ArcView Market Research and BDS Analytics recent report showed a market revenue of $5.9 billion for medical cannabis and $2.6 billion for recreational cannabis. 2018 projections show that recreational cannabis use will reach $6.7 billion, with medical cannabis coming in at $4.3 billion.
But can the two coexist? BDS Analytics managing director Tom Adams says that as consumers gain more access to recreational cannabis, the medical market will experience a steep drop.
In California, the medical market had $3 billion in revenue in 2017; next year, that revenue is expected to fall under $300 million—all because recreational cannabis became legal January 1. It’s simply easier to buy recreational cannabis. Californians don’t have to deal with all the red tape of buying medical cannabis when they can just go buy their own. Additionally, medical cannabis sales see great tax breaks, so many stores have stopped selling medical marijuana because of it. They have much higher returns on recreational cannabis sales.
Is the medical marijuana market doomed?
ArcView and BDS point out that their projections don’t necessarily mean that the medical cannabis market is doomed. Looking forward to 2022, recreational cannabis is expected to bring in nearly $16 billion with medical cannabis use bringing in nearly $8 billion. In other words, there’s enough pie for everyone.
Considering that these projections are based on the majority of states having legalized for the medical market, $8 billion is not particularly a strong figure, but $8 billion is still $8 billion. It’s certainly nothing to at which to turn up one's nose.
Industry experts are not in agreement regarding what will happen to the medical cannabis industry. New Frontier Data also projects the recreational cannabis industry to surpass medical cannabis by 2025, but the CEO of New Frontier Data, Giadha Aguirre de Carcer, says this does not necessarily mean a death knell for the medical cannabis market. She says that talk of medical cannabis’ demise are unfounded and misguided rumors not based on facts, stating that the international medical market cannot be counted out because it has “overshadowed investment level in adult-use recreational markets.”
New Frontier Data is also predicting double-digit compound annual growth rate for both markets (medical at 11 percent, and recreational at 18 percent). de Carcer says that the recreational market is very new and will settle in and stabilize over time.
Over that same period, the same variables that have driven the medical market will continue to do so—variables like increased CBD research and quality standards for medical cannabis. This demand from consumers is very likely to create a resurgence in medical market growth which will easily co-exist alongside a stable recreational market.
The two markets may merge into one
Other industry insiders like Canna Advisors in Boulder, Colorado, don’t share New Frontier’s optimistic view. Founding partner Diane Czarkowski suspects that the two markets will inevitably merge into one.
Czarkowski says that the design of the medical system as a condition-based one means that there will always be a group of patients who are excluded from using medical cannabis. She also says that most cannabis businesses are in both markets, and over the long run, it will be too costly for these businesses to maintain separate business structures for growing, cultivation, processing and dispensary.
Certainly, bigger companies are becoming involved. Constellation Brand’s huge $4 billion investment into Canopy Growth is a perfect example. When big companies are involved in a new industry, it leads to an increase in lobbying dollars—for cannabis, that means lobbying on behalf of federal legalization, which many industry experts say is inevitable in the U.S. Once that happens, some wonder whether these big companies will still be interested in targeting the medical market.
The flip side of that argument is that if federal law changes, so will intellectual property regarding patents. Some industry insiders predict that the medical cannabis market will be Big Pharma’s next big thing because of it; they’ll leave it to other big businesses to focus on the recreational cannabis market.
Local communities will make the difference
Despite national and global trends, the footprint of cannabis in a particular area is mostly dependent on the local community as well. In communities that have low support for recreational cannabis, medical dispensaries tend to flourish because they are considered more legitimate and of higher reputation in the community. In communities that support recreational use, medical marijuana dispensaries are much more likely to turn into recreational dispensaries.
Recreational and medical dispensaries are very different beasts with very different focus. With federal legalization looming in the near-term horizon, recreational products will play a lasting role. However, there will also always be a need for medical recommendations for cannabis for pain and other conditions, and medical dispensaries fulfill that role like no other business can. In an ideal world, communities should support both medical and recreational cannabis dispensaries. For the next few years at least, it seems the U.S. market is big enough for both of them.