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The Blooming Weed Industry

5 months ago by Thinknum Media in Features

Table of Contents:

In 2006, marijuana rights activist Jon Gettman conducted a study that found that marijuana is America’s top cash crop by a long shot. The study determined that the marijuana industry was valued at $35.8 billion, more than the combined value of the corn ($23.3 billion) and wheat ($7.5 billion) industries.

Colorado legalized marijuana distribution, sales, and usage in 2014. Since then, the state has collected nearly a billion dollars in tax revenue.

Calendar Year

Revenue By Calendar Year

Total Revenue Since Feb 2014

2014 (Feb - Dec)

$67,594,323

$67,594,323

2015

$130,411,173

$198,005,496

2016

$193,604,810

$391,610,306

2017

$247,368,473

$638,978,779

2018

$266,529,637

$905,508,416

2019 (Jan - Mar)

$63,490,118

$968,998,534

Other states want in on the action, and their numbers are growing. So are the nascent companies looking to get a piece of the action.

As the marijuana industry goes legit, we take a look at the major players in the legit weed industry as it stands: where they are, who they are hiring, and what they're making or selling, in the first alternative-data report on the blooming weed industry.

Is weed the next billion-dollar industry, or is it all just a bunch of smoke? We look to the numbers for an answer in this report.

(And if you get confused by any language, we have a handy glossary at the end)

The Legit Weed Industry

It's easy to predict that the weed industry will grow. But to truly understand how it will scale, it's important to first understand its components and how they are set up to expand.

This looks like any other crop industry: manufacturers create a product that they sell to distributors, who get product to retailers, who get product into consumers' hands.

The extant, once-illegal weed industry, always resembled its future self: farms and manufacturers, distributors and packagers, and retailers. Call them what you want — your local weed guy or a pharmacy — but this industry was always structured for scale. The main difference is that we now have legitimate players who are in the process of scaling in public: they list jobs online, distribute product over borders, and sell to consumers at the retail level at locations they list online.

And because these nascent, legitimate players are taking their businesses to the web, we can track their growth over time. That, then, is the focus of this report: the blooming weed industry.

The Manufacturers

Dozens of companies are scrambling to get what will likely become the largest slice of the pot pie: manufacturing. After all, if you're supplying the suppliers, or if you are the supplier yourself, you're in control.

We took a look at 9 of the most prominent (and promising) weed manufacturers to gain an understanding of how they're hiring and growing. This provides a good indication not just of the expansion of the weed industry, but also of the health of each company. 

Overall, we see rapid growth in job openings over time. Just nine companies surveyed are hiring for close to 1,500 people alone. Here they are and how they are hiring:

Tilray ($NASDAQ:TLRY)

Remember Tilray's meteoric rise in the stock market back in 2018? On the heels of Canadian marijuana legalization, this medical cannabis company made waves by being the first in the industry to ship medical marijuana to the United States. Someone who held stock in the company right before September ($65) and sold it on September 19 ($214) would have seen the stock's value quadrupled...before it normalized back down to around $50.

That spike in the stock market also came while there was a dramatic increase in job openings at the company. Now that legalization in Canada is approaching a year, however, the number of job openings at the company is at its highest level yet.

Canopy Growth ($NYSE:CGC)

Canopy Growth is the world's largest cannabis company, flying under the auspice of Tilray (due to the aforementioned stock boom and bust) until recently. That's because it just bought out Acreage Holdings, America's largest multistate cannabis operators with roots in 20 states, for $3.4 billion that will take effect when, not if, marijuana is legalized on the federal level. While that's a big deal, it is less than what beverage-maker Constellation Brands ($NYSE:STZ) invested into Canopy a year ago ($3.8 billion).

Essentially, Canopy, a Canadian company that is known for its Tweed branded marijuana and mainly does medicinal products, just secured access to a nation-wide rollout of its products through a multi-billion dollar deal, and also recently received a huge payday from the makers of Corona Beer and Svedka vodka.

Not surprisingly, it is hiring in the hundreds as it continues this massive expansion.

Aurora Cannabis ($TSX:ACB)

The second-largest weed company by market cap, Aurora Cannabis produces and distributes medical cannabis with a production capacity of 500,000 kilograms per year. It also sells and makes indoor cultivation systems for those that want to "grow their own," as well as hemp products.

While the number of job openings at the company is down slightly, the employee count as told by LinkedIn data has steadily risen since the start of 2019, and just cracked the 550 mark a few days back.

Cronos Group ($NASDAQ:CRON)

The third-largest cannabis company by market cap, Toronto-based Cronos Group is backed by tobacco giant Altria Group ($NYSE:MO) which owns a 45% stake in the company. This is the same company that took a 35% stake in the mega-popular e-cig brand JUUL ($JUUL), which, when putting two and two together, looks to be a dope-dream product combination for those who want to vape weed.

Despite its place among the pack, Cronos has a tight-knit group of employees. According to its LinkedIn profile, around 77 people say they work for Cronos Group. That's still triple the workforce it had in September of 2018, but compared to its larger competitors, it pails in comparison.

Aphria ($TSX:APHA)

A budding company with a $3-billion market cap based in Ontario, Canada, Aphira is showing growth in just a few weeks of employee profile data tracked via LinkedIn:

Hiring roughly 50 people, the most-common of which include Extraction & Refinement Managers, Greenhouse Production Associates, and marketing professionals such as Brand Managers, Project Managers, and Graphic Designers.

Aphria Job Title

Openings in April

Associate Brand Manager

7

Extraction & Refinement Manager

7

Greenhouse Production Associate - Bio Distribution

7

Integrated Pest Management Coordinator

7

Janitorial Associate

7

Maintenance Technician

7

Greenhouse Associate

7

Electro-Mechanical Associate

7

Manager of Information Security

7

Equipment Launch Manager

7

CannTrust ($TSX:TRST)

Another Canada-based medical marijuana producer and distributor, CannTrust is undergoing a major self-investment period that is seeing it expand its greenhouses to produce up to 50,000 kilograms of weed annually. The company's stated goal is to produce 100,000 kilos by 2020, which would be a fifth of Aurora's output.

It is also investing into human capital; LinkedIn data shows a small increase in headcount over the past few weeks as it ramps up production efforts.

Liberty Health Sciences ($OTC:LHSIF)

Based in Toronto, Liberty produces and markets medical-grade marijauna in both Canada and the United States. It is currently hiring for 24 openings, the majority of which are focused on patient liaison.

Interestingly enough, Liberty's hiring efforts are creeping south of the Canadian border, mostly in Florida where it has a medical marijuana dispensary.

Liberty Health Sciences Title

Openings in April

CEC Patient Care Liaison Medical Cannabis - Orlando

19

Assistant Retail Manager Medical Cannabis- Tampa

19

CEC Patient Care Liaison Medical Cannabis - Palm Harbor

19

CEC Patient Care Liaison Medical Cannabis - Winter Haven

19

Delivery Patient Liaison Medical Cannabis-Fort Myers

19

Harvest Technician- Medical Cannabis

19

Hub Liaison Medical Cannabis - Fort Lauderdale

19

Hub Liaison Medical Cannabis- Ft. Myers

19

Accounting Assistant

19

Delivery Patient Liaison Medical Cannabis - Ft. Lauderdale

19

That also makes Liberty Health Sciences one of the few companies with a complete vertical integration; it controls every aspect of a transaction with its customers from the cultivation of the plant to distribution to patients. As seen with major companies like Amazon, vertical integration is one of the toughest things in business to do. But when it works, it is a fantastic basis for scale and expansion.

AbbVie ($NYSE:ABBV)

So far, every company in this report is based in Canada where marijuana is legal. AbbVie, on the other hand, is an American-based company that dabbles in the cannabis industry. It is mainly a biopharmaceutical that is known for drugs such as Humira for arthritis.

What lumps it into our profile is Marinol, a drug based on a compound similar to THC. That, in turn, makes it a competitor to medical marijauna manufacturers who are selling natural THC as opposed to AbbVie's synthetic alternative. It also seeds it as a company for future expansion in the weed industry as American laws change.

With that said, AbbVie dwarfs its competitors in terms of job openings and size, as it is a representative of the old guard of pharmaceutical companies who will have to prepare for this new wave of potential treatment options.

GW Pharmaceuticals ($NASDAQ:GWPH)

GW takes things across the pond as the only British cannabis company within our group of major companies.

Another biopharmaceutical company, GW made nabiximols, the first-ever cannabis-based drug used for multiple sclerosis (MS) that got market approval in any country. It also makes a cannabis-based drug for those with epilepsy.

Over time, hiring at GW has remained steady, which is also seen when looking at the company's LinkedIn headcount.

Of course, there are more than just nine companies that make marijuana products, but among the big and the small, these are the ones that stood during our extensive research. They are fully operational, mentioned by traditional media outlets, and in some cases, publicly traded.

The Distributors

So, where are people getting marijuana, whether it be for medicinal or recreational purposes?

Many who want to get marijuana legally turn to Weedmaps ($WEEDMAPS), a user-generated-content website "where businesses and consumers can search and discover cannabis products" among other services it offers. In layman's terms, it is the Google Maps of weed. It's the legitimate, web version of asking a friend who knows a guy who knows a guy's cousin who might sell marijuana.

Weedmaps tags locations for doctors, dispensaries, and delivery services from around the world on its website. For the sake of breaking down the weed industry in our own backyard, let's take a deeper dive into how many places one could get marijuana by doing a quick search on this website.

According to data scraped from April 17, 2019, the 12,675 location pins placed for services where one could get marijuana are in 41 states as well as Puerto Rico. While this may seem peculiar — only 33 states have legal marijuana laws for either medicinal, recreational, or both purposes — the others are states where CBD is legal for medicinal purposes, such as Texas.

Unsurprisingly, the states with the most services can be broken down by the order of when they legalized medical marijuana. For most of the states with the largest number of marijuana dispensaries, doctors, and delivery services, they have had the infrastructure in place for years or even decades.

State Legalization Date(s) Number of Services on Weedmaps
California 1996 (Medical), 2016 (Recreational) 7,557
Colorado 2000 (Medical), 2012 (Recreational) 864
Florida 2016 (Medical) 837
Oklahoma 2018 (Medical) 654
Oregon 1973 (First to decriminalize), 1998 (Medical), 2014 (Recreational) 621
Washington 1998 (Medical), 2012 (Recreational) 422
Michigan 2008 (Medical), 2018 (Recreational) 392
Arizona 2010 (Medical) 319
New York 2014 (Medical) 280
Massachusetts 2012 (Medical), 2016 (Recreational) 251

As seen here, Oklahoma sticks out like a growing weed among the pack, as it only fully-legalized medical cannabis last year. But in looking at how it legalized the drug —licensing began on August 25, 2018, just over two months after a ballot initiative passed — and how it passed a low-THC, high-CBD medical marijuana law back in 2015, it's clear to see how it could have 613 dispensaries and 41 doctors in such little time.

Another big outlier is Florida; it too passed a stricter medical marijuana law prior to 2016, and it is still running into trouble during its rollout for growers and businesses. It doesn't, however, have a shortage of doctors willing to prescribe the drug; 517 Doctors in Florida — more than half of the state's pins on Weedmaps — were listed, compared to 193 delivery services and 127 dispensaries. This also holds true for New York, which has five times the number of doctors than it has delivery services and dispensaries combined.

And, not to be remiss, Florida is home to Liberty Health Sciences' big American root, as the company expanded rapidly within state borders. That all allows it to have a high position among the states with the most medicinal marijuana services.

Breaking it down by specific type of service, weed delivery services outweigh dispensary locations and doctor locations. This is due to a large number of delivery services — 6,125 in total — that are in California.

Of course, due to medical marijuana being legal in more states, doctors, delivery services, and dispensaries that are for medical use only are more common than those for recreational use. When looking at the number of services per capita, Oklahoma sticks out as a state due to its population below the country's median and 654 individual services listed.

Meanwhile, looking at the recreational services per capita map is fairly expected for those who know an inkling about weed in America. Yes, there are thousands of services on the West Coast, a couple hundred in Colorado, and, in New England, a bloom in recreational outlets in Massachusetts and Maine.

The Storefronts

We know who is making cannabis products and where they are sold, but what is also interesting is the marijuana industry on a micro scale.

First, marijuana products aren't only smoked. There are now oils, oral sprays, vape pens, pills, patches, edibles (i.e. marijuana-laced foods), and even more ways for someone to take this drug.

Before any legalization whatsoever, marijuana was sold on the streets by drug dealers and was all about "knowing a guy."

But, as any police officer or politician can tell you, street sales may come with a lot of issues. Besides it being, well, illegal, some dealers have reputations. Some may straight up rip people off. Others get in trouble with the law and they just don't show up anymore... Or might have a new "friend" who is watching over business. Or, in the absolute worst cases as seen in national horror stories, a dealer could knowingly or unknowingly sell marijuana laced with other drugs.

It's not every dealer, but in this day and age, the relaxation of marijuana laws and the influx of public companies stepping into the space makes an illegal drug deal that less tantalizing.

While there is very little data out there for the U.S. market — for good reason, due to legality — Canada has plenty of storefronts. Specifically, a few cannabis companies have online storefronts, with Tilray publicly listing where its products are sold in brick-and-mortar dispensaries as well.

Outside of Tilray, Aphria, CannTrust, Liberty Health Science, and OrganiGram ($OTC:OGRMF) all have online stores where one can purchase products. Relatively speaking, for the price of a gram of marijuana, these companies are trying to stay competitive with one another, as seen in the following charts:

In terms of the raw marijuana flower, the average price is $9.39 (or roughly $7.01 USD) a gram. For reference sake, the average price of high-quality street weed in the United States $319.73 per ounce, according to PriceofWeed.com, a website where marijuana users self-submit pricing and quantity data for weed around the country. Medium quality weed, on the other hand, goes for $283.36 per ounce.

A rough conversion of the Canadian average price of flower from these companies — one ounce is equal to 28.3495 grams — gives us $198.73. In other words, you'd be high to buy street weed over an ounce of pure Canadian medical-grade weed if you had the choice (and most often, at the moment, you don't).

Even in other forms of marijuana, the price is drastically lower than what one would pay, on average, on the street. Oils and oral sprays go for about CAD$2.14. Individual capsules are CAD$1.63 each. Patches are CAD$11. And the high-tech Cartridges, Vaporizers, as well as Concentrate (highly potent), goes for CAD$53 each.

As seen in Canada, the advent of white collar weed is adding more supply into the market, which, as any stoned economics freshman can tell you, would theoretically drive down the price of the drug over time. Frank Bi, previously of Forbes and now at SB Nation, made a map of weed prices in 2015 based off Price of Weed data.

In Colorado, the average price of an ounce of high quality weed was $243 at the time. Today, that same ounce is about $241. That isn't a big decrease over four years, but if marijuana is legalized nationwide and these Canadian players head south, prices will head south as well.

Unless, of course, taxes and regulations limit supply for the sake of competition. But even then, dealers will still be a factor in the weed economy, as by laws of capitalism, they will look to undercut the suits who showed up in their territory. 

Conclusion and Definitions

This report isn't just meant for those who are experts in the weed industry; anyone who is even remotely curious about this industry should be able to digest this report. With that in mind, here are a few things we talked about in here that might need further context:

This is, according to alternative data including location, pricing, hiring, and workforce information, the state of the marijuana industry as of mid-2019. It consists of major players that are already doing plenty of business in Canada while already planting roots in the United States as legalization runs its course in the states and US capital. The states that have legalized marijuana — recreational or medical — are rolling this out slowly, with California and Colorado leading the way for the newly budding legal weed states such as Massachusetts. Finally, in terms of pricing, those who are already selling in Canada are still experimenting with price points that turn a profit while not forcing customers back to traditional dealers.

But, most importantly, this industry has billions of capital already in it; it's just a matter of finding out where, and when, to enter the rotation as the money pipe gets passed around.

Name/Concept Definition
Marijuana, Weed, Cannabis, etc. A natural psychoactive drug used for medicinal or recreational purposes, this flower is comprised of over 400 chemical entities. The main two chemicals are Tetrahydrocannabinol (THC) and cannabidiol (CBD). 
Legality of Cannabis Although it has been used heavily in human history, the plant saw numerous legal restrictions placed on it around the world in the early 20th century. In the U.S., it was considered a Schedule I of the Controlled Substances Act, on par with LSD and cocaine. Since then, cannabis increasingly became decriminalized, delisted (in some forms) from Schedule I, and legalized in some capacity in all but three states.
CBD Cannabidioil acts on the brain's neurotransmitters to give a user the feeling of relaxation and calmness. It is not psychoactive, and is also considered "better" in the eyes of some states for medicinal purposes. I.e Texas has legal medicinal marijuana, but only with high CBD and limited THC.
THC Tetrahydrocannabinol is the primary psychoactive part of cannabis and is what, in layman's terms, gets people high. While naturally occurring in cannabis, it can also be man-made into drugs, such as Dronabinol (sold by AbbVie Inc. as Marinol), used for complications with HIV/AIDS (anorexia) and chemotherapy induced nausea and vomiting

Written by Joshua Fruhlinger and James Mattone. Data analysis provided by Stella Weng. Art by Klawe Rzeczy and Marta Lopata. Data processed by Thinknum.

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