Advisory Firm Analyzes Colorado Market Dynamics

The inception of the recreational marijuana market has caused medical sales to decrease significantly in the state of Colorado, according to a new report published by GreenWave Advisors.

GreenWave Advisors, a startup research advisory firm based in New York City, has published a report aggregating and analyzing market data provided by the Colorado Department of Revenue and the Colorado Marijuana Enforcement Division.

Matt Karnes, the author of the report, spoke at the Marijuana Investor Summit on Monday, April 20, 2015, inspiring a lively audience debate about whether reclassifying cannabis as a Schedule II drug would negatively impact the recreational market.

Karnes said no, claiming that reclassifying the drug would only ease banking regulations and reduce investor risk in the industry. But an audience member quickly pointed out that changing the classification may loosen the restrictions around accessing a medical card, making the medical market—which would no longer be considered federally illegal—much more appealing to consumers.

This proposed theory conflicts with the central thesis of the GreenWave Advisors’ Report, which suggests that medical marijuana users are slowly migrating towards the recreational markets. According to the report, the growth rate in medical marijuana sales declined 3% during the 2014 calendar year, in comparison to the 50% growth increase the previous year. The average monthly purchase per patient also dropped from $284 per month in 2013 to $273 per month for 2014. The analysis forecasted that these trends might continue in 2015.

“We expect 2015 total retail marijuana sales to be flat from 2014 levels and we believe that the trend of medical use consumers migrating into the recreational marketplace will continue,” Green WaveAdvisors said.

The report also offers high-level investment advice, hinting at how potential regulatory changes could affect certain market niches within the industry. For example, GreenWave Advisors expects investment opportunities in the laboratory industry to become more “attractive” as the laws regarding testing regulations become less lax.

The analysis also opined that demand for infused products could be tempered by new regulations that could potentially limit the THC/CBD content in edibles, as well as limit transaction size. GreenWave Advisors’ report illustrates that infused products composed 45% and 25% of total recreational sales and total medical sales in 2014, respectively.

At the summit, Karnes offered a long-term forecast that demand for certain ancillary or “picks- and-shovels” businesses may cease should cannabis become federally legal. Cannabis delivery services? Karnes forecasts that this will be replaced by mail delivery service. Armed security guards? These may become obsolete once cannabis businesses can put their cash in the bank.

“We wanted to provide insight to the investor community,” said Karnes, on his objective for the report. He hopes to continue to publish analytical reports on the industry. “We’ll continue to take this state-by-state and move in tandem with the markets.”

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