How Big Is The California Marijuana Market, Really?


Ryan Allway

November 14th, 2017

Exclusive, News, Top News


California’s population of 39.2 million is 45% larger than its 6 nearest MJ states combined, with an aggregate number of residence in Alaska, Arizona, Colorado, Nevada, Oregon and Washington equaling 27.3 million. Simply put, California’s population is absolutely massive. And that population will be, unequivocally, the driving force in the cannabis movement throughout the US.

The $5 billion market. Let’s compare California with Colorado. California is approximately seven times larger in population than Colorado. In addition, tourism in California in 2016 exceeded 251 million visitors, and in Colorado it was approximately 82 million. Similar to California, Colorado was a medicinal cannabis state when in 2014 it ushered in Adult-Use (a/k/a “recreational”) cannabis sales to the general public. California has been a medicinal cannabis state since 1996 and in less than 60 days will usher in Adult-Use cannabis.

In 2016 California sales of medicinal cannabis were approximately $2.7 billion and are expected to be approximately $3.6 billion in 2017. Colorado total sales (medicinal and Adult-Use) in 2016 were approximately $1.2 billion, and reports state that within the first ten months of 2017 Colorado has already surpassed the $1 billion sales mark. If we use the above variables (population, tourism, commencement of Adult-Use cannabis), it’s highly probable in 2018 California will exceed $5 billion in cannabis sales.

Rules, Regulations & Licenses. There is no empirical data available that provides accurate statistics on the number of nurseries, growers, manufactures and dispensaries of cannabis-related products in California. But a “back of the napkin” approach is that at least 70% and probably closer to 90% of the growers, manufacturers, and dispensaries in California will either not be properly licensed in the next 60 days, or will not be able to provide clear “chain of title” relating to the cannabis sold. This is a state requirement that is anticipated to be strongly enforced by the State of California as it implements “Track & Trace”, a methodology that allows the state to follow all cannabis products from the seed, through manufacturing, to the dispensary.

Quality Above All Else. The current shortage of cannabis production in California that is capable of passing laboratory testing, a 2018 state requirement in order to sell to dispensaries, is staggering.  According to the Los Angeles Times more than 80% of sampled cannabis grown in California was contaminated with pesticides, fungicides and/or infestation. Consequently, the majority of cannabis grown in California would not pass the proposed 2018 safe levels of purity.

The Big Short(age). It now boils down to simply economics. The demand for cannabis in California in 2018 is expected to increase by about 50% from 2017, and the number of properly licensed cannabis growers and sellers will decrease by at least the same percentage. Unlike any other time in California’s history, the State of California will be regulating all things Cannabis. The State of California is notorious for getting what it wants – and starting in 2018 it wants cannabis tax revenue. Lots and lots of tax revenue.

Incredible Opportunity Awaits. It is anticipated that very few companies will be able to better capitalize on the significant increase in demand and simultaneous decrease in supply than Lifestyle Delivery Systems Inc. (CSE: LDS) (OTCQB: LDSYF). Located in southern California, LDS is a vertically integrated publicly traded company that spent $6 million to retrofit and fully equip a 20,000 sq. ft. facility in the “Green Zone” of Adelanto, CA. Its facility comprises eight isogenic rooms, an agricultural nursery, a cultivation division, three distillation and extraction laboratories, as well as a manufacturing division for CannaStrips™, the company’s sub-lingual dissolvable strips that have various degrees of active ingredients from the medicinal cannabis plant.

The company spent the last eighteen months obtaining the required permits, licenses and certificates to be in full compliance of the local municipal laws of Adelanto, one of the few municipalities that has attempted to mirror the rules and regulations that are being implemented by the State of California. And as important as anything else, all of the materials and biomass produced by LDS will be 100% organic grade. No pesticides, fungicides or infestation.

The company’s CEO, Brad Eckenweiler, believes that, “As much as 90% of the current extractors and distillers, of which there’s probably 1,400 in California, are not properly licensed for a variety of reasons, and probably won’t make the cut as 2018 approaches. That means that only a handful of companies will be positioned to participate in the estimated $3 billion market of medicinal and adult-use cannabis oils in 2018, and we’re one of those few that are properly licensed and that can scale, with organic grade quality biomass, predicated on sales. In addition, because we don’t have any middle men or brokers to deal with, our margins are extremely attractive.”

As LDS stated in their most recent news releases, they are now in production and will be reporting in early December their sales that started in November.

Exponential Growth Opportunities. It appears that LDS has tremendous production capabilities for organic grade oils and CannaStrips™ and the company also mitigated future problems that relate to lack of quality biomass or plant material. The company has purchased 24.25 acres of additional land in Adelanto for the purpose of creating up to 30 indoor grow facilities in which LDS will create relationships with license holders who will be required to utilize LDS’s unaltered, organic grade seeds and follow their time-tested procedures.

Eckenweiler concludes, “We’re located in the most populous state in the country, are properly licensed, utilize only organic grade medicinal cannabis materials and have built a state-of-the-art facility. As a result of external events, most of our potential competition probably will be eliminated in the next few months, and projected sales in California are anticipated to double to about $5 billion. From where we stand, we are extremely excited to commence production and are looking forward to an outstanding holiday season, as well as a very, very productive 2018.”

Ryan Allway

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.


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