Portal - Metro - Portland and Vancouver
(Multnomah and Clark Counties)

Portland and Vancouver
(Multnomah and Clark Counties)

Regulatory Environment Overview

Multnomah County (Portland, Oregon)

The City of Portland's Marijuana Policy Program is responsible for regulation and enforcement actions on businesses engaged in the cultivation, processing and sale of marijuana within city limits. Applications for marijuana business registration began on January 4, 2016.

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 by adults
  • Authorizes in-state manufacture, processing, and sale of marijuana by/to adults
  • Licensing
  • Regulation
  • Taxation by the state
  • Retains current medical marijuana laws

    The first recreational dispensaries opened on October 1, 2016, per state regulation. Currently recreational marijuana is also 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.

    The City of Portland currently adheres to State law concerning zoning restrictions on medical marijuana dispensaries. Such dispensaries:

    • May not be located in an area that is zoned for residential use
    • May not be located at the same address as a marijuana cultivation site
    • Must be registered as a business, or have filed an application to register as a business with the office of the Secretary of State
    • May not be located within 1,000 feet of any private or public school
    • May not be located within 1,000 feet of another medical marijuana dispensary

    There are no additional zoning restrictions for dispensaries in Portland.

    Taxation

    The sale of medical marijuana is not currently taxed in Oregon. Recreational marijuana sold at medical dispensaries through October 2016 is subject to a single 25% sales tax charged at the point of purchase and remitted to the state by dispensaries. As of October 1, 2016, marijuana sold at retail dispensaries is subject to a state tax of 17% and up to 3% at the local level, for a potential top rate of 20%.

    In October 2014, the Portland City Council voted to levy a 10% sales tax on recreational marijuana. However, the passage of Measure 91 nullified the tax, replacing it with a 25% tax on limited recreational sales to last until December 31, 2016. In November 2016, Portland residents will vote on a proposed local sales tax on recreational marijuana of 3%.

    Law Enforcement and Government Attitudes

    Portland is widely considered to be one of the most marijuana-friendly cities in the United States.

    Although the transportation of cannabis across state lines in technically illegal and discouraged by local law enforcement, the Portland Police Bureau announced in June 2015 that Oregonians traveling to Washington to buy marijuana and bring it back into the state are “not an issue” in terms of enforcement (as long as they abide by the current laws concerning possession). This makes buying cannabis in Vancouver to bring back to Portland a relatively safe prospect for residents, even after the opening of the Oregon recreational market.

    Local police are generally focused on preventing public consumption, discouraging driving under the influence, and keeping marijuana away from minors. They are not interesting in resolving minor disputes between residents over issues related to home consumption and are encouraging them to resolve such issues on their own.

    The Multnomah County District Attorney’s office issued a November 2014 press release stating its intention to dismiss all pending charges related to marijuana conduct that would otherwise become legal on July 1, 2015. This suggests local authorities are strongly committed to abiding by the will of the majority of voters who voted in favor of legalization.

    Clark County (Vancouver, Washington)

    A maximum of 12 retail stores may be licensed in the City of Vancouver. Adults can purchase up to one ounce of marijuana, but can only consume it on private, non-commercial property outside of public view. All production, processing, and retail facilities must be located at least 1,000 feet from the nearest school, park, playground, daycare center, transit center, recreation center or library.

    In March 2014, the city adopted local zoning standards for state-licensed facilities, which also require the following:

    • All facilities must be indoor only
    • Dispensaries can only be located in Community and General Commercial zones, and at least 300 feet from each other
    • Producing and processing facilities may only be located in Light and Heavy Industrial zones
    • All facilities must be in compliance with Southwest Washington Clean Air Agency odor standards
    • All marijuana products and cash must be locked in constructed or secured safe
    • No facilities may be open past 11 p.m.

    Such facilities are prohibited in unincorporated Clark County. Medical marijuana dispensaries are not present in Clark County.

    Taxation

    All recreational marijuana transactions are subject to a 37% excise tax paid to the Washington State Liquor Control Board, in addition to state and local sales taxes. In Vancouver, the combined sales tax is currently 8.4%. All businesses with over $100,000 in gross revenue are also subject to a business and occupation (B&O) tax of 0.215%.

    Law Enforcement and Government Attitudes

    The March 2014 vote to regulate the cultivation, processing and sale of recreational marijuana passed in the Vancouver City Council by a vote of 6-1, demonstrating a strong commitment to the development of a legitimate retail marijuana industry in the city.

    Rather than expending resources to prosecute individual violations of public smoking regulations, the police in the City of Vancouver have expressed a far greater concern about individuals driving under the influence of marijuana, as well as the importance of preventing underage consumption.

    However, authorities have not hesitated to halt marijuana businesses that operate outside the boundaries of state law. In July 2015, the owner of Grow Systems Northwest, a Vancouver-based marijuana dispensary, was arrested on charges of possession of marijuana with intent to deliver, illegal manufacturing and money laundering when authorities discovered he was operating without a license.

    MARKET DYNAMICS

    Growth Rates

    Although the Portland and Vancouver markets are part of the same metropolitan area, differing state regulations mean they are likely to take differing trajectories in the years to come.

    The Portland market has undergone steady growth since allowing medical dispensaries in 2013, with total annual sales of over $74 million in 2016. Current projections estimate the medical market will continue to grow by over 9% annually, surpassing $43 million by 2020, even with the recreational market opening in fall of 2016.

    Based on demographic data, Portland’s recreational market is expected to see remarkable growth, swelling to roughly $140 million in annual sales by the end of 2020. Overall, combined total demand in Portland is expected to grow by approximately 25% every year over the next five years.

    Vancouver is home to a larger proportion of regular marijuana users than other Washington markets, and is consequently expected to grow at a slightly higher rate than the rest of the state. Vancouver dispensaries are among the highest grossing dispensaries in the state and by the end of 2016, the Vancouver recreational market is projected to approach $106 million in annual sales, despite having no more than 16 operating dispensaries.  This indicates healthy growth despite competition from the opening of the legal market in neighboring Portland.

    2016 Headlines 

    The biggest story impacting the Portland market for 2016 has been the statewide legalization of recreational marijuana. Oregon residents are now permitted to cultivate, possess, and consume limited amounts of marijuana for recreational use. This has greatly increased the number of consumers crossing state lines to purchase marijuana in Vancouver.

    In addition, medical dispensaries have been allowed to sell limited amounts of recreational products in municipalities that have permitted it since October 1, 2015. Overall, the measure will establish four types of licenses: cultivation, processing, wholesale, and retail, each of which is expected to contribute to the development of the marijuana industry in Portland, Oregon’s largest legal marijuana market.

    The biggest story affecting the Vancouver market for 2016 has been the regulatory transition initiated by SB 5025 and HB 2136. Under the new regulations, recreational marijuana will be taxed at a rate of 37%, a significant reduction from the previous tax laws in which legal marijuana was taxed 25% at each level of production for an effective rate of 75%. As a result, prices in the Vancouver market have started to drop allowing local dispensaries to continue generating some of the highest revenues in the state. Although local dispensaries have lost some revenue as customers from Oregon begin to purchase recreational products in their home state, this drop in tax rates has contributed to a fall in the average price of flower to roughly $240 per ounce from prices above $300 per ounce in 2015.

    Industry Challenges

    In additional difficulties in banking and taxation caused by the federal classification of marijuana as a controlled substance, many dispensaries in Portland are having trouble attracting new business due to oversaturation of the market. At present, dispensaries may only legally sell to card-carrying patients and there are currently over 150 medical marijuana dispensaries in Portland. In addition, licenses for new dispensaries are continually being reviewed and awarded. The opening of the recreational market is expected to alleviate some of the saturation, and many medical dispensaries are already making preparations to apply for recreational licenses beginning in 2016.

    The biggest challenge facing Vancouver’s cannabis businesses will be sustaining continued market growth in the face of competition from the newly opened recreational market in Portland. Vancouver dispensaries have recently enjoyed a sales boom fueled by Oregon consumers crossing state lines to purchase recreational marijuana. However, this source of revenue has already fallen in 2016, although continued growth is expected over the forecast period.

    The price of marijuana in Oregon is generally cheaper than in Washington due to an abundance of supply. Furthermore, the planned tax rate for recreational marijuana in Oregon is 17%, substantially lower than the 37% tax rate in Washington.

    Although, Vancouver dispensaries are expected to lose a good portion of their Portland customers, recent drops in the overall price of marijuana in the medical market, as well as the recent increase in the number of dispensaries allowed in Vancouver from 6 to 12, are expected to help sustain continued market growth. In addition, new recreational regulations in Oregon which prohibit carrying marijuana purchased in Oregon over state lines into Washington (citing federal law) will help Vancouver dispensaries maintain their local customer base.

    SUPPLY CHAIN

    Cultivation 

    As of August 2016, Oregon was in the midst of approving licenses for upwards of 180 cultivators, most of which are expected to being operation throughout the remainder of 2016 and into 2017. As there is no cap on the number of business licenses available, the supply of product is not expected to be an issue in the near future. Prior to recreational legalization, legal cultivation in Oregon took the form of indoor grow sites operated by qualified patients or their designated caregivers.

    In Portland, a small number of medical caregivers serve 10 or more patients and medical dispensaries in the area are likely to purchase marijuana from these collectives, run their own collectives, or (because Oregon is home to a developed but unregulated marijuana growing industry) purchase marijuana from one of the state’s numerous unregulated grow operations. Licensed indoor and outdoor cultivation is expected to expand significantly in early 2017 as newly licensed commercial cultivators begin operations.

    There are currently 14 marijuana producers operating in Vancouver, indicative of significant market growth since 2015 in spite of the opening of the Portland recreational market. Growth in producer numbers is expected to increase steadily for the time being to meet the rising demand of the southern Washington market.

    Processing

    Portland is home to a number of small to medium sized edibles and concentrates manufacturers that specialize in one or two types of goods, supplying dispensaries throughout the area. Among the more notable processors are Elbe’s Edibles, which specializes in baked goods; Laurie & MaryJane, which makes infused nuts and peanut butter; and Crop Circle Chocolate, which produces infused specialty chocolates.

    Portland is also home to a number of concentrates manufacturers, including Sirius Extracts and True North Extracts. Although most Portland processors operated in a legal grey area prior to legalization and were consequently somewhat limited in size, a new processor licensing system and the advent of recreational dispensaries is expected to generate demand for new, larger processing facilities in 2017.

    Most marijuana infused products sold in Vancouver are from processors located elsewhere in Washington State. However, there are 16 active processor licenses in Vancouver, most notably Fairwinds Manufacturing and Crop Circle Chocolate, both of which produce infused products commonly found in dispensaries statewide.

    Dispensary System

    There were 11 medical-only dispensaries and 143 medical dispensaries with limited recreational sales in Portland as of August, 2016. In Vancouver, there were 16 dispensaries. Before Oregon’s legalization of recreational marijuana, the Vancouver dispensaries were the only place for Portland residents to legally acquire marijuana without a medical card. Consequently, recreational dispensaries in Vancouver had been among the highest grossing dispensaries in the state due to strong demand in Northern Oregon.

    The focus of the recreational market is expected to shift back to Portland due to the opening of Oregon recreational dispensaries, but demand is expected to remain strong in Vancouver.

    Portland’s recreational dispensaries are expected to grow in number quickly due to the fact the medical dispensary market in Oregon is currently oversaturated. Many medical dispensaries are expected to transition to the recreational market in order to gain new customers and cut down on competition.

    Quality Assurance

    A number of commercial testing facilities are located throughout Portland and Vancouver. GOAT Labs, Inc., a testing laboratory owned and operated by Vietnam combat veterans, has locations in both Portland and Vancouver. Green Leaf Lab, a testing laboratory chain with 6 stores throughout the state, also operates a location in Portland. Other laboratories located in the area include Rose City Laboratories and Going Green Labs.

    The recent legalization of recreational marijuana in Oregon is likely to increase the demand for laboratories in order to meet the testing requirements outline by the state.

    DEMAND FACTORS

    Multnomah County (Portland, Oregon)

    Demographics

    The proportion of Multnomah´s population ages 25 to 45 is larger than that of Oregon State, the region, and Washington State. Oregon has a slightly older population than does Multnomah County; 23.2% of Oregon´s population is 60 or older versus only 17.6% in Multnomah County.

    Multnomah has a higher percentage of African American and Asian people, and slightly smaller Hispanic and white populations, than does the state of Oregon. It is predominantly composed of white inhabitants, who make up over 80% of Multnomah´s population.

    Multnomah´s income levels are higher than those of the state, with a median income of over $57,000 versus Oregon´s $50,000, and a mean income of over $80,000 versus Oregon´s $66,000.

    Education levels are high in Multnomah, with nearly 44% of the population holding a Bachelor´s degree or higher, versus 29% in Oregon. Its education rates are similar to those of King County, Washington.

    Demographic Influences on Demand

    Oregon is one of the two US states with the highest rates of 26-and-over marijuana use, with more than 10% of adults ages 26 and above having used marijuana at least once in the past month.[1] Since the proportion of Multnomah´s population ages 25 to 45 is quite large, this may indicate higher demand for marijuana in the county than elsewhere in the state or the Pacific Northwest region.

    Multnomah´s primarily white population may correspond to higher demand for marijuana when compared to neighboring regions (such as Clark County) with much larger Asian and Hispanic populations, which are ideologically more conservative and less likely to support marijuana.

    Conversely though, Multnomah´s high income levels and impressive education levels correspond with a lesser propensity to use or demand marijuana.

    Political Influences

    Multnomah is an extremely liberal county, much more so than the state as a whole. As can be seen below, in the latest presidential election in 2012, Multnomah contributed nearly 30% of the Democratic popular vote, with over three-fourths of the county´s votes going to the Democratic incumbent.

    http://www.politico.com/2012-election/results/president/oregon/

    Democrats are historically much more likely to support marijuana decriminalization and legalization than Republicans are. This was reflected in Democratic Multnomah County´s support of Measure 91 legalizing recreational marijuana in the state. As illustrated in the map below, Multnomah approved the measure with over 70% voter support.

    http://gov.oregonlive.com/election/2014/general/maps/

    While it is currently legal to use and grow recreational marijuana in Oregon, thus far only medical dispensaries have been licensed to operate in the state (and may only sell to patients and caregivers). However, Measure 91 allows for shops to begin selling marijuana by 2016, though a bill headed to the governor's desk would allow bans on retail sales in cities and counties where at least 55% of voters opposed legal marijuana.

    There is one notable difference between this potential legislation in Oregon and the implementation of Initiative 502 in Washington. Cities and counties in Oregon that wish to ban marijuana cannot do so unilaterally as they did in many sub-regions of Washington. They would instead be required to adhere to the will of the majority of voters in their districts.

    The consideration of this bill demonstrates the state government´s intention to have Measure 91 implemented in a just and representative manner that supports the will of the people. This is of course good news for marijuana investors considering Oregon, and Multnomah County in particular which offers a favorable political environment, a great deal of popular support and potential demand for marijuana.

    Clark County (Vancouver, Washington)

    Demographics

    Clark County´s age groups are very similar to those of the state, thus Clark has a slightly older population than King County (which includes the cities of Seattle and Bellevue) with over 14% of the population age 65 or older. Clark has a slightly smaller portion of its population between the ages of 20 and 35 than does Washington State.

    A much higher proportion of Washington State and King County is Hispanic than in Clark County, where just over a third of the population identifies as Hispanic (versus nearly half statewide). The proportion of the population that is white is also larger in Clark than the rest of the state, making up 82% of the population.

    Clark County´s income levels are slightly higher than those of the state, very similar to those of neighboring Multnomah County, Oregon, and lower than King County´s, with a median income of nearly $60,000 and mean of over $77,000. There appears to be little inequality in the county.

    Education levels are nearly identical to those of Washington and Oregon, but substantially fewer of Clark County´s residents hold a Bachelor´s or graduate degree than do in King County or Multnomah County.

    Demographic Influences on Demand

    Given that statewide in 2014, 23.4% of residents aged 18-25 have used marijuana in the past month, versus only 8.1% of those over 25, Clark´s smaller population between the ages of 20 and 35 may mean the marijuana market may be weaker in Clark than in the state in general.

    According to Pew Research Center´s data from 2015, Hispanic people tend to be conservative when it comes to marijuana with only 40% supporting its legality. Clark County has less Hispanic people than the state and the vast majority of its population is white, thus the county may be friendlier toward the marijuana market than its neighbors.

    Clark County´s income levels are relatively high and since wealthier households are much less likely to use marijuana than poor households, its residents are less likely than average state residents to use or demand marijuana with frequency. However, since fewer of Clark County´s residents hold a Bachelor´s degree or higher than in King County or Multnomah County, there may be more cannabis demand in Clark as higher education is correlated with lower rates of marijuana use.

    Political Influences

    Although it is located in Washington State, Clark County is mere miles from Portland, the capital of the state of Oregon. However, it does not share Portland´s strong liberal tendencies but is instead split down the middle politically with about half of the county´s population supporting Republicans and the other half, Democrats. Marijuana use and legality typically see much less support among Republicans than Democrats, sentiments reflected in Clark County´s I-502 vote wherein residents voted with respect to marijuana just as they tend to vote down party lines.

    While Clark County voters did not pass I-502 legalizing marijuana for those 21 and older, the initiative failed by only a very slim margin of 0.6%. Despite Clark residents´ lukewarm stance on marijuana, its county government came out adamantly against marijuana - choosing to ban it entirely in unincorporated parts of the county. Some cities in the region, such as Vancouver, Battle Ground, and parts of Woodland still allow some marijuana businesses, while others such as Camas and Washougal are upholding the ban.

    While Clark County´s population is split on marijuana´s legality, its government representatives are clearly opposed to its use and have been aggressive about suppressing its sales. This stance by the local government threatens the success of the local market and makes Clark a poor environment for investors.

    [1] Oregon Health Authority.  Marijuana Report, 2016. http://public.health.oregon.gov/PreventionWellness/marijuana/Documents/oha-8509-marijuana-report.pdf

    COMPETITIVE ENVIRONMENT

    Major Players - Dispensaries

    The Portland metropolitan area, although centered on the city of Portland in northern Oregon, also encompasses the city of Vancouver in southern Washington. Although medical marijuana has been permitted under Oregon state law since 1998, the prohibition on recreational marijuana was only ended in July 2015 (with recreational marijuana dispensaries only recently opening in October 2016). Consequently, until recently, the metropolitan area only contained two distinct markets: the larger medical marijuana market of Portland and Multnomah County, Oregon, and the smaller recreational marijuana market centered in Vancouver, Washington.

    Under Oregon’s medical marijuana program, obtaining a license to run a medical marijuana dispensary is relatively straightforward, leading to an overabundance of dispensaries. Currently, there are over 400 licensed dispensaries in Oregon with over a third located in and around Portland. The market is saturated to such an extent several dispensaries have gone out of business and many others are struggling to stay open until recreational cannabis sales begin. Portland’s medical dispensaries have been very proactive in applying for recreational licenses in order to expand their customer bases. In August 2016, Oregon authorities reported receiving over 1,300 applications for recreational marijuana business licenses.

    Although the dispensary scene in Portland has mostly been dominated by small, independent operations, larger chains have recently been entering the market. Perhaps the largest chain in Portland is Nectar PDX, which has four locations within the city. Portland is also home to Kaya Shack, the first of a planned national chain of medical marijuana dispensaries by Florida-based Marijuana Holdings Americas. Other notable chains in the area include Shango, which also manufactures its own line of edibles, and Cannabliss & Co., one of Portland’s first medical dispensaries.

    Under Oregon’s new recreational marijuana regulations, Oregon residents are allowed to bring in marijuana bought in other states. This means until the Oregon recreational market is established, Vancouver, Washington will be the primary source of recreational products for Portland residents.

    There are only a handful of brick-and-mortar dispensaries in the Vancouver area, all of which are recreational establishments. The city’s only dispensary chains are The Herbery and Main Street Marijuana, both of which operate two locations each.  Main Street Marijuana’s Vancouver location is the highest grossing dispensary in all of Washington with over $9 million in sales from January to August 2016. Although Vancouver’s dispensaries have been some of the highest grossing in the state due to their proximity with Portland, it is expected growth will slow as recreational dispensaries begin to open in Oregon.

    Major Players - Edibles and Concentrates

    As of August 2016, the dominant brand on the medical side of the Portland area edibles market is Lunchbox Alchemy, an Oregon manufacturer of infused candies and concentrates that commands 7.63% of the market. Edibles maker Wyld places second with just shy of 6.5% of the market. Following Oregon maker That Taffy, Washington brand Mirth Provisions placed fourth with 6.31% of the market, illustrating the growing presence of Washington brands in the Oregon market. While the majority of brands available in Oregon are from Oregon or Washington manufacturers, a small number of brands from other states such as Gaia’s Garden (a Colorado brand) are readily found in Portland dispensaries. The presence of out of state recreational brands is expected to increase once state authorities decide on specific regulations for recreational edibles.

    As in most markets throughout the US, a significant portion of concentrates products are unbranded, despite an increasing share of branded products. Accordingly, several brands have grown to accommodate significant shares of the market. In-state manufacturer Dab Society commands over 3% of the market, while other Oregon-based manufacturers such as OM Extracts and Lunchbox Alchemy also place in the top ten. Other top brands include out-of-state manufacturers such as POP Naturals of California. Tremendous growth in the concentrates market is expected as recreational dispensaries begin to establish themselves in the region.

    As of August 2016, Phat Panda was the leading concentrates manufacturer in Vancouver with 12% of the market. As a whole, the branded concentrates market has seen rapid growth over the past year, transforming from an absence of any branded goods in early 2015 to dozens of branded products available in 2016.

    For the edibles market, Washington-based manufacturers Magic Kitchen (11.7%) and Venice Cookie Company distributor Evergreen Herbal (7.5%) hold a commanding lead over the Vancouver market. Other popular brands include Mirth Provisions, Botanica Settle and Zoots also place in the top five. 

    Local Brands

    Elbe’s Edibles has been operating in Portland since 2010 and its line of baked cannabis goods currently ranks as the second-largest brand by market share in the Portland medical market. Likewise, Laurie & MaryJane, a manufacturer of brownies, infused nuts, and peanut butter, also ranks among the top ten brands in the region and is exclusively carried at Portland dispensaries.

    Vancouver is home to Fairwinds Manufacturing, a popular producer of tinctures, capsules, and infused coffee that ranks among the top brands by market share on the Washington side of the Portland metropolitan area, and the Washington facilities of Crop Circle Chocolates, a manufacturer originating out of Portland seeking to enter the Washington market.

    GROWTH POTENTIAL

    Outlook

    Portland, the largest legal marijuana market in Oregon, is expected to undergo significant economic growth once recreational dispensaries open for business in 2016. Current estimates based on demographic data project annual recreational sales to be around $140 million by 2020, with medical sales surpassing $43 million over the same period. It is expected growth will be driven by strong regional demand, abundant local supply, and the relatively low price of marijuana in Oregon.

    In terms of product splits, flower will likely be the most popular product in the market for the foreseeable future, accounting for more than half of the market through 2017. Edibles and concentrates are expected to grow in popularity annually, with concentrates gaining favor among recreational users and edibles becoming more popular with medical users.

    Vancouver is expected to retain its position as one of the strongest markets in Washington for the near future, although the new recreational market in Oregon now provides a significant source of competition. Unlike other markets in Washington, there are no medical dispensaries in Vancouver threatened with closure under the provisions of Senate Bill 5052. For this reason, market growth is expected to continue relatively uninterrupted through the first half of 2016. Specifically, demand is expected to grow nearly 12% annually through 2020 and sales are expected to reach $106 million by 2020 at current rates, although it remains to be seen how the market will be affected by the opening of the full recreational dispensary system.

    With regards to product splits, flower currently accounts for approximately 59% of the market, although this number is expected to decline to 44.6% by 2020 as edibles and concentrates grow in popularity. By 2020, edibles are expected to account for about 29% and concentrates for about 25% of the market. 

    Opportunities

    Opportunities abound in Portland’s nascent recreational market. The largest opportunity will be for existing medical dispensaries to expand their business by obtaining retail licenses, and this will likely lead to the development of dispensary chains like those in Colorado. The small number of medical dispensary chains currently operating will likely be in the best position to expand into the new recreational market. Demand generated by recreational sales will also create new opportunities for cultivators and processors to expand operations and develop new products.

    As part of the legalization process, the Oregon Liquor Control Commission has created a license for marijuana wholesalers. This will most likely create a niche business opportunity for entrepreneurs who can connect the Oregon’s numerous cultivators with processors and retailers. It is also expected the market will create opportunities for secondary cannabis businesses such as tour services and marijuana-friendly accommodations, as commonly found in Colorado and Washington.

    The legal marijuana market in Vancouver is expected to continue growth throughout 2016 and 2017, when it will begin to compete with recreational dispensaries in Portland. Although slightly higher prices may put Vancouver dispensaries at a competitive disadvantage, competition from Oregon will provide local dispensaries with the opportunity to sustain growth by focusing on providing specialty, brand-name edibles, concentrates, and other infused products currently unavailable in Oregon. The recent fall in Washington marijuana prices is also expected to contribute to sustained growth in the region.

    Threats

    Federal laws against marijuana continue to be the most significant threat to cannabis businesses in Portland. Federal banking regulations block dispensaries from access to financial and banking services and IRS tax code forbids marijuana businesses from making business related tax deductions. However, a group of Oregon lawmakers are currently at the forefront of an effort to pass federal legislation that would allow marijuana businesses to use banks. In April 2016, Oregon passed a bill removing criminal liability from financial institutions doing business with cannabis businesses.

    Another threat to the marijuana industry in Oregon is federal regulations regarding pesticides. The federal government tests commercial pesticides and then determines in what context they may be used. Using a pesticide outside of its federally approved context constitutes a federal offense. However, since marijuana is illegal at the federal level, there are no approved pesticides for marijuana growers. This led the Oregon Department of Agriculture to issue warning letters to Oregon growers instructing them to cease using pesticides. Subsequently, a list of acceptable pesticides was released in January 2016.

    The largest threat to the Vancouver market will most likely be competition from the Oregon recreational market. Recreational consumers from Portland have been contributing to the sales boom for Vancouver dispensaries. However, since recreational marijuana prices in Portland will likely be significantly lower than prices in Vancouver, most Portland consumers are expected to patronize dispensaries in Oregon which will most likely generate a slight tapering of market growth in Vancouver.

    Moving Forward

    Regulatory Environment

    The passage of Measure 91 by Oregon voters in 2014 has brought significant regulatory changes to the Portland market, most notably the legalization of recreational marijuana. Since July 1, 2015, Oregon residents have been allowed to cultivate, possess, and consume limited amounts of marijuana for personal use. The measure also grants the Oregon Liquor Control Commission the authority to tax, license, and regulate recreational marijuana grown, processed, or sold for commercial purposes. The legislation also creates four types of marijuana licenses: cultivator, processor, wholesaler, and retailer, and will establish a licensing system for commercial testing facilities. The OLCC began accepting license applications in January 2016, and recreational dispensaries began opening shortly after October 1, 2016.

    The most significant regulatory change affecting the Vancouver market in for 2016 has been HB 2136, which lowers the tax rate on recreational marijuana to 37%. The bill, which took effect July 1, 2015, has already contributed to lower marijuana prices in the region. Since all of Vancouver’s currently operating dispensaries possess retail licenses, it is expected the local market will not be significantly affected by the consolidation of the state’s medical and recreational markets mandated by Senate Bill 5052.

    Supply

    The Portland market has recently corrected from an overabundance of supply and a scarcity of legal customers. An increase in the number of qualified patients, as well as the sale of limited amounts of recreational marijuana, has eased the market’s oversaturation. A large number of medical dispensaries are expected to transition to recreational licenses in 2017 in order grow their customer bases.

    The Vancouver market is not expected to suffer from any shortages in the near future. The recent month over month price of an ounce of flower has remained stable at approximately $240, indicating relative stability in the local supply chain.

    Demand

    Demand for recreational marijuana in Portland is expected to drive rapid market growth in 2016 and 2017. Portland consumers are believed to have contributed to record sales by Vancouver marijuana retailers in 2014, and similarly high sales figures are expected for the Portland market once recreational dispensaries are fully operational. In the near future, Portland may also have the opportunity to attract demand from tourists and other out-of-state users as the local industry develops.

    Conversely, growth in demand for recreational marijuana in Vancouver is expected to slow as customers from Oregon turn to Portland dispensaries for their marijuana purchases. While the new, lower tax rate of 37% instituted by HB 2136 may help spur local demand, it is believed competition from cheaper Oregon marijuana will pose a challenge for less-established local dispensaries. These dispensaries may have to focus on providing specialty edibles, concentrates, and other products in other to stay competitive.

    Competition

    The Portland market is currently saturated with too many dispensaries competing for an insufficient number of medical patients. This makes it difficult for new dispensaries to stay in business. This situation is expected to change as a large number of the existing medical dispensaries fully transition to the recreational market.

    Likewise, lower prices are expected to give Portland recreational dispensaries a competitive advantage over dispensaries in Vancouver. Since Measure 91 prohibits recreational marijuana purchased in Oregon from being carried over state lines, it remains to be seen to what extent the fully operation recreational market will attract consumers from Washington.

    The Washington Liquor and Cannabis Control Board is currently accepting new applications for marijuana licenses, although local regulations limit the number of dispensaries operational in the city to 12.

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