Operators have benefited from increased acceptance and legitimacy of medical marijuana products
Los Angeles, CA (PRWEB) March 07, 2013
For decades, all marijuana transactions in the United States were conducted under implicit or explicit prohibition. States have increasingly moved to legalize marijuana for medical purposes, though, and to implement regulations for organizations that produce and distribute cannabis. “The growing acceptance of medical marijuana is providing operators and investors with unprecedented opportunities,” says IBISWorld industry analyst Agiimaa Kruchkin. “Furthermore, the federal government has signaled its tacit acceptance of these state actions.” Consequently, the Medical Marijuana Growing industry is expected to experience annualized revenue growth of 13.8% to $1.7 billion in the five years to 2013.
Revenue growth did slow in 2011, though, due to aggressive prosecution of medical marijuana growers and dispensaries by the Drug Enforcement Administration. This sort of intervention has increased uncertainty for industry operators, resulting in higher operating costs from legal fees and risk mitigation.
Luckily for industry operators, there has been no shortage of demand in recent years. The Medical Marijuana Growing industry has benefited from increased acceptance and legitimacy of medical marijuana products. Revenue is expected to grow 22.8% in 2013 alone, largely due to favorable regulatory environment, a steadily aging population and an increase in per capita disposable income. According to Kruchkin, “Adults aged 50 and older are a major industry market because they tend to require more healthcare services and treatment than the rest of the population.” The number of adults in this age group has been steadily expanding and is expected to total about 104.8 million in 2013. Consequently, medical marijuana demand from this demographic has risen during the past five years.
The industry will remain at risk, however, until the federal government definitively changes its position on the legality of medical marijuana. Until then, a growing number of doctors and patients will likely turn to medical marijuana for treating health conditions such as Alzheimer's. Rising demand is also forecast to widen profit margins. Appealing margins and any legal advancement would entice new operators. Consequently, IBISWorld estimates that the number of firms operating in this industry will increase at significantly in the five years to 2018, which will contribute to the industry's already low level of market share concentration. By law, in the majority of states where medical marijuana is legal, industry operators must be a part of nonprofit marijuana collectives (also known as dispensaries) to grow marijuana. Industry operators are known as vendors and must also possess medical marijuana cards for the state where they operate. Additionally, because the sale of marijuana is still prohibited in all states except Colorado, vendors only provide marijuana to the collective in exchange for donations. All vendors are independent and privately operated. All vendors hold marijuana ID cards, and most grow their allocated plant quota according to state law. In some states, however, patients may designate a grower to provide medical marijuana for them, resulting in some larger farms. For more information, visit IBISWorld’s Medical Marijuana Growing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry’s establishments grow marijuana for medical use. Most operators are nonprofit collectives that provide medical marijuana to other collective members. Transactions are typically conducted on a donation basis, because the sale and distribution of marijuana is illegal in most states that permit medical marijuana.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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