|Medical or Recreational
|Accepts other States Cards
|Medical & Recreational
|$100 ($25 application fee + $75 annual registration fee)
Medical marijuana was legalized via the Nevada Medical Marijuana Act, also known as Question 9, which was an initiated constitutional amendment on the November 7, 2000 election ballot in Nevada. It was approved by 65.4% of voters.
Recreational marijuana was legalized via voter approval of Question 2, the Nevada Marijuana Legalization Initiative, by 54.47% of voters in November 2016.
To become a medical cannabis patient in Nevada, applicants must reside in the state and be diagnosed by a licensed, in-state physician with a chronic or debilitating condition. These conditions include: HIV/AIDS, cancer, Glaucoma, Cachexia, persistent muscle spasms (including Multiple Sclerosis), seizures (including epilepsy), Post-traumatic stress disorder (PTSD), severe nausea or chronic pain. A person under the age of 18 may become a medical marijuana patient provided they have permission from their parent or guardian.
A state-issued Registry Identification Card is required to legally possess medical marijuana. If a physician determines a patient suffers from one of the above conditions, the patient may apply to the Nevada State Health Division (NSHD) to register with the program. With NSHD approval and payment of the $100 fee ($25 application and $75 registration/renewal), the Nevada Department of Motor Vehicles will issue the patient a Registry Identification Card good for one year.
Out-of-state residents may obtain medical marijuana in Nevada with a valid, unexpired medical marijuana card from their home state.
Medical marijuana patients can legally buy and possess up to 2.5 ounces of usable marijuana in any one 14-day period as well as possess up to 12 marijuana plants at any one time (regardless of size/maturity).
Patients (or their registered designated caregivers) may sell unused marijuana to dispensaries one time. Otherwise, patients (or caregivers) may donate unused cannabis to dispensaries without receiving compensation.
Under the recreational law, anyone over the age of 21 is legally permitted to purchase and possess up to one ounce or less of marijuana or one-eight of an ounce or less of concentrated marijuana.
The Nevada Division of Public and Behavioral Health (under the Department of Health and Human Services) regulates the industry. In order for a proposed medical marijuana establishment to receive registration certification it must be in compliance with local government licensing regulations and zoning codes.
As of August 2016, approximately 37 medical dispensaries were operational statewide. There may be a total of up to 66 licensed and regulated dispensaries in the state, 55 of which have already been registered. The number of registration certificates granted per county is based on population size. Clark County can have up to 40 dispensaries, while Washoe County can only have 10. Carson City can have two, and each of the other 14 counties can have one.
The Nevada State Health Division grants licenses to successful applicants who pass a background check and pay the $30,000 registration certificate fee, plus an annual renewal fee of $5,000.
Dispensaries may be for-profit or non-profit.
Marijuana establishments cannot be within 1,000 feet of a public or private school (pre-K through 12th grade). They also cannot be within 300 feet of a day care, public park, playground, public pool, religious building, or recreation facility for kids or teens.
Sites may be vertically integrated. Applicants must apply for each license (cultivation, retail, etc.) individually and pay the corresponding fees for each. Testing labs, however, must be independent and cannot be owned by an entity that also owns one of the other facilities.
Nevada imposes a 2% excise tax on each wholesale or retail sale of medical marijuana and marijuana products. This tax applies regardless of whether the purchaser is a medical marijuana establishment or a patient cardholder, and is in addition to any applicable state, local and use taxes. With the passage of Question 2 in November 2016, the sale of recreational marijuana will be subject to a 15% excise tax.
Medical Marijuana Dispensary Fees
Registration Certificate Fee...............................................................................$30,000.00
Annual Renewal Fee............................................................................................$5,000.00
Medical Marijuana Cultivation Facility Fees
Registration Certificate Fee.................................................................................$3,000.00
Annual Renewal Fee............................................................................................$1,000.00
Facility for the production of Edibles and Infused products Fees
Registration Certificate Fee.................................................................................$3,000.00
Annual Renewal Fee............................................................................................$1,000.00
Medical Marijuana Independent Testing Lab Fees
Registration Certificate Fee.................................................................................$5,000.00
Annual Renewal Fee............................................................................................$3,000.00
*There is also a one-time nonrefundable fee of $5,000 plus processing costs.
|Total Medical Marijuana Sales
|32.19% ('16-'20 CAGR)
|Total Recreational Marijuana Sales
|113.41% ('18-'20 CAGR)
Nevada’s medical market has seen significant growth in 2016, and is expected to continue growing as more dispensaries continue to open and establish themselves. Fueling market growth is the increasing presence of edibles and concentrates products: most of the 300 marijuana business licenses issued to Nevada have gone to cultivators and processors, meaning the market will likely exhibit larger shares of branded edibles and concentrates products, mirroring trends in neighboring states such as Arizona. Overall, medical sales are on track to surpass $105 million in 2016 year, reaching $322 million in 2020.
The recreational market is expected to come online in 2018, generating an estimated $121 million in its first year of sales. Nevada’s prominent tourist industry is expected to help fuel the recreational market’s growth to over $259 million by 2020.
The biggest story of 2016 has been voter approval of Question 2, the Nevada Marijuana Legalization Initiative, by 54.47% of voters in November 2016. The ballot measure not only allows for the legal possession, use, and limited cultivation of marijuana for recreational use for adults over 21, but also paves the way for the establishment of recreational marijuana industry. Under the guidelines of the measure, the Nevada Department of Taxation would oversee the licensing and regulation of marijuana businesses. During the first 18 months of licensing, only registered medical marijuana establishments would be allowed to apply for recreational licenses.
The medical marijuana market has also seen steady expansion following the issuance of licenses to cannabis businesses in the state. As of August 2016, 37 dispensaries were operational statewide, with more expected to open until the state limit of 66 is reached.
Out-of-state brands are also poised to capitalize on the state’s anticipated growth. Already, edibles and concentrates manufacturers from neighboring states command large market shares. California brands Trikom Treats, House of Jane, and Bhang are among the state’s top-ten ranked edibles by market share, while the state’s top concentrates manufacturer is Colorado-based O.PenVape. Colorado brand Dixie has also announced plans to make its products available in Nevada.
As of June 2016, Nevada now allows medical marijuana patients to buy marijuana the same day they are registered as a patient. Previously, the wait after being registered to buy marijuana was 40 days. Increases in patient numbers should now translate to faster growth in medical sales.
While flower sales are expected to grow by over 100% 66% in 2016, it is expected to be the slowest growing product category over the forecast period (2016 to 2020). Flower is estimated to make up close to 58% of medical sales in 2016, but its market share is expected to decline through the forecast period. These expected declines are due to innovations in the edible and concentrate market segments that cater to patient preferences for healthier, less conspicuous, or more convenient products.
Despite an estimated decline in market share, the dollar value of medical flower sales is expected to increase from $61 million to over $113 million between 2016 and 2020. Total growth in flower sales is estimated at a Compound Annual Growth Rate (CAGR) of 16.34% over the forecast period.
Flower sales are expected to account for 49% of the market in 2018, with $60 million in total market volume. Although flower’s share of the market is expected is expected to decline to 41.6%, total market volume is expected to increase to $108 million in 2020.
Edibles are expected to capture increasing market share each year of the forecast period, particularly among older medical patients who are looking for a healthier method of consuming their products. Visitors to Las Vegas who have legal medical marijuana cards are certain to be growth drivers as these products are easier to consume in hotels or rental properties that prohibit smoking. Edibles are known to be extremely popular amongst tourists in Colorado and are expected to be similarly popular amongst Las Vegas visitors.
Edibles are expected to see rapid growth over forecast period. Sales in edibles are predicted to reach over $137 million in the medical market by 2020, surpassing flower as the largest market segment, and expanding by a CAGR of 46.78% per year between 2016 and 2020.
In the recreational market, edibles are expected to comprise 26.5% of the market in 2018, with an estimated $32 million in estimated sales. This share is expected to grow to 31.6% in 2020, comprising a market volume of nearly $82 million.
Concentrates are expected to perform just as well as edibles in terms of growth with an estimated CAGR of 50% between 2016 and 2020. By 2020, its share in the medical market is estimated at over 20% with sales of more than $64 million. The potency, convenience, and odorless vapor of many concentrates will also make them an attractive alternative to the traditional flower that at present dominates the Nevada market. Dabbing has become extremely popular with the party crowd as well, and as such is expected to perform well with many visitors to Las Vegas.
Recreational concentrates are estimated to comprise 21.12% of the total market in 2018, totaling $25.6 million in total market volume. This share is expected to increase to 23.5% by 2020, representing a market volume of $61 million.
Topical products (creams, lotions, etc.), THC pills, tinctures (liquid cannabis extracts) and so forth are growing in popularity among both medical and recreational marijuana users across the nation. However, all these products combined are estimated to only make up 1.35% of the medical market in 2016 and are forecasted to grow to just over 2% by 2020. In dollar value terms, these products are expected to see moderate growth from just over $1.4 million in 2016 to just over $6.9 million by 2020, which corresponds to an estimated CAGR of 46% 48.5% over the forecast period.
For the recreational market, the others category is expected to grow from $3.5 million (2.9% market share) in 2018 to $8.3 million (3.2% market share) in 2020.
Current Pricing Trends
Marijuana prices in Nevada have generally been comparable to prices in nearby Arizona or Southern California, being slightly higher than prices in markets with closer access to developed areas of cultivation such as Oregon and Colorado. Before the establishment of medical marijuana dispensaries, the average price for an ounce of flower bought through an unregulated delivery service was $352, according to a Brightfield Group study conducted in April 2015. Our latest survey, which was completed in August 2016 and incorporates the prices of marijuana available from each of the state’s operating dispensaries as well as major delivery services, indicates the average price per ounce has decreased to $300. This decrease is expected: as the market matures, cultivators establish operations, and the supply of marijuana stabilizes, prices consequently drop as a result. Competition from increasing numbers of open dispensaries is also expected to exert downward pressure on prices.
Production influence on unit prices
As of August 2016, 182 cultivation licenses have been issued to serve 55 approved dispensaries. Based on the number of registry card holders and estimates of per patient consumption, each cultivation operation will need to produce approximately 17 pounds a year on average to meet in-state resident demand. This estimate does not take into account out-of-state visitor demand, which is expected to be significant as the market develops.
Qualifying patients living outside a 25-mile radius of a dispensary will still be allowed to grow their own plants, which may help meet demand in more remote areas of the state. State production should have more than enough capacity to meet demand, especially in the early years of the forecast period. If this is the case, expect production to ramp up slowly so that producers can avoid flooding the market and driving prices down.
Tax policy influence on unit prices
Nevada imposes a 2% excise tax on each wholesale or retail sale of marijuana and marijuana products. This tax is in addition to applicable state and local taxes, which range from 6.85% to 8.1%. The prospect of an additional 4% tax (2% for wholesale sales and 2% for retail sales) will create mild upward pressure on prices, but as competition grows wholesalers and retailers will likely absorb at least a portion of the tax.
According to Question 2, approved in November 2016, recreational marijuana sold in the state of Nevada will be subject to a 15% excise tax.
The biggest challenge the market faces in 2016 is perhaps the possibilty of opposition from local federal authorities. As with markets in other states, Nevada marijuana businesses are denied access to financial institutions and must carry out transactions in cash, causing a significant logistical burden to business.
It remains to be seen whether the cap of 66 dispensary licenses will pose a problem for patient access to medical marijuana.
Number and size of grow operations
Senate Bill 374 allows for the creation of up to 200 production facilities. While nearly all licenses have been granted, cultivators have experienced difficulty complying with the state’s stringent testing standards, delaying the opening of some dispensaries and resulting in shortages in others. Question 2 limits the distribution of recreational licenses to existing medical marijuana license holders, potentially limiting the effect of the new recreational market on the total number of license holders in the state.
While it is too early to determine which will be the largest grow operation in the state, Nevada has decided to offer multiple licenses to a handful of companies for growing, processing and distribution. Tryke Companies, Medifarms LLC (partially owned by Terra Tech), NuLeaf and LivFree Wellness have each been issued two grow licenses, in addition to multiple licenses for dispensaries. All except NuLeaf have also been issued at least one license for production.
Regulations on grow operations
Although Nevada has limited the number of medical cultivation licenses to 200, and limits recreational licenses to current medical license holders until 2020, there are currently no restrictions as to the maximum number of plants allowed per license. There are also no restrictions regarding vertical integration, as found in other states: dispensaries may grow their own product provided they possess a cultivation license, or purchase from independent growers. Cultivators are also allowed to carry out one-time purchases of unused marijuana plants from Nevada medical marijuana cardholders who grow marijuana for personal use. As in other states, cultivation can only take place in enclosed, secure areas, and must not be located near schools, parks, daycares, and other institutions where minors are present.
Adequacy of supply
Despite the fact that a significant portion of the first commercial medical marijuana harvest failed to reach the market due to strict testing standards that were decided after the first crops had already been planted, commercial production is expected to rise to meet demand within the next few months. The entrance of major edibles brands from the Colorado market, such as Incredibles, is also a strong indicator of expectations that supply will be adequate to meet demand as the market matures.
Number of processing facilities
As of August 2016, the state has granted 117 118 processing facility licenses, although many processors have yet to begin operations, given the supply issues the market has recently faced. However, once current crops are harvested, a large number of both independent processors and dispensaries are expected to begin producing their own infused products.
Regulations on processing
Processing facilities are subject to the same regulations as dispensaries, and may only sell edible marijuana products or marijuana-infused products to medical marijuana dispensaries. Processors are also subject to the same testing standards as cultivators, and must submit random samples of infused products for testing at independent facilities before sale. Batches for which the random sample fails also automatically fail quality tests and must be destroyed.
Size and scope of operations
Based on public records regarding licenses that have been issued thus far, it is apparent there will be several vertically integrated businesses that will have a significant impact on statewide production once operational. Several of the state’s larger dispensaries, such as Euphoria Wellness and Las Vegas Releaf, also possess producer licenses and are expected to begin production of concentrates and edibles in the coming months. Other licensees, such as Silver Sage Wellness and Green Therapeutics, hold cultivator, producer, and dispensary licenses, and are expected to establish vertically integrated production processes in the near future.
Number of QA operations
Seventeen testing laboratory licenses have been granted as of August 2016, with most currently providing services for cultivators looking to meet the state’s rigid testing standards.
State QA requirements
Nevada testing regulations require that a sample from each batch (defined by law as a “specific lot of marijuana grown from one or more seeds or cuttings that are planted and harvested at the same time”) of flower undergo testing for THC potency, terpenes, microbes, mycotoxins, heavy metals, and pesticides. Testing must be carried out by an independent testing laboratory that is certified by the state, and testing samples must be collected by either an agent of the laboratory or a person designated by the cultivator to select and package random samples in accordance with state regulation. If a sample fails a quality assurance test, all marijuana materials made from the same plants automatically fail to meet testing standards, and may not be sold for medicinal purposes. However, with approval of regulatory authorities, flower that fails to meet standards may be used to produce CO2 or solvent-based extracts, provided the resulting product passes quality assurance tests.
Nevada’s stringent quality standards ensure that testing laboratories will form an integral part of the supply chain for the foreseeable future. While local laboratory chains have yet to be developed, several testing facilities have already established themselves as influential industry players. For example, 374 Labs, located in the Reno-Sparks area, played a major role in helping Silver State Relief, the state’s first medical dispensary, open for business in June by providing then-uncommon pesticide testing services mandated under state testing regulations. Steep Hill, the California testing chain operated by Harborside Health owner Steve DeAngelo, has also established a location in Las Vegas.
As of August 2016, there were 37 dispensaries operating statewide, although this number is expected to increase as additional newly licensed dispensaries begin operations, and as current medical license holders open retail establishments following the approval of Question 2 in November 2016. The number of dispensaries per county is based on population size. Clark County can have up to 40 dispensaries, while Washoe County can only have 10. Carson City can have two and each of the other 14 counties can have one.
Lounges are not permitted by law. In Nevada, medical marijuana establishments may not allow any person to consume marijuana on the property or premises of the establishment.
Number and size of operations
The dispensary system will be characterized by both independent stores and dispensary chains. Of the 55 licensed dispensaries already registered, seven approved multi-dispensary chains account for a total of 20 dispensaries. Tryke Companies and NuLeaf each have four approved locations, Medifarm LLC and LivFree Wellness have three, and Nevada Organix LLC, Clear River, and Waveseer have two.
|For Calendar Year 2016 (unless noted)
|Medical cards in circulation
|18,599 (August 2016)
|Estimated Legal Marijuana Consumers
|# of university students
|Prevalence of HIV/AIDS (Rate per 100,000)
|HIV 316.5 / AIDS 153.3 (2011)
|Prevalence of Cancer
|Prevalence of Glaucoma
|Prevalence of Epilepsy
Given the state’s high population concentration in its major urban centers such as Reno, Henderson, and Las Vegas, as well as the latter’s status as a major tourist destination, the vast majority of existing and potential demand for cannabis will be found in these densely populated regions. Most of these cities can be found in Clark County which holds nearly 80% of the state´s population. The possibility of a highly lucrative marijuana market emerging in the city of Las Vegas is not difficult to imagine.
According to the U.S. Department of Education, there were approximately 21 million university students in the United States in 2012, or about 5.7% of the population. Nevada falls below this national average, with its 122,800 students enrolled in 2013 comprising only 4.4% of the state’s total population. Though Nevada accounts for about 0.9% of the total U.S. population, it is home to only about 0.6% of its university students.
The majority of Nevada´s colleges are public and operate within the Nevada System of Higher Education (NHSE). The College of Southern Nevada, an NSHE community college located in Las Vegas, is the state’s largest school with over 37,000 students. This campus, together with the NHSE´s University of Nevada campuses in Reno and Las Vegas, account for nearly 70% of the state’s university population.
In late 2014, the Regents of the NSHE banned marijuana use and possession on all NSHE campuses. The ban was put in place because, according to Regent Allison Stephens, if the NSHE were to allow participation in medical marijuana it would put at risk federal funding that is critical for college students and institutions. Possible disciplinary action could include expulsion from school for students or termination of employment for faculty or staff, as well as possible criminal action.
However, despite bans such as that implemented by the NSHE, there is an undeniable presence of marijuana on college campuses and among college students in the United States. One University of Michigan study found that one in 20 college students used marijuana daily or near daily. Among those who completed the National Survey on Drug Use and Health (NSDUH) from the Substance Abuse and Mental Health Services Administration (SAMHSA) in 2013, between 60 and 75 percent of marijuana users were between the ages of 18 and 25 – many of whom were college students.
With a 2014 population of about 441,500 residents 65 or older, or 15.5% of its total population (compared to around 13% in Colorado and California), Nevada has a moderately large proportion of senior citizens. This percentage is not expected to change significantly in the next few years and suggests a high potential demand for medical marijuana to treat ailments commonly suffered by elder populations.
Among those 65 or older, approximately 37,000 people (or 8.4%) currently suffer from Alzheimer’s in the state. Although Alzheimer’s is not currently listed as a qualifying condition for the legal use of marijuana in Nevada, despite a 27% increase in prevalence since 2010, it may be among a number of specially approved conditions for which physicians may authorize cannabis use. Glaucoma is another such condition, affecting over 20,000 people over age 65 in 2012, or about 5.1% of that age group statewide. These numbers indicate the presence of a potential market far larger than the 12,091 medical marijuana patients currently registered in the state (as of October, 2015).
However, the results of the 2013 NSDUH data analysis show that very few users (less than 1%) of those surveyed nationally in the 65 or older demographic were using marijuana with any frequency. The true figure may be higher due to bias, social stigma or privacy concerns that altered responses among this particular age group, especially when considering opposition to marijuana legalization tends to be much higher among those 65 and older than younger people. Despite the possibility of bias or inaccurate responses, it can still be inferred from this extremely low figure the market for marijuana among this age group is probably minimal.
The number of people living with HIV or AIDS in Nevada has increased by 16.5 percent since 2009, from a rate of 298.4 per 100,000 to just over 347.5 per 100,000 in 2014. Alzheimer’s disease has shown an even sharper climb since 2010, from 29,000 cases to 37,000 in 2014 (a 27.6 percent increase). Additionally, there were nearly 5,000 more cases of Glaucoma in 2012 than in 2004. The prevalence of cancer in the state is relatively low at 110,211 in 2014 (or 3.5 percent) and substantially lower than the national average of 4.2 percent for the same year. However, none of these conditions commonly treatable by marijuana have been leading large numbers of patients to seek out medical marijuana for their treatment.
|Nevada Medical Marijuana Program Statistics - October, 2015
|Number of Cardholders
|Cardholder Conditions (A patient may have more than one qualifying condition)
According to the October 1, 2015 Nevada State Health Division statistics above, severe pain was the most prevalent medical condition affecting medical marijuana patients, afflicting 89% of cardholders. Muscle spasms and severe nausea were also relatively prevalent conditions, reported by 26% and 11% of cardholders, respectively. All other conditions accounted for a combined 11% of reported medical afflictions.
Symptoms such as pain, nausea, and muscle spasms may be related to a wide array of health conditions, including both those listed above, such as cancer or HIV, and those not listed, such as Parkinson’s disease. Since the general categories of “severe pain” and “severe nausea” are qualifying conditions for a large proportion of cardholders, growth in the number of medical patients statewide could be potentially be large than the prevalence rates of more defined conditions such as glaucoma or cancer may suggest. The “severe pain” and “severe nausea” categories may also provide an avenue for those concerned with privacy to receive medical marijuana treatment while avoiding the possible social stigma associated with a condition such as HIV.
Given the broad range of conditions that fall under the umbrella of “severe pain” or “severe nausea,” it may be difficult to forecast patient growth based on the prevalence rates of qualifying conditions alone. However, assuming that the pain and nausea categories include patients with medical conditions not listed as qualifying, or patients whose medical condition may not be otherwise be considering serious to warrant a medical marijuana card, patient growth rates may actually be higher than the current incidence of qualifying conditions may suggest.
Nevada residents over the age of 18 may receive a medical marijuana card if they suffer from one of the following conditions: cancer, Glaucoma, HIV/AIDS, Cachexia, severe/chronic pain or nausea, seizures (including epilepsy), persistent muscle spasms (including those caused by Multiple Sclerosis), Posttraumatic stress disorder (PTSD), or other condition specifically approved by the Department of Health and Human Services.
Patients must present written documentation from their physician that marijuana may mitigate one of the aforementioned conditions and an official diagnosis is also necessary.
Although any Doctor of Medicine (MD) or Doctor of Osteopathy (DO) licensed in Nevada can recommend a patient for the Nevada Medical Marijuana Program (NMMP), many physicians remain unwilling to recommend medical marijuana due to its illegal status under federal law. Therefore, many patients seek out clinics to obtain their physician recommendations. Because clinic physicians must provide a “personal assessment of the patient´s history and medical condition”, it is often required that charts and medical records be sent over from a patient´s primary care physician for review by the clinic.
Once a recommendation is obtained, the cost to request an application for the Nevada Medical Marijuana Program is $25, in addition to a $75 registration/renewal fee before receiving a card. Cards must be renewed each year and the same application processes must be repeated with each renewal.
Nevada is neither a traditionally conservative or liberal state. In fact, in the 22 Presidential elections since the end of World War II, Nevada has voted 11 times for both parties. In terms of Congressional representation, the two parties were a dead heat in the 2010 elections, with Democrats leading by just over a tenth of a point. Republicans nudged out a victory in 2012, but again by less than 1%.
Despite its uniquely balanced political leanings, a substantial 65.4% of Nevada’s population voted to legalize medical marijuana in 2000, and 54% of voters approved recreational marijuana in 2016. This suggests political affiliation in Nevada is not necessarily a significant indicator of public opinion on the issue of legalization.
The medical marijuana market is characterized by a number of small, independent dispensaries. The market had previously featured a large number of unregulated delivery services. These delivery services are have decreased in number as new medical marijuana businesses begin to open up and offer quality-tested marijuana products. While the majority of new marijuana businesses will be concentrated in Clark County, other areas of the state such as Nye County and Carson City should also see significant development in the local medical marijuana industry.
Nevada has garnered the attention of many major companies looking to invest in the industry. It is one of the few states that allow medical marijuana facilities to be for-profit and allows out of state cardholders to purchase from Nevada dispensaries. As the market is still relatively new, this provides numerous opportunities for investors.
Major out-of-state companies that have already been granted multiple licenses include Chicago-based Waverer, Medifarm LLC, a subsidiary of California’s Terra Tech Corp. Out-of-state manufacturers are also expected to license their brands for distribution in Nevada: at the time of publication, Colorado brands Incredibles and Wana Edibles have secured licensing deals, while Dixie and California-based Venice Cookie Company were reported to be exploring licensing options. Nevada has also recently become the ninth market in which Colorado-based O.PenVape is distributing its products.
Strainz, a Nevada-based startup, has raised $8 million from investors to begin operations in Nevada and expand to Colorado and Washington. The company seeks to manufacture a wide variety of products under the Strainz brand name.
Vertical integration in Nevada is neither required nor prohibited. The state will include some independent operations specializing in each segment of the supply chain, though significant amount of businesses have already been granted multiple licenses for dispensaries, grow operations and production facilities. It is expected within several months of the market opening, there will already be large scale, vertically integrated businesses of the sort seen in Colorado.
Branded edibles play an important part in the Nevada medical marijuana market, currently accounting for an approximately 67% 66% share of the market. The branded products available are roughly evenly divided between those produced by in-state manufacturers and those from out-of-state companies. Leading out-of-state brands include House of Jane, Bhang, and Trikom Treats.
Evergreen Organix, based in Las Vegas, produces a wide variety of infused products including baked goods, honey sticks, oil, and vape pens. The company also grows its own strains of flower, which are available in most Nevada dispensaries. As of August 2016, Evergreen Organix leads the edibles category with an estimated 23% market share, and the others category with a 2.5% 2.87% brand share.
Trokie is a Nevada edibles maker that specializes solely in pharmaceutical lozenges which come in a variety of flavors. Trokie lozenges are available in both THC and CBD varieties. Trokie currently has a 12.91% edibles market share.
CannaVative is the top-ranked in-state concentrates manufacturer in Nevada, specializing in shatter, oil, and honeycomb. The company also invests significant resources in community outreach efforts, seeking to promote the medical use of cannabis among the general public. As of August 2016, CannaVative accounted for 6.15% of the Nevada concentrates market.
Most brands rely on online marketing through company websites, social media, or directory sites such as WeedMaps and Leafly. Larger out-of-state manufacturers commonly feature product descriptions and customer testimonials on professionally made websites, while smaller in-state manufacturers tend to rely on Instagram and other social media platforms.
While medical marijuana has been legal in Nevada for many years, the state’s first dispensary system only came online in the second half of 2015. Nevada’s marijuana market also presents a distinct, more lucrative business opportunity than medical markets in other states thanks to the lack of a nonprofit requirement for medical marijuana businesses, the permission of sales to out of state residents carrying medical marijuana cards from their home state, the ability of out of state residents to obtain a Nevada medical marijuana card, and the legalization of recreational use in 2016. Given tourism’s central position in the Nevada economy, these market characteristics will undoubtedly help drive sales in the state and compensate for its relatively small population. Current estimates project that purchases by out-of-state customers will account for roughly 40% of total statewide sales through 2020. In dollar terms this represents projected sales of approximately $42 million at the end of 2016, growing to $582 million by the end of 2020.
Although Question 2 was initially not expected to pass in the November 2016 election, Nevada voters approved the legalization of recreational marijuana by a healthy margin, with 54% of the electorate in favor. While the establishment of a recreational market in Nevada will certainly stimulate massive growth in the state’s cannabis industry, regulations that limit recreational licenses to current medical licenses holders,for the first 18 months of legalization is expected to limit market growth potential in the initial stages of legalization.
Accordingly, our forecasts are designed to be conservative estimates. We are not estimating that domestic demand for cannabis will significantly increase with the advent of legal medical and recreational markets, but rather that the bulk of market growth will come from those switching from the black market to the legal market. As such, the number of heavy, moderate and occasional users were forecasted using average year on year growth rates from the trend exhibited between 2002 and 2013. The number of tourists using medical marijuana is expected to grow by 5% per year as more states begin issuing medical marijuana cards that could be accepted by Nevada dispensaries, and as recreational dispensaries begin to open in 2018.
The growth potential of the Nevada medical marijuana market continues to be strong. The total market is set to grow from $42 million in 2016 to $582 in 2020 with a CAGR of over 53%. An arduous business licensing process will gradually ramp up the industry once operations begin.
Steady growth in the medical market is expected as the number of medical cardholders and dispensaries allowed by the state increases. As of August 2016, approximately 0.6% of all Nevada residents held a medical marijuana card, compared with over 2% in Colorado, Oregon and Washington. This indicates significant potential for the number of medical patients in Nevada to grow through the forecast period.
While all product categories are expected to benefit from industry growth, edibles and concentrates stand to do so the most. Edibles are also expected to see the strongest growth over the forecast period as they are extremely popular with tourists looking for discreet consumption and are gaining in popularity among older medical patients who prefer to take their medicine orally rather than smoke it. Edibles in the medical market are expected to generate over $113 $137 million in sales by 2020, with a CAGR of 46.8% over the forecast period. By 2020, recreational edibles are expected to account for a market volume of $81.9 million.
Concentrates are expected to see considerable growth over the forecast period, especially among younger consumers who have shown great interest in the potency, convenience, or the odorless vapor of many concentrates. The emergence of major multistate concentrates brands will make these products more readily available. Concentrates are expected to grow by a CAGR of 50.4% between 2016 and 2020 to reach nearly $137 $65 million in sales for 2020. By 2020, recreational concentrates are expected to grow to a market volume of $61 million.
Topical products, THC pills, tinctures, and other products are becoming more popular among marijuana users across the nation. This category of products is expected to increase to over $6.9 million in sales by 2019 with a CAGR of 48.49%. Recreational market volume for the others category is expected to increase to $8.3 million by 2020.
While the state of Nevada is not currently accepting applications or issuing any more provisional licenses, Nevada State Bill 276 has introduced a means for new investors to enter the market by allowing current license holders to sell their licenses to the highest bidder, pending approval from regulatory authorities. Dispensary licenses currently command the highest premium. Investors eager to establish themselves and capitalize on anticipated market growth over the next few years would do well to weigh the cost of purchasing a license against the potential gains expected. Since the ballot measure regarding recreational marijuana set to go before voters in November 2016 states that only those who possess medical marijuana business licenses will be allowed to apply for recreational licenses, purchasing a license now could potentially be very lucrative.
Entrepreneurs for whom a license purchase may be out of reach should still prepare application materials and be ready to apply once the state begin accepting new applications. New legislation has recently been introduced in the state senate to expand the number of dispensaries, so a new round of approvals could begin soon. A license purchase would also be the key for out-of-state manufacturers seeking to follow the lead of Colorado’s Incredibles and Wana Edibles brands by positioning themselves to capitalize on the growth of the medical market and the potential opening of the recreational market.
The most immediate threat to approved medical marijuana businesses in Nevada is the potential for local jurisdictions to ban their operation. Municipalities have the authority to regulate medical marijuana businesses and many are eager to see how they will react. Outright bans or local regulations which implement de facto bans would negate the value of holding an approval.
Nevada businesses in the medical marijuana market face many of the same threats as others in the industry nationwide, most notably the risk a shift in federal government policy could result in shutting the industry down. As Nevada is a well-regulated state, dispensaries that comply with the state's rules are not in danger of federal prosecution under the current policy set by the Department of Justice, though this policy could change with a new administration or new Attorney General.
As most dispensaries must operate in all cash without easy access to financial products such as business loans or even checking accounts, they encounter significant difficulties in regards to expansion or even normal business transactions.
Nevada’s well-defined industry regulations and low tax rate make any large changes in regulation unlikely over the next few years. Changes in the testing regime may be a possibility depending on the average quality test pass rate for upcoming harvests, as more shortages would harm not only the industry but also the state government in the form of lost revenue.
Currently, 182 cultivation licenses have been approved statewide, meaning that there will be potentially three cultivators for each of the 55 dispensaries approved by the state, a ratio that takes into account expected market growth from rising patients numbers and increases in out-of-state consumers. This also means that the number of recreational cultivation licenses will likely not exceed 182 until 2020, given that recreational licenses will be limited to current medical license holders until 18 months after legalization.
However, local bans or restrictions on locations for grow operations make it possible production capabilities could fall short of demand in some areas, thus forcing patients to either grow themselves or travel long distances to find a dispensary. For example, Elko County has banned the establishment of medical marijuana enterprises in unincorporated areas of the county, limiting opportunities for market growth in the northeastern area of the state.
Based on the NSDUH it is estimated that total demand will increase 20% over the period from 2014 to 2019. As only an estimated 0.3% of the population currently has a medical marijuana card, the number of cardholders is expected to steadily increase in the coming years. As previously mentioned, states with more mature medical marijuana markets have close to 2% of the population as medical marijuana patients. Assuming the Nevada market grows to exhibit similar ratios, total annual sales are expected to exceed $100 million by the end of 2016, ballooning to $240 $263 $582 million in 2020.
The impact of out-of-state visitor sales should not be overlooked. Las Vegas and Reno are popular tourist destinations and visitors from neighboring states (who hold valid medical marijuana cards from their home state) could help drive the market in these destinations. Foreign tourists will not be eligible, but the great number of visitors from California (which is quite liberal with their distribution of medical marijuana patient recommendations) will more than compensate for the inability of foreign tourists to qualify for the program. By 2019, over a million out-of-state cannabis consumers are expected to purchase marijuana in Nevada. Tourist sales are also expected to grow by roughly 10% per year, translating to $57 million in sales in 2016 but ballooning to over $200 million in 2020 with the opening of the recreational market.
Competition is not particularly strong in the as yet nascent Nevada market. Nevertheless, the market is expected to see significant competition as licensees begin business operations, especially in Clark and Washoe counties, each of which have been allocated a relatively large number of licenses. Overall, the development of the Nevada business environment will be closely followed by investors and activists from a variety of markets.
The amount of competition will depend a great deal on the strength of demand. If demand surges because of an increase in medical cardholders and/or because of out-of-state visitors, there should be enough business to support the number of licensed companies. However, if demand increases only slightly it can be expected there will be strong competition for larger market share on the part of dispensaries in Clark and Washoe counties. Nevertheless, current estimates forecast strong growth in the both medical cardholders and out-of-state visitors, suggesting overly fierce competition between dispensaries will not be an issue in the short-term.
In other areas of the state, the regulations have all but guaranteed a virtual monopoly on the legal medical market, as 14 counties have been allocated only one dispensary license to issue.
Competition in the recreational market is expected to be limited until 2020, as recreational cannabis business licenses will be limited to current medical license holders.