Blog : 50 Billion Reasons to Like Marijuana; Florida Medical Game-Changer

by Ed Zwirn on November 3rd, 2014

As promised, here are two more developments to keep in mind when assessing the budding marijuana industry:

Marijuana Game Changer Number 2: Okay, so most MJ stocks may not be worth the hemp they're printed on, but there is no doubt that these companies are chasing after a huge market, with enviable demographics. The latest numbers from Colorado show recreational and medical adult use at nearly $70 million for August. Significantly, recreational use (which gets hit with higher sales tax) at $34.1 million, edged out the medical figure ($33.4 million) for the first time.

In an earlier use of this investment blog, I used the relatively unscientific method of comparing the state of Colorado's then-$610 million estimate of annual MJ revenues to extrapolate a $37 billion annual expenditure on cannabis by Americans for all reasons, assuming that Coloradans get stoned at the same rate as their countrymen. Of course, nobody really has any idea how much Americans spend each year on weed, but this figure came in close to the then-prevalent estimates, which were in the $35 billion to $45 billion range.

Here are two updates: 1) The latest Colorado MJ sales figures, assuming they hold up, would put the state's sales figures to about $810 million annually, and the national extrapolation over $50 billion. Total Colorado adult demand has been most recently pegged at 121.4 million metric tons. 2) The Rocky Mountain High state also has a lower prevalence of overall marijuana use than the U.S. as a whole (12% versus 16%) although there are more hard-core stoners in Colorado.

Enviable demographics: Those of us old enough may recall the once-ubiquitous "Pepsi Generation" ads that flooded TV. Market to youth and you get consumers who will buy into your generational dream for decades to come. Cigarette makers have long employed this tactic, as per Joe Camel. I probably deserve to get in trouble for saying this, but the MJ industry can tut-tut all it wants about juvenile use, but (unless high school has changed drastically since I last attended) there is no need on their part spend money to make MJ "cool" among youth. It already is.

2) The Florida election initiative and why it will prove a game changer:

"You know, it's a funny thing. Every one of the bastards that are out there for legalizing marijuana is Jewish. What the Christ is the matter with the Jews, Bob? What is the matter with them? I suppose it is because most of them are psychiatrists," President Richard Nixon told chief of staff Bob Haldeman in 1972, according to a Watergate tape transcript excerpt used by Thomas M. Cooley Law School's Lauren Nicole Frieder to introduce her study of the Florida medical marijuana initiative to face voters on Nov. 4.

Florida is one of the seven states, one U.S. territory and at least 17 cities and counties throughout the country to face a marijuana referendum Tuesday. Oregon is widely expected to approve recreational adult use on election day, and there are other contests worth watching as well. But, as Frieder's paper (Florida's Medical Marijuana Act's Language Is Ambiguous; Maybe the Drafters Were High When They Wrote It?) points out, the Florida proposal is broad enough to drive a MJ harvester through, specifically allowing the medical use of marijuana for individuals with debilitating diseases as determined by a licensed Florida physician." I wonder if writers' block would qualify as debilitating.

The bad news: Since the ballot measure is considered a state constitutional amendment, it requires a 60% yes vote to pass muster. And while polls are split on whether this is achievable, any respectable showing would have proponents back campaigning next year, at least for a less permissive measure.

One thing is clear about Florida: The stereotypes have come home to roost. Drug policy has often been aimed at particular ethnic and/or racial groups, like the Chinese workers who smoked opium when it was outlawed or the Black Jazz musicians who smoked weed when the feds began to rein in on the product in the late 1930's.

President Nixon was right: There were a great many Jewish people (along with many others) who had supported MJ legalization at the point when he tried to make war against its use in 1972. Many of these self-identified as hippies, another reason making MJ an anathema to loyal Americans. The hippies, at least those luck enough to have survived, have grown much older since then and many of these have moved (along with their aches and pains) to Florida.

If by some miracle the Florida ballot initiative gets past the 60% post you are likely to see sales figures that make the Colorado results look like a sideshow. This will also impact the supply-and-demand for the product throughout the east coast, particularly in neighborhoods like mine, where many prescription-savvy seniors (snowbirds) migrate with the seasons. It would also add another dimension to the national MJ debate: It is one thing to demonize hippies or Jazz musicians or even Snoop Doggy Dog, but going after seniors could prove counterproductive. MJ, in short, offers that rare product market that can lure both seniors and the Pepsi generation, and that is saying something in-and-of itself.