“I’m in the weed-growing business. And cousin, business is a ’boomin!”

                                                                                           – Brad Pitt in ‘Inglourious Basterds’

California has been a home to black market marijuana industry for decades now. The state, one of the highest producers of Cannabis, according to estimates, produces just enough to supply 60-70% of the overall demand (Both legal and illegal) in the US.

California was the first state to legalize marijuana for medical purposes in 1996. On January 1, 2018, California joined Alaska, Nevada, Colorado, Washington, and Oregon as the sixth state to introduce the sale of recreational marijuana.

Although it is not the first state to legalize recreational marijuana, it is the most prominent. This is because a number of states, as well as some countries like Uruguay, Australia, and Canada, are expected to decriminalize the nationwide use of recreational marijuana in 2018.  Yet none of them are as influential or big as California.

Being the sixth largest economy in the world, California has always been the ground zero for new technological innovations, and it has been a trendsetter for very long. Not just in the US, but the technology trends across the world swings around California. You would agree that global thinking tends to behave magnetically and being a trendsetter, California is a hefty magnet.

In other words, a successful cannabis legalization campaign in California could provide the necessary momentum for a serious discussion on national legalization. At the same time, a failed one could fuel the powerful forces standing in the way of it, as well as impede international progress in cannabis legalization.

Stats Speak: The Impact of Legalization of Cannabis on Californian Economy

The ‘Golden State’ is expected to make up to 40 percent (around $12 billion) of its economy from the weed industry. These figures are very intriguing for any state, but this becomes even more alluring when we are talking about the wealthiest sub-national entity in the world.

It has been estimated that the legal weed business will reach $70 billion annually by 2021, provided the federal government let the legal cannabis industry flourish by loosening up the restrictions on banking and tax code. Since both state and local governments are imposing taxes on cannabis, the total figure coming up is significantly high.

Various experts and reports believe that this tax system will be revised which could lead to a significant fall in taxes on cannabis. Green Market Report predicts that –

“the tax system will be rewritten as local businesses close and get replaced with well-funded companies from outside of California. If the black market continues to stay entrenched, state and local taxing authorities will want to entice these operators to enter the regulated market and they will need to lower taxes in order to do so. Colorado did a similar reboot of its taxation system and while it was slightly disruptive for businesses, it didn’t affect the consumer-facing side of the market.”

However, according to Green wave Advisors, “Legal weed business will reach $18 billion in sales by 2021 even if Trump’s administration continues to block legalization efforts”.

Looks promising, huh! It is. After multiple layers of taxes summing up to 45%, if cannabis business is expected to reach $18 billion, it’s indeed promising.

Legalization of recreational pot in various states has attracted many famous names into this business over time and California has added fuel to the fire.  Former boxing star and youngest world heavyweight champion, Mike Tyson has realized this opportunity and has jumped into the race to become the undisputed champion of burgeoning pot industry as well.

“The venture, Tyson Ranch, in California City (110 miles Northeast of Los Angeles), is a 40-acre plot of land dedicated to the cultivation of marijuana, a resource for those interested in getting firsthand experience with how the grow process works, and also a holistic place for men and women who have suffered from psychological ailments during military service.

Additionally, Tyson hopes to build luxury cabins for those who just want a secluded getaway outside of major cities like LA and San Francisco.”

Additionally, many beer and spirit companies like Boston Beer Co., brewer of Samuel Adams, and Brown-Forman Corp., distiller of Jack Daniels, have a common fear that their consumers might cut down on drinking for marijuana has become available for adult use now.

“Marijuana is fast becoming cool and glamorous.” – Cheryl Shuman

With decriminalization of cannabis in California, the torch has been lighted, but this is a marathon and only the ones who will run longer are going to win. It’s evident that everybody is keen to exploit this space to gain an early mover’s advantage.

Impact of ‘green rush’ in California is not just limited to the US but it has embarked the pot industry in Canada as well. According to Fortune Magazine –

“Canada-based Canopy Growth rose 9%, Vancouver-based Aurora jumped 24%, U.K.-based GW Pharma popped 2%, Ontario-based Aphria grew 8%, Canadian firm MedReleaf climbed 27%, Toronto-based Cronos Group advanced 5%, and while another Canadian company Canntrust increased 5%.”

This clearly signifies the impact legalization of marijuana in California has made all across the globe. It is high time for companies in the domain to jump into the race and leverage this opportunity.

After having access to all this information, you would be curious to know the areas which may be ripe to pursue (market study) in whole marijuana domain in California. For example:

• What are the opportunities in marijuana cultivation across California?
• What impact will legalization of recreational marijuana make on medical marijuana sales?
• What are the biggest openings in food and beverages sector?
• Which big players are trying to capture this market by M&A activity?
• Who are the pre-existing players which have a good hold over the market?

All these questions are the barriers to entry into this fast-growing business market. We have answers to all these, we just need to know what are the specific areas in the domain that piques your interest. If you are seeking answers to any of the above questions, or anything else related to Marijuana Industry, we’re just a click away-

Conclusion

As we say at GreyB –

“Businesses nowadays are driven by innovation and the ones who don’t innovate don’t grow.”

Cannabis is the trend of the times and those who do not develop requisite competencies are bound to lose relevance.

The winners and losers are yet to be determined but the game is on!

Authored by: Gaurav Sharma, Associate, IP Solutions.