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California’s Constant, but Limited, Marijuana Business Opportunities

by Ella Young August 21, 2019

California Recreational Marijuana Overview

The Adult Use of Marijuana Act, otherwise known as Proposition 64, appeared on California’s November 2016 ballot. The initiative passed with 57% voter approval, legalizing marijuana for people 21 years of age and older. Adults aged 21+ are allowed to possess up to an ounce of marijuana, and grow up to 6 plants at home for personal use.shutterstock_256362514

Prop 64 established a recreational marijuana market of state-licensed businesses, and included strict anti- monopoly provisions to protect small farmers, so California’s marijuana industry isn’t overrun by mega-corporations.

In June 2017, California integrated the Medical Cannabis Regulation and Safety Act with the Adult Use of Marijuana Act to create the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Under MAUCRSA, a single regulatory system governs the medical and adult use cannabis industry in California.

California has an all-encompassing regulating website for the state’s marijuana programs, known as the California Cannabis Portal.

 

California’s Recreational Marijuana Business Opportunities Remain Constant, but Extremely Limited

Last week, California was in the news as sales have greatly surpassed recent projections. Cannabis sales are expected to reach nearly $3.1 billion this year, according to a report released August 15, 2019. There are also new predictions that include sales to be on track to hit $7.2 billion in 2024.

With a 23% growth rate there is no better time to tap into this industry. “Any market in the world would be ecstatic about a 23% growth rate,” Tom Adams, managing director and principle analyst for BDS Analytics stated. “That is fabulous for any industry to have that kind of growth.’’

In 2018, cannabis tax revenues totaled to over $345 million, with $182 million coming from cannabis-specific excise taxes. Out of the rest of $345 million, $36 million from various cultivation taxes.

With a lower per capita consumption rate than most other adult-use markets, California’s market potential is strictly due to the state’s large population, which is approximately 30 million adults over the age of 21 in 2019.

BDS Analytics Consumer Insights research also found that the average consumer in California is around 44-years-old. Younger generations consume at higher rates, as 39% of Gen Z and millennials and 41% of Gen X reporting consumption in the past six months. Whereas just 20% of Baby Boomers and older generations reported these levels of consumption.

However, California has a relatively low number of retailers for its population size, with only one licensed retailer for every 35,147 adults over the age of 21. Whereas, Oregon has one dispensary for every 5,567 adults over 21.

This may be due to the majority of local municipalities in California opting out of allowing recreational marijuana businesses within their borders. According to data from

California Marijuana State Application Guide

 CannaRegs, only 161 of California’s 482 municipalities and 24 of the 58 counties have opted to allow commercial cannabis activity of any sort. Additionally, many of these municipalities only allow certain types of marijuana businesses. For example, a county may allow retail stores, but not cultivation or manufacturing facilities.

If you’re looking to start a recreational marijuana business in California, your first hurdle will be selecting a local municipality that allows for the type of marijuana business you’d like to establish, and ensuring they have a current or upcoming application process to become licensed for it.

For complete information and details on how to apply for a marijuana business license in California, download our California Application Guide & Checklist. The guide provides step-by-step instructions on over 100 action items to complete prior to submitting your application for a marijuana business license. You’ll be able to learn about business application topics from real estate and financial planning to staffing and team building activities. 

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