| Medical or Recreational | Legal Since | Requires Cards | Accepts other States Cards | Fee | Dispensary System |
| Medical and Recreational | Medical: 1998. Recreational: July, 2015 | Yes | Medical: No. Recreational: Yes | $20-$200 | Yes; Non-Profit |
Medical marijuana has been legal in Oregon since 1998 after the passing of Ballot 67, approved by 55% of voters. The passage of Ballot 67 decriminalized the possession, use and cultivation of marijuana for medical patients with signed documentation of an approved condition from their physician. However, cannabis was only available if cultivated by a patient or caregiver until March 2014 when Oregon enacted the dispensary program. This allowed licensed facilities to sell medical marijuana to legal Oregon cardholders.
Recreational marijuana was legalized through the Oregon Legalized Marijuana Initiative (Measure 91) which was passed in November 2014 with 56% of the voters´ approval. Measure 91, which took effect July 1st 2015, allows possession, authorizes in-state manufacture, processing, sale of marijuana by/to adults; licensing, regulation, taxation by state; and retains current medical marijuana laws.
Legal Consumption
In order to be eligible for medical marijuana in the state of Oregon, patients must have documentation from a licensed physician that states they have one of the approved conditions: Cachexia, cancer, chronic pain, epilepsy/seizures, Multiple Sclerosis, Glaucoma, HIV/AIDS, nausea, or Alzheimer's. Patients can then apply for a medical marijuana card, for which the application and annual renewal fee is $200.
Reduced application and annual renewal fees are available to individuals who receive specific government benefits (minimum of $20). Cards are mandatory and out of state cards are not accepted.
As of July 1st 2015, any person age 21 and over may legally possess and purchase recreational marijuana from an authorized retailer in the state of Oregon. Likewise, any person age 21 and over may legally purchase marijuana flower from a licensed Oregon medical marijuana dispensary.
Possession Regulations
Recreational marijuana: Those 21 and older are allowed to possess up to 1 ounce of marijuana in a public place and up to 8 ounces in their home. Beginning October 1, 2015 adults of at least 21 years of age may purchase up to a quarter ounce of marijuana flower, as well as seeds, and up to 4 immature plants from medical marijuana facilities in one day. The law also allows the cultivation of up to 4 marijuana plants per household. Selling marijuana without a license and public consumption of marijuana will remain illegal, but anyone 21 or older will be able to give away 1 ounce of marijuana, 16 ounces of marijuana products in solid form, or 72 ounces of marijuana products in liquid form to others 21 or older.
Medical marijuana: Oregon State Senate Bill 1085, which became effective in 2006, raised the quantity of cannabis which qualified medical marijuana patients or caregivers may possess up to 6 mature marijuana plants, 18 immature seedlings, and 24 ounces of useable cannabis.
Regulatory Authority
As of 2016, the Oregon Liquor Control Commission (OLCC) is responsible for the licensing and regulation of the state’s cannabis industry, in consultation with the State Department of Agriculture and the Oregon Health Authority. Measure 91, which designated the OLCC as the industry’s regulatory authority, is not intended to alter the current medical marijuana system as the measure clearly states the, “Act may not be construed … to amend or affect in any way the Oregon Medical Marijuana Act.”
Under Measure 91, municipal governments may enact reasonable ordinances that govern where, when, and how marijuana businesses may operate if they find doing so is needed to prevent adverse effects. A locality may completely ban marijuana businesses if the locality’s voters elect to do so via a ballot question asked of the voters during a statewide general election.
Oregon enacted the Medical Marijuana Dispensary Program in March of 2014. According to Karynn Fish, spokeswoman for the Oregon Health Authority, dispensaries may not operate on a for-profit basis "per se". They may, however, roll the costs of salaries and overhead expenses into the prices they charge patients. There is no limit on the number of dispensaries that may register with the dispensary program.
Licenses are currently granted by the Medical Marijuana Dispensary Program under the Oregon Health Authority to Oregon residents who apply successfully, pass a background check, attain zoning documentation, pay a $4000 fee, and comply with restrictions listed below.
The first recreational dispensaries are expected to open after October 1, 2016, as per state regulation. Currently (August 2016) recreational marijuana is available for sale in limited quantities at most medical marijuana dispensaries statewide. However, the sale of recreational marijuana at medical dispensaries will be prohibited after December 31, 2016.
Dispensary Restrictions
Dispensaries in Oregon must be located in an area zoned for commercial, industrial or mixed use, or as agricultural land. A dispensary may not be located within 1,000 feet of a school or another registered dispensary, and may not be at an address registered with the Oregon Medical Marijuana Program as a grow site. Local government agencies may have additional restrictions.
Vertical Integration
Vertical integration is permitted under Measure 91. There are no limits on horizontal or vertical integration of operations for the adult-use market. A licensee may hold multiple licenses and multiple license types.
Medical marijuana is not currently taxed in Oregon. Recreational marijuana sold at medical dispensaries is currently subject to a single 25% sales tax charged at the point of purchase, remitted to the state by dispensaries. After October 1, 2016, marijuana sold at retail dispensaries will be subject to a state tax of 17% and up to 3% at the local level, for a potential top rate of 20%.
Fees levied by the Oregon Health Authority:
The state's medical dispensary system has a $4,000 annual fee for dispensary owners and no sales or excise taxes or other fees.
Fees levied by the Oregon Liquor Control Commission:
A non-refundable application fee of $250 is required for all license types. The following
| 2015 | 2016 | 2017 Forecast | 2020 Forecast | |
| Total Medical | $137,186,821.00 | $138,283,301.00 | $149,036,464.00 | $179,018,774.00 |
| Marijuana Sales Growth | 8.6% | 0.8% | 7.8% | 6.67% (2016-2020 CAGR) |
| Avg. Price/Ounce | $215.00 | $222.00 | $218.00 | $220.00 |
| Total Recreational Marijuana Sales | $116,079,457 | $226,800,00 | $316,408,476 | $729,264,626 |
| Sales Growth | N/A | 95.4% | 39.5% | 33.91% (2016-2020 CAGR) |
| Avg. Price/Ounce | $215.00 | $222.00 | $218.00 | $220.00 |
While Oregon’s growth in 2015 and 2016 came largely from the official opening of the medical marijuana dispensary system, total market growth in 2016 continues to stem from regulations permitting recreational flower to be sold through medical dispensaries. The medical market continues to thrive as new dispensaries increase throughout the second full year of the state’s medical marijuana program. Although recreational sales through medical dispensaries will cease in 2017, the establishment of new recreational dispensaries is expected serve as a continued driver of market growth throughout the forecast period.
Concentrates in the medical market witnessed significant growth in 2016, growing by 11% to reach $33 million, solidifying its position as the second largest product category behind flower. Edibles continue to make important gains in the market, growing to 19.26% of the market with $26 million in sales. Flower remains the dominant category, comprising 53% of the total market.
Topical products (creams, lotions, etc.), 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 make up nearly 3.45% with just over $4.7 million in sales in the medical market.
Edibles and concentrates are expected to continue making steady gains in market share and will continue their trend of outgrowing the overall market. While infused products will continue to gain in popularity, flower is expected to continue as the leading product category both in terms of market share and dollar value of sales in the coming years.
The biggest story for the marijuana market in Oregon is the imminent opening of the recreational dispensary system in October 2016. In November 2014, Oregon voters ended the state’s prohibition of marijuana, laying the foundation for a regulated, licensed, and taxed recreational dispensary system like those found in Colorado and Washington. To fulfill demand for recreational marijuana while the new dispensary system is undergoing preparation, the Oregon Health Authority has allowed limited recreational sales at participating medical dispensaries from October 1, 2015, to December 31, 2016. The limited recreational sales program has proved very successful, with Oregon Authorities reporting approximately $25 million in tax revenue collected as of August 2016, translating to roughly $100 million in sales volume. However, current recreational sales are limited to approximately one-quarter ounce of flower, or one serving of edibles, extract, or topical products per day. The October opening of recreational dispensaries, where concentrates are also available and purchase limits are non-existent, make it likely for total recreational market volume to exceed $200 million for all of 2016.
Oregon also faces incredible demand for recreational business licenses. As of August 19, 2016, the state has received over 1,300 marijuana business applications and has approved roughly 200. The Oregon Liquor Control Commission reports most issued licenses so far have been for cultivation operations, and it will take until the end of 2016 to finish processing all applications since there will be no cap on the number of licenses awarded. Many medical dispensaries are planning to transition to recreational sales when the limited recreational marijuana sales program ends.
Flower
Flower is the dominant product category in Oregon's medical market comprising a 53% market share in 2016. However, flower's market share is expected to decline through the forecast period due to innovative products in the edibles and concentrates market segments. These innovations will enable them to capture increasing market share by catering to consumer preferences for healthier, less conspicuous, and/or more convenient products. As the recreational market matures and the number of users who prefer edibles and concentrates continues to increase, the medical market share of flower is expected to decrease from $73.2 million to $63.3 million between 2016 and 2020. The recreational market exhibits the same basic trend of decreasing market share. In 2020, recreational flower sales are estimated to reach $209 million.
Edibles
Edibles are expected to perform very well through the forecast period with the medical market share increasing to 24.6% by 2020 and recreational market share increasing to 34.25% by 2020. This growth will come from the variety of products within this category that cater to different consumer tastes and consumption preferences. Much of the growth of this market segment will be driven by consumers who prefer eating or drinking rather than smoking as their method of consumption; viewing it as a healthier, less conspicuous, and/or more convenient option.
Growth in the medical edibles market looks even more impressive when viewed in dollar value terms with an estimated increase from $26 million in 2016 to $44 million in 2020, accounting for a total growth of 65% The recreational medical market is expected to increase from $14 million in 2016 to $249 million in 2020, a total growth of 1,662%
Concentrates
Concentrates are expected to perform nearly as well as edibles with their medical market share forecasted to grow to just over 34% by 2020 and their recreational market share to 33% by 2020. In dollar value terms, medical concentrates will see strong growth moving from $33 million in 2016 to more than $62 million by 2020, for a total growth of 84.59% and an estimated CAGR of 16.56%. In the recreational market, concentrates will grow from $12 million in 2016 to $240 million in 2020, a total growth of 1,900%, and a CAGR of 109%. Growth will be the result of many aspects including the fact concentrate products can be manufactured to contain only the more medicinally beneficial CBD compounds without the high-inducing THC compounds. This is occasionally preferred by some users in the medical market who are only interested in the medicinal properties of marijuana.
Likewise, the growing popularity of dabbing amongst younger consumers will influence growth in the concentrates market. Potency, convenience, and/or the odorless vapor of many concentrates make them an attractive alternative to traditional flower for some consumers.
Others
Topical products (creams, lotions, etc.), 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 only made up 3.45% of the medical market and 0.75% of the recreational market in 2016 and are forecasted to grow to 5.35% and 3.98% by 2020. In dollar value terms, these products are expected to see significant growth in the medical market and increase from $4.7 million in 2016 to more than $9.5 million by 2020, a total growth of 100.72% (and an estimated CAGR of 19.03% over the forecast period). For the recreational market, total market value is expected to increase from $1.7 million in 2016 to $29 million in 2020, a total growth of 1,607% and a CAGR of 103% over the forecast period.
Production influence on unit prices
The legal medical market maintained growth in 2016 by continuing to capture sales from the black market, but black market sales are still expected to be significant in Oregon during the forecast period. This means as legal production increases there will be an abundance of demand to mitigate the drop in price that would be anticipated from an increase in supply, thereby keeping prices generally constant.
Tax policy influence on unit prices
Even with the 25% sales tax on the current limited recreational marijuana sales implemented by the Oregon Liquor and Cannabis Control Commission, and the planned 17% tax on recreational dispensary sales, prices in Oregon's medical marijuana market are already among the lowest in the country, and are expected to stay below neighboring Washington and even Colorado. As a result, the Oregon recreational market will likely pull significant numbers of customers from southern Washington.
Market category influence on unit prices
The average price per ounce for flower is $215, and is expected to remain at this level throughout the forecast period. However, prices vary significantly with pricing for an ounce of flower in the medical market ranging from $160 -$250 per ounce, catering to smokers on a budget as well as those with the more discerning palates. Oregon boasts some of the lowest price flower in the country, thanks to a climate that promotes bountiful growing opportunities.
The oversaturation of the market in Oregon is proving to be a significant challenge as it has created massive pricing wars that can make it difficult for dispensaries to cover their costs. Currently, there are 412 medical dispensaries operating in Oregon, 362 of which are participating in the limited recreational marijuana sales program. A large number of medical dispensaries are expected to transfer to the recreational market following October 1, 2016. The OLCC also reports it has received over 1,300 business applications, and it will not be capping the number of approved licenses. Consequently, Oregon marijuana businesses are expected to face a crowded and competitive market.
Likewise, Oregon cannabis businesses have many of the same challenges facing the industry nationwide, including being unable to establish bank accounts or access business loans, as well as the inability to deduct business expenses on their federal taxes.
Number and size of grow operations
According to the Oregon Medical Marijuana Program Statistical Snapshot July 2016 there are 27,464 grow sites registered in the state. While some of these sites are comingled by caregivers to serve multiple patients, the majority (18,020 of the sites) serve only one patient.
As of August 2016, the OLCC was reporting it had approved approximately 200 marijuana business licenses, most of which were for cultivation sites.
Regulations on grow operations
Oregon’s medical marijuana growers must operate as nonprofits and sell only to patients who reimburse them for the costs of growing. In October 2015, the Oregon Liquor Control Commission established caps the size of cultivation operations: growing operations will be limited to 10,000 square feet indoors and 40,000 feet outdoors, and the size of growth operations will be divided into tiers. Mixed cultivation will be allowed, but growers must maintain a 4:1 ratio limit between indoor and outdoor canopy (for example, a producer with 5,000 square feet of indoor grow space may have up to 20,000 square feet of outdoor grow space. Limits are designed to ensure adequate supply to the legal market without generating surplus that is likely to end up on the black market. Regulations also contained detailed provisions for pesticides, testing, tracking, secure transport, and harvesting technique.
Under new regulations that will be set forth by the state’s recreational marijuana program, cultivators will be divided between medical “growers” and commercial “producers.” Different specific regulations will govern the grow operations of growers and producers: growers will continue to be regulated by the Oregon Health Authority, while producers will be regulated by the OLCC. OLCC-licensed producers will not be allowed to supply marijuana to medical dispensaries. OLCC production will also fall into the following four tiers, each with separate limits based on whether cultivation takes place indoors or outdoors:
Adequacy of supply
The cultivation operations in Oregon have proven to be more than adequate in meeting the demands of the medical market, and occasionally even have gluts in supply during the outdoor harvest seasons. For these reasons, there are no supply issues expected when the recreational adult use market opens and even more cultivation sites come online. It is also believed by some in the industry, because the environment in Oregon is so well suited to cultivating marijuana, they will export product to other states if federal laws are changed to allow for interstate commerce of marijuana.
Number of processing facilities
Large scale processing facilities are as yet not common in Oregon’s highly fragmented market place. The market for processed cannabis is mostly characterized by small local brands or dispensaries carrying their own brands. With the exit of Cheeba Chews from the Oregon market, few major edibles companies that are popular in other states have a presence in the top ten edibles brands. However, with the imminent establishment of OLCC-licensed processors beginning in October 2016, branded products are expected to comprise larger shares of the market. The entry of out-of-state brands through local distributors is also a likely possibility.
Regulations on processing
At the time of publication (August 2016), rules on marijuana processing were still being finalized by the OLCC Rules Advisory Committee and Technical Subcommittees. It is believed the finalized regulations will be similar to those already implemented in Washington and Colorado, with detailed requirements regarding packaging, labeling, licensing, testing, and the issuing of Marijuana Handler’s License cards for those involved in the production process.
Number of QA operations
At the time of this publication there were a total of 11 testing facilities in Oregon, with 29 testing licenses granted by the Oregon Health Authority (many labs are certified for multiple types of tests). Quality testing is required. Currently, only OHA approval is required to test marijuana, but after October 1, 2016, testing may only take place at labs approved by the Oregon Environmental Laboratory Accreditation Program (OREPLAP) and licensed by the OLCC.
State QA requirements
Currently, the state requires testing marijuana for potency, mold and pesticides but sets no rules for the labs doing the work, thus labs have inconsistent standards and results. However, after October 1, 2016, testing must adhere to protocol laid out by ORELAP, which contains specific guidelines for testing flower, concentrates, and extracts for pesticides, solvents, and other contaminants.
Major players
As is the case in virtually all the states with some category of legalized marijuana use, state chains of laboratories have yet to be developed.
Dispensary systems
Oregon has a nascent dispensary system that has only been officially authorized since March of 2014, though dispensaries certainly existed prior to this time operating in a legal gray area. However, by August 2016 there were 412 approved dispensary applications creating a state of oversaturation given the limited number of cardholders in Oregon. This number is expected to fall significantly as a large number of medical dispensaries switch over to the recreational market, alleviating the medical market of some of the oversaturation it currently faces. However, as the OLCC has announced there will be no limit on the number of business licenses it issues, the number of total dispensaries will likely remain high on both sides of the market, increasing competition and exerting downward pressure on prices.
Lounges
On January 1, 2016, the consumption of marijuana indoors at businesses was explicitly outlawed by state law. The small number of cannabis lounges that had been operating prior to this date have subsequently ceased operations.
Number and size of operations
While the dispensary system is certainly characterized predominately by independent stores, there are dispensaries with multiple locations that have been established. With the legalization of recreational adult use, the current oversaturation of medical dispensaries, and the uncertainty of what the final recreational rules and regulations will be, it is difficult to determine what the future holds in regards to consolidation or expansion of the dispensary market.
However, participants in the Oregon industry expect the recreational market to alleviate some of the oversaturation issues and provide a lucrative investment opportunity given a relatively high proportion of Oregonian adults that uses marijuana illicitly.
| Category | For Calendar Year 2016 (unless noted) |
| Total Population | 4,028,977 |
| Medical cards in circulation | 73,605 |
| Estimated Adult Marijuana Consumers | 630,571 |
| Heavy | 154,422 |
| Moderate | 61,384 |
| Occasional | 414,764 |
| # of university students | 258,904 (2013) |
| Population 21-35 | 802,632 |
| Population 36-50 | 825,670 |
| Population 51-64 | 744,538 |
| Population 65+ | 638,225 |
| Prevalence of HIV/AIDS (Rate per 100,000) | HIV 158.7 / AIDS 104.3 (2011) |
| Prevalence of Cancer | 184,594 (2014) |
| Prevalence of Glaucoma | 31,900 (2012) |
| Prevalence of Epilepsy | N/A |
University Students
Even with the recent approval of the legalization of recreational marijuana in Oregon, the drug is still illegal under federal law and like most public and private colleges across the U.S., the schools in Oregon have no choice but to comply. Colleges must implement drug-prevention programs to be eligible for federal funding and as long as it is federally illegal, that includes marijuana. Thus, with the legal retail sale of marijuana in Oregon approaching, and as stated by Dean of Students at the Oregon Institute of Technology, Dr. Erin Foley: “everyone is thinking about what this [will look] like July 1. The bottom line is for the federal government marijuana is still illegal, so that trumps state law because we get federal funding. It’s straightforward. The bigger piece for us is to make sure students are aware of that.”
At larger universities such as Oregon State University, Portland State University and the University of Oregon (each with between 24,000 and 29,000 students in attendance) enforcing student conduct policies will be an even greater endeavor, particularly because in the past these schools have shown some leniency and willingness to look the other way when it comes to marijuana. The Princeton Review and High Times both have ranked the University of Oregon among the most marijuana-friendly schools. Oregon State University began offering a marijuana policy course in the winter of 2014. All three universities have on-campus chapters of a club called Students for Sensible Drug Policy: Ending Prohibition with Confidence (in reference to ending the legal prohibition of cannabis).
With nearly 260,000 college students in the state in 2014, or 6.6% of Oregon's population, and a student base that appears to be very interested in using marijuana (and quite free to do so) Oregon college students are proving to be an ample market for recreational marijuana sales, particularly as the recreational market comes into full swing.
Senior Citizens
Oregon has 635,130 residents ages 65 and above, based on 2015 estimates, accounting for 15.4% of its population. However, only 13.1% of those registered for medical marijuana in the state are 65 or older (less than 10,000 people).
The state has approximately 59,000 Alzheimer's patients (2014), accounting for 9.63% of those 65 and older, as well as 31,900 Glaucoma patients (2012), or 1.8% of those 40 or older in the state. Both of these conditions typically manifest themselves amongst the elderly population. Based on the Oregon Medical Marijuana Program's (OMMP) statistics, the Oregon elderly are rarely seeking medical marijuana as a treatment to these common age-related ailments. As of July 2016, OMMP had 988 patients or caregivers reporting Glaucoma and 417 reporting Alzheimer’s or another neurological condition as their qualifying conditions for medical marijuana. Those make up 1.4% and 0.5% (respectively) of the total number of people registered for medical marijuana cards. These figures are extremely low, both as a percentage of the total number of people suffering from these conditions and as a percentage of the market for medical marijuana.
This market could foreseeably grow if marijuana were to become less stigmatized in the state, particularly among the elderly whose opposition to marijuana has traditionally been much higher than among younger people. For now, however, this demographic does not appear likely to seek medical marijuana, particularly not for conditions such as Alzheimer's or Glaucoma that this age group is commonly afflicted by.
HIV and AIDS prevalence rates are quite low in the state at 158.7 and 104.3 per 100,000 people respectively (2011). Oregon also has a low to normal prevalence of Glaucoma and Alzheimer's. As of 2014, the state has 184,594 people with cancer, approximately 4.65% of its population when adjusted by age, roughly equal to the national average. However, as reflected in the Oregon Medical Marijuana Program Statistics (July 2016) chart below, none of these conditions commonly treatable by marijuana are leading large numbers of patients to seek out medical marijuana for their treatment.
| Conditions | Number of patients and caregivers |
| Neurological | 417 |
| Cachexia | 1,016 |
| Cancer | 4,355 |
| Glaucoma | 988 |
| HIV+/AIDS | 649 |
| Nausea | 9,032 |
| Posttraumatic stress disorder (PTSD) | 5,175 |
| Severe Pain | 60,584 |
| Seizures, including but not limited to epilepsy | 1,792 |
| Persistent muscle spasms, including but not limited to those caused by Multiple Sclerosis | 19,588 |
| Total number of patients and caregivers | 94,567 |
According to the data collected by the State of Oregon, over two-thirds of patients are looking to marijuana to suppress severe pain. Another large portion is addressing persistent muscle spasms, followed by patients with nausea, then Post-Traumatic Stress Disorder (PTSD). None of the other conditions illustrated above (that are commonly treated by medical cannabis) made up a significantly large fraction of the state registry of marijuana patients. There are many possible explanations for this phenomenon.
It is possible some patients may be experiencing pain, nausea or spasms as a result of any number of health conditions, including some of the qualifying conditions listed above such as cancer. It is also possible some patients may be falsifying information and using the vague categories of "pain" and "nausea" in order to gain legal access to cannabis without having to claim any verifiable condition. Likewise, others may be concerned with privacy and simply omitting further details about their underlying medical conditions by claiming pain rather than, for example, stigmatized HIV or AIDS.
Whatever the case, this information is revealing. The market for medical marijuana in Oregon is not necessarily rooted in the needs of patients suffering from many of the conditions commonly treated by marijuana. “Severe pain” and “nausea” are such broad categories they cover a virtually infinite number of medical conditions. Likewise, because of the questionable practices by doctors in the state (see discussion below) it is impossible to know which of these conditions are valid medical issues and which are physicians' falsifications. Due to these factors, data on the prevalence of conditions typically treatable by marijuana are not an effective tool for gauging or understanding the medical marijuana market in the state of Oregon.
Physicians are hesitant to recommend marijuana to patients for various reasons, including the possibility of federal prosecution or professional sanctioning. Thus it is still difficult for patients in Oregon to receive recommendations from their primary care physicians. As a result, many are deferring to marijuana clinics for their recommendations.
In late 2012, medical marijuana clinics entered the limelight when, according to the Oregon health authority, 37 doctors had exceeded the 450-patient threshold since 2005. These doctors signed statements asserting "primary responsibility for the care and treatment" of as many as 5,400 medical marijuana patients each. Most notably, nine doctors approved half of the 56,531 medical marijuana patients and pending applicants in Oregon leading up to 2013.
Currently, however, many marijuana clinics are requiring medical records documenting a legitimate need for medical marijuana before making recommendations. Thus, though many patients were previously able to access medical marijuana cards in Oregon more easily, it is relatively difficult now as patients must attain documented proof they have a medical need for cannabis and many must pay a premium for the medical marijuana clinic fees as well.
On its surface, Oregon looks like a purely left-leaning part of the country. In the 2010 and 2012 elections the state voted for a Democratic congress and president. Portland’s reputation as a cyclist and public transportation friendly city with environmentally friendly inhabitants is well established. Likewise, polling shows it is also among the least religious states in the country. However, the eastern and southern parts of the state are much more rural and conservative than the western portion (where Portland is located). There is also a decided independent and libertarian undercurrent in Oregon that has led some GOP strategists to express optimism about its future in the state.
Thus far, however, the state as a whole has taken a quite liberal stance toward marijuana, becoming one of the first states to legalize medical as well as recreational marijuana. Locals in Oregon appear to be friendly toward cannabis, but there may be some resistance to the adoption of recreational marijuana in the eastern and southern regions of the state upon the implementation of Measure 91 in July of 2015.
In Oregon, the market for dispensaries is characterized almost entirely by small, independent operations with only a handful of dispensaries that have more than one location (though this is becoming more common). While dispensaries have been present in Oregon for many years, the state just officially legalized the medical marijuana dispensary system in March of 2014. Because the state places no limits on the number permits that can be issued there has been an explosion in the number of dispensaries (increasing from 223 in January 2015 to 345 in August 2015 and 412 in August 2016). The non-profit nature of the industry, as well as residency requirements and intense competition have encouraged many local entrepreneurs to enter the market with the hopes they will get first pick of recreational licenses (and the market will become less competitive once the recreational market comes online).
Regulations on the recreational cannabis industry will not be final until October 2016, so many companies are patiently waiting to see what the outcome will be before making a decision regarding entering the recreational marketplace. However, as of August 2015, the OLCC has imposed a 2-year residency requirement on out-of-state investment in the recreational market in Oregon, a measure that is favored by existing small dispensary owners and growers who fear being driven out of business by larger operations. Single owners of marijuana businesses must have been an Oregon resident for at least two-consecutive years, while for businesses with multiple owners, Oregon residents must own at least 51% of the business. Nevertheless, interest in the market has been strong, as the OLCC reported receiving over 1,300 business applications as of August 2016.
Investment into the Oregon market is expected to pick up over the forecast period, as many major businesses have already announced plans to establish themselves in Oregon. Denver-based Mary’s Medicinals, one of the nation’s most well-known makers of cannabis-infused topicals and capsules, has signed a deal with local distributor Oregrown to market its products in Oregon. Colorado-based Wana Edibles is also partnering with a local distributor to market its goods in Oregon. California manufacturer Auntie Dolores and Colorado manufacturer Medically Correct are also reported to be exploring licensing deals in Oregon. The establishment of recreational dispensaries is likely to attract further out-of-state investment in the near future. Furthermore, in April 2016, Oregon governor Kate Brown signed legislation exempting financial institutions from criminal prosecution under state law. Although the legislation does not exempt financial institutions from federal prosecution, the move is expected to facilitate investment into the industry.
While vertical integration is permitted by law, it is not common practice in the Oregon medical marijuana industry. However, some dispensaries grow a small amount of their own product to safeguard themselves against potential supply issues. Due to the small-scale nature of most Oregon dispensaries and the inability of cannabis business owners to get business loans, the startup costs of developing a grow operation would be prohibitive to most dispensary owners. The excellent growing conditions in Oregon, as well as the relatively large amount of small to medium sized grow operations mean high quality product is generally available to dispensary owners at reasonable prices. Product is particularly widely available during the fall harvest season when prices drop to as low as $1,200 to $1,600 per pound.
The market for edibles in Oregon is currently highly fragmented with many dispensaries producing their own house brand or unbranded products. Small-scale local products are common as well, with basic shrink wrapped products distributed only to dispensaries in a certain area. The ten largest edibles companies make up only 30% of the total market. However, this is likely to change in later 2016, as major out-of-state brands such as Wana Edibles begin to appear on Oregon dispensary shelves. Brands like Mary’s Medicinals are also expected to have a strong impact in the state’s emerging topical product market.
Lunchbox Alchemy is an Oregon edibles manufacturer which has a strong presence throughout the state with its trademark edibles and extracts. The company’s edible portfolio strays from the traditional array of cookies and chocolates, instead focusing on infused snack foods including pretzels, almonds, macaroons and small hard and soft candies. The company’s flagship product is a small round gummy candy called “Squib.” As of August 2016, Lunchbox Alchemy accounts for 7.97% of total edibles sales.
That Taffy is another native Oregon edibles manufacturer with availability at dispensaries in both Oregon and Washington. As the name suggests, the company specializes in cannabis infused taffies that come in a wide variety of flavors. As of August 2016, That Taffy is Oregon’s third largest edibles manufacturer with a 6.4% market share.
Golden XTRX is Oregon’s leading manufacturer of concentrates products, specializing in smokeless vape pens, cartridges, and oils. The company is also a local distributor of Toasted Rooster and Crispy Kraken infused chocolate bars, originated by Colorado maker Dixie. As of August 2016, Golden XTRX led the concentrates market with a 3.63% share.
Larger edibles manufacturers market consumers through an online presence (company website and social media) as well as advertising in industry publications, targeting consumers and dispensary owners alike. Smaller operations rely mostly on social media and word of mouth. Many local operations forgo extensive advertising and simply sell to dispensaries nearby.
Oregon's legal marijuana market is expected to grow by a CAGR of 25.6% between 2016 and 2020 to reach a total of over $900 million in sales for 2020. While the medical market saw explosive growth in 2014 due to the opening of the official dispensary system, growth on the medical side is expected to slow considerably, registering stable single digit growth over the forecast period. The introduction of a recreational market, particularly one with such a low taxation rate, is expected to slow the growth in the number of Oregon medical patients who already make up nearly 2% of the state's population. Much of the growth in the medical market is expected to come from the shifting of existing medical patients from home grown cannabis to product sold in dispensaries. Therefore, much of the growth over the forecast period is expected to come from recreational marijuana.
Recreational markets opened in October 2015, when medical marijuana dispensaries began selling limited amounts of flower, edibles, and extracts to recreational consumers. As of August 2016, these limited sales had already accounted for approximately $100 million in revenue. The full recreational market will open on October 1, 2016, and limited recreational marijuana sales at medical dispensaries will cease on December 31, 2016.
Edibles and concentrates are each expected to register substantial growth over the forecast period, at a CAGR of 13% (edibles) and 17% (concentrates) for the medical market, and more than 104% (edibles) and 109% (concentrates) in the recreational market. Edibles and concentrates are rapidly increasing in popularity in legal cannabis markets nationwide and they are segments of the market where the legal market has a competitive advantage over the black market.
Other infused products, including topicals, THC pills and tinctures, are particularly popular in Oregon and are expected to register the fastest growth once the recreational market opens with a CAGR of 109% between 2016 and 2020, reaching sales of $29 million in 2020. Topicals in particular are extremely popular in recreational markets because they can help people who may not be eligible or willing to get a medical marijuana card treat less severe conditions (such as arthritis or other aches and pains). Many of these products are not mind altering and therefore can be used as a complement, rather than a substitute, to other cannabis products.
Oregon's recreational market holds massive potential as several important factors set Oregon apart from other states. First, according to the National Survey on Drug Use and Health (NSDUH) from the Substance Abuse and Mental Health Services Administration (SAMHSA), Oregon has a higher rate of cannabis consumption among adults than nearly any other state in the country (at nearly 25% by 2014) meaning there is a massive potential consumer base. Secondly, Oregon's medical marijuana market attends to mostly older patients, meaning the younger consumers are not yet being served. As consumers are increasingly looking for concentrates which are more easily produced in legal than illicit channels, Oregon's recreational market holds massive market potential.
The advent of legalized recreational marijuana in Oregon will break the current oversaturation deadlock and provide a new market of consumers for marijuana businesses in desperate need of revenue. Although the specifics of the new retail licensing system have yet to be finalized, it is expected that there will be a significant increase in the number of dispensaries. This also means a wide variety of investment opportunities at all levels of the supply chain for potential investors.
Given that most of Oregon’s new recreational consumers will have never had the opportunity to purchase Oregon marijuana products legally before, a smart investment move could be to develop a loyal following for an edible or concentrate brand. This would create name recognition and an advantage over the competition when the recreational market opens. This can be done through the development of a new brand or through licensing of a multi-state brand. The Oregon medical market does place extremely strict regulations on the packaging of edibles in the state, which could serve to make the market slightly less attractive for some investors.
Those looking to gain a foothold in the state prior to legalization could also look into the development of cannabis testing laboratories. However, without a sense of what exactly the recreational laws will require to be tested and how, investors who have already entered the space may find themselves having spent money on the wrong equipment.
Many local entrepreneurs (who are not excluded by the state’s residency requirements for business owners) have begun buying up real estate so they will already have locations when licenses are finally granted.
With the opening of the recreational market, Oregon's regulatory environment is expected to become much more complicated, though the state is certainly working to avoid overregulation. At the time of publication (August 2016), rules on marijuana processing were still being finalized by the OLCC Rules Advisory Committee and Technical Subcommittees. It is expected the final regulations will mirror those already implemented in Washington and Colorado, with stipulations regarding testing, packaging, labeling, and dispensary security.
Due to the amenable grow conditions in Oregon (particularly in the southern portion of the state) supply has been able to keep up with demand in the medical market. Likewise, with many entrepreneurs already looking into real estate for grow operations to serve the recreational market, it is expected supply will be adequate to meet demand even as the recreational market opens. Given the state will not be limiting the number of grow licenses it issues, it is highly likely Oregon may end up with an oversupply issue as the recreational market dispensaries first become operational (as was seen in Washington) until demand increases to sufficient levels. The recent retail buy-up by current license applicants suggests that the market may become overly saturated in late 2016 and early 2017.
As was previously mentioned, demand amongst Oregonians is expected to be quite high given the affinity of Oregonian adults for cannabis. At the time of writing, less than 3% of Oregonians over the age of 21 held medical marijuana cards, while NSDUH data indicates that 25% are marijuana consumers. While the remaining 22% who are currently getting their product from the black market are unlikely to switch as soon as the recreational market opens up, over the long term (particularly with such relatively low taxation rates) the recreational market has strong potential for growth as it begins to offer more sophisticated options for marijuana consumption, such as lab-tested goods, gourmet infused edibles, high-quality dabs and waxes, and electronic vape pens, among many others.
Competition, particularly amongst dispensaries but all along the supply chain, has intensified in recent months as the market has become oversaturated. With everyone contending for a position in the upcoming recreational market, competition is expected to ramp up immediately prior to the issuance of licenses and until shortly after the opening of the market (when it is likely to stabilize). Many medical dispensaries are planning to transition into the recreational market, possibly alleviating competition in the medical market. Growth in the recreational market is likely to attract investment from out-of-state marijuana businesses, furthering contributing to industry expansion in the coming years.