Marijuana Business Magazine

S ince launching our first Marijuana Business Factbook in 2013, we’ve been making retail sales estimates annually for every state with a cannabis industry and the nation as a whole. It’s a tough task in general given that most states don’t track sales figures or even release tax data. But the biggest headache is trying to figure out what’s going on in California. The state clearly is home to the larg- est medical marijuana market in the country, given its sheer size (a popula- tion of roughly 40 million), the relative ease of getting a doctor’s recommenda- tion to use MMJ and the unregulated nature of its cannabis industry. Beyond that, the situation is murky. No one really knows if California dis- pensaries generated, say, $1 billion last year …or twice that amount. Our 2016 estimate for sales via storefront dispen- saries in the most recent Factbook is on the low end of that scale at $1 billion to $1.3 billion. Other estimates put the market at closer to $2 billion, though some lump in sales via pseudo-legal, delivery-only operations that populate parts of the state. It’s difficult to make accurate estimates about retails sales for several reasons: • California currently doesn’t have statewide regulations on the industry or license plant-touching businesses, although it will soon. Without a state agency tracking the industry, there’s essentially no official data on sales or other aspects of the sector that can be used to make estimates. • No one knows how many dispensa- ries exist, which is another reper- cussion of not having a statewide regulatory and licensing program. I’ve talked with many cannabis professionals on the ground over the past year, including those who focus on selling directly to dispensaries across the state and therefore should have a good idea of the landscape. Their estimates range from less than 1,000 to over 4,000. In some cities, most notably Los Angeles, there are scores of fly-by-night dispensaries sprouting up all the time in viola- tion of local regulations and laws. If you know how many dispensaries are in a market, it’s much easier to make realistic estimates of overall sales using benchmark data. • State sales tax collections can offer a solid picture of industry activity. California collects sales taxes on marijuana transactions, but many dispensaries don’t pay it – or under- report their revenues – because enforcement is weak amid a lack of statewide regulations.The Califor- nia-based firm HdL Companies tracks the amount of reported sales tax collections tied to dispensaries, but there’s no reliable information on what portion of these businesses fudge their numbers so they owe less or simply don’t pay anything. As a result, sales are higher than the sales tax data indicates – but how much is anyone’s guess. The Multibillion Dollar Question Why it’s so difficult to estimate the size of California’s cannabis market Chris Walsh 92 • Marijuana Business Magazine • November / December 2017 No one knows how many dispensaries exist, which is another repercussion of not having a statewide regulatory and licensing program. C alifornia D reamin' FROM THE EDITOR'S DESK