Oregon Heat Map:
Score 1 (least attractive) to 10 (most attractive)
Regulatory environment: 7
Current level of saturation: 4
Size of current market: 6
State´s willingness to accept new investors: 8
Legal and political respect of investments: 6
Possibilities for growth: 6
Current legal conditions – medical / recreational: 10
Average score: 6.7
- Oregon´s legal marijuana market is expected to more than triple in size between 2015 and 2019, to reach a total of $800 million in sales for 2019. Given the dramatic growth forecasted, this figure is set to match or surpass those projected for the more developed cannabis markets of Colorado and Washington, whose marijuana industries are expected to rake in approximately $1 billion and $770 million, respectively, in 2019.
- Marijuana use is very prevalent in Oregon. At the time of this writing, less than 3% of Oregonians over the age of 21 hold medical marijuana cards, while national survey (NSDUH) data indicates that 25% are marijuana consumers – a higher rate of cannabis consumption among adults than nearly any other state in the country. This means there is a vast – and until recently, largely untapped – recreational consumer base in the state.
- Survey results also indicate that those Oregonians who do use marijuana, use more frequently than their counterparts in other states.
- Over 50% of Oregon residents surveyed by Brightfield Group indicated they use marijuana on a daily basis, versus 34% in California and Washington, and a mere 26% in Michigan.
- Only 6% of Oregon respondents use less than once per month, versus nearly 30% in California and 27% in Michigan.
Oregon residents´ regular cannabis use is a great sign for investors targeting Oregon, as heavy users drive the vast majority of volume in the marijuana market. Given the large quantity of marijuana users currently purchasing on the black market, sales figures should continue to rise more rapidly in the state than they have in other new recreational markets.
While local governments in Oregon are permitted to enact bans on commercial cannabis activity, current and potential cannabusinesses in various areas of the state remain somewhat protected because Oregon is presently only allowing cities and counties to enact bans if 55% or more of local voters opposed Measure 91 (which legalized recreational cannabis sales). The window for local governments to enact bans will close in December 2015. While Oregon as a whole is perceived as very liberal, its liberal voters and residents - including the champions of the marijuana movement - are mostly restricted to the major population centers. A vast expanse of the state is made up of rural, conservative counties with less concentrated populations and less propensity to accept marijuana. For this reason, retail consumption and production will most likely be consolidated in large liberal areas more friendly towards cannabis, which may lead to oversaturation in these regions and sparsity in rural, conservative areas.
Some local governments in more conservative areas have found a way around this hurdle by opting to enact regulations in lieu of bans. For example, in Grants Pass, a town of roughly 35,000 in the southern part of Oregon, the city council recently approved a new ordinance requiring that all marijuana be grown indoors.
It is highly advised, therefore, that those interested in investing or expanding in Oregon markets remain keenly aware of local politics and historical attitudes toward marijuana, as these may prohibit, curtail or facilitate business operations in certain regions.
- Although medical dispensaries were permitted to begin selling recreational marijuana in October 2015 by meeting a few minor requirements, the first new recreational shops are not expected to open until the second half of 2016.
- 280 medical marijuana dispensaries out of 315 listed with the Oregon Health Authority applied to begin selling recreational cannabis.
- There will not be a cap on the number of business licenses to be issued in Oregon, though licensing more at this point would only add to a glut that has already caused three storefronts to shut their doors, per the AP. This has not stopped or slowed the influx of recreational license applications, which has in fact continued to accelerate.
- As the recreational market expands beyond flower to edibles, concentrates and tinctures, Oregon will offer a lucrative opportunity for manufacturers (assuming regulations are not so restrictive as to strange profit margins). Oregon has few major brands of edibles, with no single company holding more than 10% of sales in and no presence of major multi-state brands since the exit of Cheeba Chews earlier in the year. Concentrates is slightly more consolidated, with Golden XTRX and the CO2 company together holding 20% of the market, but is still made up of a handful of mid-sized players and the vast majority of sales coming from small independent companies or unbranded products.
Cannabusinesses looking to enter the dispensary space should be highly aware of the competition they will face in the market. Investors would be wise to create a sound and strategic business plan before diving into Oregon´s recreational marijuana industry, where competition will be fierce – especially during the first few quarters of sales when hundreds of companies with competing pricing will still be crowding the market and taking up market shares.
Companies that survive the first few crucial years should be set to benefit greatly from this small but steadily growing market.
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