With a Gross Domestic Product of $2.7 trillion, the California economy surpasses all sovereign countries in the world with the exception of the United States, China, Japan and Germany. Oh, and Californians like cannabis.
As China and Japan stand years away from any type of federal cannabis reform and Germany tests out a small, recently-introduced medical marijuana program, California has managed to seize its place as the largest cannabis market in the world.
A colossal economy with a legalized market with a strong appetite for marijuana products has led investors and entrepreneurs to stargaze at the immense possibilities this monumental market has to offer.
The Largest Cannabis Market in the World
Although off to a slow start, the California legal cannabis market is set to far surpass its own record-breaking numbers.
The state was the first to approve medical marijuana legislation in 1996, and by 2017, a massive $3 billion annual market was forged.
Adult-use cannabis was legalized in 2016 with the passage of Proposition 64. The new legislation –- which went live in 2018 -- brought an overwhelming wave of tight regulation and strong taxation that struck hard at the medical marijuana businesses of the time. Most of these companies were enjoying an almost utopical landscape of loose regulation and simple taxation.
Then everything changed.
As new measures were established, many businesses were forced to shut down, and those who remained had to boost prices by up to 77%. As a result, many consumers went back to purchasing black market products, causing the legal spending in the state to drop down to $2.5 billion in 2018. Still a massive market, but the legal
However, most experts agree that this is just a temporary set back. A joint report by BDS Analytics and Arcview Market Research puts the legal California cannabis market at 7.2 billion by 2024. This means that cannabis spending in the Golden State is set to become 40% larger than the entire cannabis market for Canada, and 253% higher than Colorado, which ranks as the second-highest cannabis grossing state in the country.
And it’s not the “traditional” cannabis consumers that will be responsible for growth in the legal cannabis market over the next five years. As stigmas fall and legalization marches on, the canna-curious of all ages will be entering the legal market at never-before-seen rates. And they will be interested in the wide array of new THC-based products – from topicals and balms to edibles and oils. The potential is phenomenal.
A Hub for Deep-Rooted Cannabis Culture
California’s particular climatic conditions make it one of the country’s top locations for outdoor cannabis cultivation. It’s tremendous size -- third in the country, only after Alaska and Texas -- allowed illegal growers to grow in remote areas, sustaining a very profitable black market that started in the 1960s and survived heavy eradication efforts in the 1970s and 1980s.
From the 1960s onwards, the Golden State became an international hub for cannabis culture. As the culture expanded from coastal cities to rural areas, the state’s population harvested a set of social and cultural traits that make it the ideal location to provide cannabis products.
A mainly libertarian attitude towards life and a denial of traditional conservative values amongst the average population has led researchers from the Substance Abuse and Mental Health Services Administration to find that in 2017, approximately 5.3 million Californians over the age of 18 consumed cannabis in the past year.
Although other states have reported a higher rate of consumption per capita, the sheer size of California’s market secures it a place at the top of the list. In 2019, the state had a population of 40.2 million inhabitants, 30.1 million of which are potential consumers over the age of 21.
Rigid regulation, strong taxation and a competitive black market have caused California’s cannabis sales climb slower than expected after legalization. In fact, other legal states like Colorado, Oregon and Washington have grown at much faster rates on a per capita basis.
However, the immense size of its consumer base and the potential prospect for interstate and international exports have positioned the Golden State as a key region in the list of savvy entrepreneurs and ambitious companies all over the globe.
California will get through its growing pains. And the companies and brands that enter the market the right way will be poised to flourish in a massive market that’s only going up.
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