Infused Companies Serving

Multiple StatesData 4.5: Average Infused Product Manufacturer Startup CostsChart 4.25: Breakdown Of Startup Costs For Infused Product

ManufacturersChart 4.26: Largest Startup Costs For Infused Product Manu-

facturersChart 4.27: Funding Sources For Infused Products ManufacturersData 4.6: Average Annual Infused Product Manufacturer

RevenuesChart 4.28: Breakdown Of Infused Product Manufacturer

RevenuesChart 4.29: Profitability Of Infused Product ManufacturersChart 4.30: Time To Profitability For Infused Product Manu-

facturersChart 4.31: Estimated Time To Profitability For Unprofitable

Infused Product ManufacturersChart 4.32: Largest Ongoing Costs For Infused Product

ManufacturersChart 4.33: Infused Product Manufacturer Growth For 2014Chart 4.34: Expansion Plans Of Infused Product ManufacturersTesting LabsData 4.7: Average Testing Lab Startup CostsChart 4.35: Breakdown Of Testing Lab Startup CostsChart 4.36: Largest Startup Costs For Testing LabsChart 4.37: Funding Sources For Testing LabsData 4.8: Average Annual Testing Lab RevenuesChart 4.38: Breakdown Of Testing Lab Annual RevenuesChart 4.39: Profitability Of Testing LabsChart 4.40: Why Some Cannabusinesses Don’t Offer Lab-

Tested Marijuana




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Chart 4.41: Projected Testing Lab GrowthAncillary CompaniesChart 4.42: Ancillary Providers Serving Multiple StatesChart 4.43: Annual Ancillary Company RevenuesChart 4.44: Annual Revenues For Dispensary, Cultivation Site

VendorsChart 4.45: Annual Revenues For Professional Services

CompaniesChart 4.46: Profitability Of Ancillary CompaniesChart 4.47: Profitability Of Professional Services CompaniesChart 4.48: Projected Ancillary Company Growth For 2014Chart 4.49: Projected Professional Services Company Growth

For 2014Chart 4.50: Expansion Plans Of Cultivation, Dispensary VendorsMethodology

Chapter 5: Market Data: National Marijuana Consumer Research Study

IntroductionBrief MethodologyEXECUTIVE SUMMARY: Top 5 Changes From 2013 + 10

TakeawaysFULL PATIENT MARKET RESEARCH STUDY RESULTS: 25 Charts

& Data PointsLOCATION & DELIVERY SERVICES - How Far Will Patients Travel

to Visit a Dispensary?Chart 5.1: Importance Of Dispensary Location to Patients Chart 5.2: How Patients Find DispensariesATMOSPHERE: What Type of Ambience Do Patients Want?Chart 5.3: Which Look/Feel (Ambience) Patients Prefer In A

DispensaryChart 5.4: Percentage Of Patients Who Prefer Mom-And-Pop

Vs. Chain Store AmbienceCATERING TO CUSTOMERS PART I: What’s Most Important to

Patients?Chart 5.5: Importance Of TestingChart 5.6: Most Important Types Of Marijuana ProductsChart 5.7: Ideal Number Of Strains A Dispensary Should CarryChart 5.8: Importance Of EdiblesChart 5.9: Importance Of Hash/OilsChart 5.10: Importance Of Discount MarijuanaCATERING TO CUSTOMERS PART II: What’s Not As Important to

Patients?Chart 5.11: Products That Are Not As Important To PatientsCATERING TO CUSTOMERS PART III: What Ancillary Products/

Services Are Important?Chart 5.12: Most Important Ancillary Goods/Services A

Dispensary Should OfferChart 5.13: Percentage Of Patients Preferring To Buy Para-

phernalia From Dispensaries Vs. HeadshopsChart 5.14: Whether Dispensaries Should Take An Active Part

In Community Service According To PatientsRETAINING CUSTOMERS: Why Would a Patient Switch Dispen-

saries?Chart 5.15: Reasons Patients Would Switch DispensariesChart 5.16: Percentage Of Patients Who Would Switch Dis-

pensaries Based On LocationChart 5.17: Percentage Of Patients Who Would Switch Dis-

pensaries For Organic MarijuanaChart 5.18: How Consumers Share Complaints About DispensariesCONSUMER TRENDS: Purchase Frequency, Average SpendData 5.1: Average Number Of Times Patients Purchase Can-

nabis Each Month Data 5.2: Average Amount Patients Spend On Cannabis Each

MonthChart 5.19: Average Amount Consumers Spend Annually On

Different ProductsDISPENSARIES VS. THE BLACK MARKET: How Patients and

Consumers Decide Who to Buy From

Chart 5.20: How Patients Decide Whether To Buy From Dispensaries Or Black Market

ADDITIONAL DATA: Cannabis TourismChart 5.21: Percentage Of Patients Who Will Engage In Can-

nabis Tourism In 2014FINAL THOUGHTS: The #1 Thing a Dispensary Should Do to

Please CustomersSURVEY METHODOLOGYChart 5.22: Demographics Of Respondents To Patient SurveyChart 5.23: Percentage Of Medical Vs. Recreational Users in

U.S.Chart 5.24: Percentage Of Medical Vs. Recreational Users In

Legal StatesSurvey

Chapter 6: Glossary of Common Cannabis Business Terms

Appendix: The Cole Memo


Documents

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