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North Americans Are Spending Nearly as Much on Weed as They Do on Wine

Submitted by Phillip Smith on (Issue #959)
Politics & Advocacy

Move over, Napa Valley, there's a new kid on the block. When it comes to spending on mind-altering substances, Americans and Canadians are shelling out just about as much for marijuana as they do for wine.

The bud of the herb is catching up with the fruit of the vine. (Wikimedia/Creative Commons)
In its executive summary of a yet-to-be-released report, Arcview Marijuana Research pegs the size of the North American marijuana market -- legal and illegal -- at $53.3 billion, which puts it roughly even with the market in wine. According to Statista, US retail wines sales sit at $55.8 billion, and Canadian government figures put sales there at $3.2 billion.

Weed has not yet overtaken wine, but it's damned close. And this is happening in a marijuana market that is still mostly illegal. Yes, Canada will legalize marijuana, but it hasn't done so yet. And yes, more than half the states allow medical marijuana and eight of them have legalized it for adults, but illegal sales still account for 87% of the market, according to Arcview.

For Arcview CEO Troy Dayton, the huge illegal market is not a bane, but a boon.

"The enormous amount of existing, if illicit, consumer spending sets cannabis apart from most other major consumer-market investment opportunities throughout history," he explained. "In contrast to comparable markets with fast growth from zero to tens of billions in recent decades such as organic foods, home video, mobile, or the internet, the cannabis industry doesn’t need to create demand for a new product or innovation -- it just needs to move demand for an already widely-popular product into legal channels."

As the adult use markets in the newest legal US states (California, Maine, Massachusetts, and Nevada) and Canada are established, Arcview predicts the illegal market's share of total sales to decline. The legal market should grow from $6.9 billion last year to $21.6 billion by 2021. But even then, Arcview says, the black market will still account for two-thirds of all sales.

That's because black market operators in states that have not legalized even medical marijuana, not to mention recreational weed, will continue to thrive on an "illegality premium" or "prohibition tax" built into black market prices with no competition from legal operators.

Conversely, state-legalized sales also include an illegality premium due to federal law, and businesses are unable to reap the efficiencies of scale that fully legal businesses are able to. The marijuana prices of tomorrow may be markedly lower than the marijuana prices of today, which could mean a smaller market eventually if measured by dollars spent, even if it is larger in terms of number of customers.

Stil the marijuana market is huge by any meausre, and it's not going away -- despite what happens in Washington, DC. That's something to ponder as you sip your Chablis.

Permission to Reprint: This content is licensed under a modified Creative Commons Attribution license. Content of a purely educational nature in Drug War Chronicle appear courtesy of DRCNet Foundation, unless otherwise noted.

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