The Money Behind Marijuana
- August 18, 2018
- Posted by: Mike Brown
- Category: Personal Finance
In the United States, marijuana has come a long, long way.
In 1931, the state of Texas declared marijuana a "narcotic," allowing a life sentence for possession of pot. In 2016, California, Nevada, Maine, and Massachusetts all legalized recreational marijuana through a ballot initiative.
In 1969, a Gallup poll found only 12 percent of the American public was in favor of legalizing cannabis. Gallup conducted the same poll in 2016 and this time 60 percent of Americans supported legalization.
As it stands today, 29 states and the District of Columbia have laws that legalize marijuana in some form. Seven of those states and Washington D.C. have also passed measures that make recreational weed legal.
As a result of cannabis becoming less taboo and local laws becoming more friendly, the marijuana industry has experienced nothing short of a boom. According to an Investopedia report, marijuana sales in North America grew by 30 percent to $6.7 billion in 2016. By 2021, that number is projected to increase to $20.1 billion. In California, where cannabis is the biggest cash crop, marijuana sales revenue could exceed $15 billion, in addition to $3 billion in tax revenue.
Marijuana was recently recreationally legalized in Nevada and is expected to support over 41,000 jobs by 2024, while also producing more than $1.7 billion in labor income.
While the anti-legalization side of the marijuana debate has many merits, one of them is not the economics of legal cannabis. The tremendous economic opportunity that comes with legalized marijuana is indisputable and a big reason why more states are re-writing their laws.
But, most folks already knew how legalized marijuana impacts state economies, the numbers are plain to see. What LendEDU wanted to discover was how legalized marijuana was affecting the financials of the individual cannabis user.
The Average Legal Consumer Spends $111.05 Per Month on Marijuana
LendEDU conducted a poll of 1,000 American consumers of legal age (21+) to gauge their marijuana spending habits. As noted earlier, we wanted to see the impact that legal marijuana was having on individuals' wallets, so we only polled consumers from the states where recreational marijuana use is legal or was recently legalized. Respondents came from Alaska, California, Colorado, Washington D.C., Maine, Massachusetts, Nevada, Oregon, and Washington. Poll participants were also screened to ensure they were marijuana-users and comfortable with revealing their spending habits.
Our first question asked 1,000 legal marijuana consumers the following question: "How much do you spend per month on marijuana product purchases? (ex. loose marijuana, pre-rolled joints, food products, etc.)"
Respondents were given the freedom to enter in a specific dollar amount, and LendEDU averaged together all 1,000 responses. On average, an of-age cannabis consumer from a state where the drug is recreationally legalized spends $111.05 per month on marijuana products.
Poll participants were also asked to accurately estimate how many individual purchases they make per month when it came to marijuana products. After averaging together all 1,000 responses, LendEDU found that the average marijuana consumer from a recreationally-legal state makes 6.22 marijuana-related purchases per month.
LendEDU then took the next step into our own hands and found the average purchase price for each marijuana product. By dividing the average monthly expenditure by the average monthly purchase count, we found that the average marijuana purchase amount equals roughly $17.85.
Over a Quarter of Marijuana Users Spend More in a Month on Cannabis Than Eating Out
LendEDU posed the next question to each of our 1,000 qualified poll participants: "In a month, do you spend more money eating out or on marijuana product purchases?"
This particular question produced some surprising results. Sure, the clear majority of respondents, 72.4 percent, said they spend more money per month eating out than on marijuana products. However, 27.6 percent of our cannabis-consuming participants do indeed spend more money on marijuana, and that is nothing to sneeze out.
First, the act of eating out can rack up quite the bill, especially over the span of an entire month. Depending on where you eat and with how many people, you can reasonably expect to spend anywhere from $10 to $150 for each meal you decide to dine-out for. Compound that expenditure over a full month and you are suddenly looking at quite the costly tab. But, there are still people out there spending more on marijuana.
Second, many consumers from states where marijuana is recreationally legal consume the drug as a hobby or luxury, not as a medical necessity. No matter where you are from, eating is required if you wish to maintain a healthy lifestyle. Yet still, a decently-sized contingent of people are prioritizing their cash for cannabis, not for food. Of course, it is important to remember that perhaps the folks that are spending more on marijuana are cooking their own food, but does anyone ever really go a full month without eating out a few times?
The point to be made is that in states where marijuana has become recreationally legal, the consumption of the drug has become both a priority and lifestyle choice, a theory that is reinforced with the next question.
More Than Half of Users Include Marijuana in Their Monthly Budgets
All 1,000 of-age American cannabis consumers from states where the drug is legal for recreational use were asked to answer the following question: "Do you include marijuana product purchases in your monthly budget?"
As the above infographic shows, a slight majority of respondents, 51.1 percent, do indeed include marijuana in their monthly budgets. Meanwhile, 48.9 percent are not budgeting for their cannabis consumption each month.
Once again, the results of this question demonstrate the level of fiscal significance that marijuana has come to play in the lives of consumers. It has not only become a prioritized purchase, but it has become a monthly bill similar to paying your cable or rent. And, the fact that more consumers are budgeting for marijuana than those that are not is a good thing; budgeting keeps your spending to a responsible limit and will prevent you from seeing red at the end of each month.
This question also helps explain why the marijuana business has become so profitable. In states where cannabis is recreationally legal, residents have become such frequent shoppers that they are now setting aside a pre-determined amount of cash to spend on the product each month.
In Recreationally Legal States, Amount of Purchases Has Gone Up, but Cost Has Gone Down
The final two questions of our poll produced results that were perhaps the most telling indicators in terms of the impact that recreationally legal marijuana has on the entire industry.
For the first question, we asked our respondents the following: "In the last year, has the cost of your monthly marijuana product purchases increased or decreased?"
The second question read like-so: "Did the legalization of recreational marijuana products increase or decrease the amount of marijuana products purchased each month?"
When asked about the cost of their monthly marijuana product purchases, 59 percent of legal cannabis consumers said the cost has decreased, while 41 percent stated the cost has gone up.
When asked about the number of marijuana-related purchases they have made, 54.2 percent of respondents answered that they have made more purchases. In comparison, 45.8 percent thought their number of cannabis purchases has decreased.
The results of these two questions must be looked at jointly, because when assessed together, the data perfectly sums up the impact the legalization of recreational marijuana has had on the cannabis economy.
As reported in a Washington Post article, the average sale weight of loose marijuana by the gram has steadily plummeted in the state of Washington since July of 2014, when the first recreational retail marijuana store opened.
The author of the Washington Post article, Keith Humphreys, wrote the following: "...Prohibition (of marijuana) imposes many costs on drug producers. They must operate covertly, forgo advertising, pay higher wages to compensate for the risk of arrest, and lack recourse to civil courts for resolving contract disputes. Legal companies in contrast endure none of these costs and also can benefit from economies of scale that push production costs down."
But, as the legalization of recreational marijuana has pushed the average price down, it has also pushed consumers - who now have more legal access than ever before - to purchase more cannabis. In an article citing data from Arcview Market Research, Business Insider writes that recreational marijuana sales are expected to surpass medical marijuana sales for the first time in 2019.
Because of an over-saturated market where marijuana retail stores are as common as the Golden Arches of McDonalds, people have more access to make purchases than at any other point in history. This access has simultaneously led to more consumers buying more cannabis products, but at a cheaper price thanks to competition and less costs for the marijuana retailers.
This survey was commissioned by LendEDU and conducted by Survata, an independent research firm in San Francisco. Survata interviewed 1,000 online respondents between September 22, 2017 and October 02, 2017. Respondents were reached across the Survata publisher network, where they take a survey to unlock premium content, like articles and ebooks. Respondents received no cash compensation for their participation and were asked to answer each question truthfully and to the best of their abilities.
Respondents were filtered using both screening questions and location data to ensure that each of the 1,000 respondents were from one of the seven states or Washington D.C. where marijuana is recreationally legal and that they were of legal age to consume marijuana (21+). Respondents were also screened to ensure they were consumers of recreational marijuana.
Image Copyright @ Dank Depot