Report: Medical marijuana market growing quickly

By Reuters
Posted March 24 at 11:19 a.m.

CHICAGO — It has been called a lot of things over the years: grass, Mary Jane, wacky weed. Now, researchers are suggesting a new moniker for marijuana: alternative investment.

A report out this week on the U.S. medical marijuana market estimates the unconventional business already generates $1.7 billion in economic activity a year. But that market could grow fivefold in short order, researchers say, as the list of states that legalize pot for treating a variety of illnesses grows and as more patients try it — and switch.

The study, conducted by See Change Strategy for the American Cannabis Research Institute and Deal Flow Media, a financial research firm specializing in unusual assets, says that of the nearly 25 million Americans who are potentially eligible to use medical marijuana based on their diagnoses, fewer than 800,000 currently do.

That makes the nascent market a potentially attractive one for investors looking for an alternative to the more traditional investment alternatives like art, antiques, wine or coins, one with an upside potential that makes China’s current growth rate look anemic.

The opportunities, the authors say, aren’t confined to cultivation and distribution — the riskier parts of the business.

Many perfectly legal products and services, from software and security to hydroponic infrastructure to marketing, communications and consulting, will offer money-making opportunities in the coming years.

But the authors, who surveyed 300 medical marijuana industry insiders, point out that the fast-growing market faces a daunting number of hurdles. These include inadequate access to legal capital, unfavorable tax status, a lack of experienced executives, downward pricing pressure and a complex — and contradictory web — of state and federal rules. All this makes investing in marijuana a risky proposition.

There’s also the very real potential for conflict with the criminal gangs that control the much larger $18 billion a year illegal U.S. marijuana market. These conflicts with criminal gangs tend to get settled outside the judicial system.

Still, the study says the U.S. medical pot market could be nearly half the size of the illegal market — about $8.9 billion — in just five years.

“That’s assuming there are no obstacles,” said Ted Rose, the editor of the study. “I’m not weighing in on whether that’s likely or not. But that $1.7 billion is the real money that’s being made this year.”

To put that in perspective, Lipitor, Pfizer Inc’s cholesterol-reducing drug and the world’s best-selling pharmaceutical, had U.S. sales of $5.33 billion in 2010.

More than a dozen U.S. states and the District of Columbia have legalized the use of marijuana to help patients with chronic illnesses, including cancer, AIDS and multiple sclerosis.

The survey found that 34 percent of the medical marijuana businesses said regulatory compliance — not customer demand or securing supply — was the top challenge they faced. Another 24 percent said financing was the industry’s most pressing need.

But because the possession and distribution of marijuana remain illegal under federal law, the report’s authors point out that the market is rife with risk, including “the ever-present risk of being shut down or experiencing a property seizure without notice.”

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  1. Barbyr March 24 at 12:24 pm

    Finally, we can see the light at the end of the long tunnel called the war on drugs. At least the marijuana part of it. Legalize it once and for all and get the criminals out of the game. Instant tax bonanza.

  2. chigirl March 24 at 12:37 pm

    Legalization really needs to happen. Increase tax revenues for the feds and the states and calm everyone down. A win-win for everyone. No smoking until the age of 18 or whatever the legal drinkng age is each state. Perfect.

  3. Jack Herer March 24 at 1:12 pm

    In a society that is so concerned with the goings on of Charlie Sheen, I find it perfectly logical that medical pot is still illegal in most states while alcohol continues along its unabated path of destruction and death. The hypocrasy between pot and alcohol will stop as soon as today’s elected leaders see the financial windfall, not the medical benefit to those in need. How sad is this folks?? Sad, but true. I’ll be sure to discuss this and similar issues with all my raging alcohol friends at happy hour tonight, and possibly at the pub crawl this Saturday.

  4. tom March 24 at 2:00 pm

    CBIS and MJNA = alternative investment

  5. chong March 24 at 2:02 pm

    yeah man. like, they should legalize it

  6. al March 24 at 4:01 pm

    It’s sad to see an illeagal market yearning to pay taxes… as the goverment is cutting every possible tax payer benefit from state budgets and they choose to ignore the voice of the people

  7. Mik April 4 at 10:38 a.m.

    Kif should absolutely be legalized in the United States, but with a federal government and Drug Enforcement Agency busting now perfectly legal “shops” in California, plus evidence showing former presidents & vice-presidents (while they were in office) and even their wives having their pictures taken at fundraising events makes one ponder the thought that maybe if the drug lords, with their worldwide influence and their vast contributions to presidential campaigns (@ least here in the U.S.), seems to be all it takes to get the federal gov’t on their side to keep their little $18B venture illegal and thriving.

    That, along with the political risk (depending on which part of the country you live), seems to be enough to keep the state and the federal government at odds with each other,.. and as long as it stays that way, progress on the legalization of medical marijuana for each state may be much slower than some are anticipating.