Legal Retail Cannabis Survey Results

By admin_45 in Blog

We have been tracking the growth of the legal recreational marijuana market since stores first opened in Colorado in January 2014. Now, retail cannabis is legal in nine states plus D.C., and therefore available to roughly one in five Americans. Even though it is not yet federally legal, we stay on top of the industry as it increasingly presents investment opportunities and potentially impacts publicly held companies and sectors.

In order to gauge investment sentiment, we conducted a survey last week with 12 randomized questions from Monday, March 5th to Friday March 9th, and received 329 responses. (A special thanks to all of you who took it!) We first want to give a sense of our respondents’ background and opinions when it comes to recreational marijuana. Here is the highlight reel:

• Location: The majority of respondents do not live in a state where recreational marijuana use is legal (78%).

• Dispensary visits: Almost one-third (30%) of all respondents have however visited a legal marijuana dispensary.

• Support for national legalization: Most participants are in favor of legalizing marijuana (67%) compared to those who aren’t (23%) or those who are unsure/no opinion (10%). The majority of respondents aged 55 and older answered yes (61%), although a higher percentage of that cohort said no (30%) with the balance answering unsure. Respondents aged 54 and younger favor legalization more (72%), with just 15% answering no.[su_spacer]The majority of those who live in a state where recreational marijuana use is legal also favored Federal legalization (66%), while 26% do not and 8% were unsure or had no opinion. We take this as a vote of confidence that state legalization has been successful enough for them to support it on a national scale.

• Likelihood of national legalization: Respondents were mostly split on if they think the US will legalize recreational marijuana use at the Federal level, but leaned towards no (51%). Those aged 55+ had a slightly higher No opinion (54%), while those 54 and younger slightly favored yes (52%).[su_spacer]The average year those who think recreational marijuana will become federally legal is 2023, with a modal observation of 2025. Some people also said they think it will happen when Democrats take back control in DC.

• Voting preferences: Most participants (52%) said they would be more inclined to vote for a political candidate if their views on legalizing recreational marijuana use matched their own perspective. Even still, 39% were indifferent and the balance said no (9%).

• Banking availability: The vast majority of respondents (77%) think the Federal government should permit financial institutions to offer banking services to marijuana-related businesses in states where it is legal. The rest answered no (12%) or unsure/don’t have an opinion (11%).

Given that around half of our participants think retail cannabis will be federally legal within the next 5 years, we also asked about which types of companies would benefit or suffer should that happen. Here is a breakdown:

• Positive economic impact (each respondent chose two options): pharmaceuticals (e.g. develop products using cannabinoids for medical purposes) received the most votes (50%) in terms of benefiting economically from federal legalization. Ancillary businesses (e.g. consulting, seed-to-sale tracking systems, security equipment, etc.) came in second (31%), followed by materials (agricultural products like fertilizers, for example) with 30%. [su_spacer]The balance included: financial services, 25% (offer financial support to marijuana-related businesses); real estate, 21% (more demand for retail store fronts, or grow warehouses/facilities); technology, 17% (e.g. integrating supply chains, offering consumer apps); and other (14%). Popular responses for “other” included tobacco companies (i.e. sell their own marijuana products, such as joints), regulators, food companies, fast food restaurants, and lawyers/compliance. When comparing overall results to those living in a state where recreational marijuana is legal, the latter favored pharmaceuticals (58% vs. 50% overall) and technology (22% vs. 17%) more. They also chose materials (21% vs 30% overall) and financial services (22% vs 25%) slightly less.

• Negative economic impact: The plurality of respondents (35%) think federal legalization will not have a discernible impact on public companies. Alcohol came in second (25%) due to the potential substitution effect, followed by pharmaceuticals (16%), tobacco (12%), and retail (7%) for the same reason. Those who live in states where recreational marijuana is legal believe alcohol will be hurt slightly more (28%). Other responses included service industries like construction (shortage of workers), law enforcement and insurance.

• Investment interest: Most of our respondents were either interested in investing in marijuana companies once it is federally legal (34%) or are already invested (28%). A little over a fifth (23%) are not interested, while 5% are not specifically because it is federally illegal and 10% are not specifically because they don’t want to support the industry.[su_spacer]Those who are invested named everything from marijuana growers/distributors, US/Canadian marijuana ETFs, and Canadian medical marijuana producers to pharma companies leveraging cannabinoids’ therapeutic properties, cannabis consulting companies, and fertilizer firms.

In light of all these results, here are our key three takeaways:

#1 Recreational marijuana legalization has broad support, and most respondents believe it should be treated like any other business with access to banking services. The industry is now too large to ignore as more states legalize the drug recreationally either through polls or state legislatures as in the case of Vermont this year. In an era of rising federal and state deficits, this has proven to be a new way to raise tax revenue.

#2 There is significant investment interest right now, and those waiting for marijuana to become federally legal could fall behind the curve as many are already starting to put money to work in the industry. This is why we started covering the marijuana market in our work early on as developments and growth in the space continue to progress rapidly. Not to mention, this summer Canada will likely be the second country (after Uruguay) to legalize recreational marijuana, where there are many public marijuana companies that respondents to our survey listed as some of their investments.

If investors are still too nervous that it is not legal here in the US, there are some safer options, such as fertilizer companies or pharma companies that use the part of the plant that does not produce a high (i.e. cannabinoids). Additionally, tech is an underappreciated play that people who live in states where retail cannabis is already legal understand by putting it near the top of the list of companies set to benefit.

#3 Our biggest surprise from the survey was that people do not think legalizing recreational marijuana nationally will have an effect on public companies. Perhaps this is because most of our respondents do not live in a state where it is already legal so they have not seen the impact. But given that industry estimates exceed $20 billion for the US marijuana market by 2021 (ArcView), that’s hard to imagine. Since people who live in states where it is legal named alcohol as the largest market to suffer, we’d look for weakness there first.