Marijuana Demand Outpaces Supply

marijuana july1 las vegas

The legal marijuana market has been growing by leaps and bounds in North America. Sales jumped 30 percent in 2016, accounting for $6.7 billion in retail activity in the United States and Canada.  A closer look at the massive demand for marijuana shows the incredible market opportunity presented to publicly traded cannabis companies as they carve their own niches in a burgeoning industry.

Just two weeks after the State of Nevada legalized the sale of recreational marijuana on July 1, nearly 50 dispensaries licensed to sell weed found themselves running out of supply. With more than $1 billion of possible tax revenue on the table, Nevada state officials declared a state of emergency to allow the creation of new rules that would expedite the licensing process to support public demand.

A report by The Washington Post claims that over 40,000 transactions of recreational cannabis occurred in the days following the start of sales. The number of transactions reveal the depth of demand, along with the dire need for adequate payment options as consumers bring their goods to the counter. Because marijuana is still illegal on a federal level, most banks are on the sidelines when it comes to offering banking services to the cannabis industry, giving dispensaries few choices other than dealing in all-cash. 

While recreational use of marijuana is making most of the headlines these days, the demand for the drug’s application to the medical industry shouldn’t be overlooked. Though cannabis isn’t its primary focus or main revenue driver, AbbView (NYSE: ABBV) is worth noting, as the pharmaceutical giant has performed well in the market, with shares 30 percent higher on July 14 than they were in November, according to a report by InvestorPlace. Aside from other drugs in its portfolio, AbbView since the mid-1980s has marketed an FDA-approved cannabis-based drug, Marinol, for the treatment of nausea and vomiting related to chemotherapy, and some that treat AIDS and other diseases. Marinol includes Dronabinol, a compound that is chemically identical to tetrahydrocannabinol (THC).

While the marijuana industry navigates uncharted territory, experimenting with various measures to smooth out the kinks of supply and demand, licensing, distribution, banking, cultivation and application, investors are presented a playing field ripe with opportunity. From bitcoin payments and accessories to hydroponics and medical treatments, the potential of cannabis companies is on the high side.


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