Property Developers Push for Open Drinking on City Streets

The issue of marijuana and opioids use with alcohol creates the need for poly impairments arrests that show other impairments, not just alcohol.  Most of the active drinkers equal 10 percent of the majority of the populace consumes close to 70 percent of the alcohol produced. Normal people drink only 30 percent of the alcohol produced and will show active signs of possible alcohol impairments much quicker than active drinkers. Active alcohol users have greater tolerance and will not show active impairments as quickly as normal patrons and must be controlled by continual and ongoing employee checks. Server are always under pressure to recheck patrons. The standard impairment guide of alcohol use is not norm for active alcohol consumers. Google what is the highest BAC counts and see what you are up against. Always train all employees to do continually and ongoing checks on the levels of possible impairment with your patrons. Pregaming patrons and drinking at other locations are always a possible situation. Deal with what you see immediately. I immediately helped, assisted, and protected our patrons.

Robert Pomplun 

Servingalcohol.com

 CO, the most established adult use state, retail revenues are up ~50% YTD (through September), tracking at close to $1 bn in annualized sales. 

Tens of Millions of Americans Use Marijuana, Can the Momentum Be Stopped?

Source: Cowen and Company

November 21, 2016

The Cowen Insight

Last week we attended the preeminent MJ conference of the year in Vegas that had a record 10,000 attendees (~2x YoY). With another 8 states embracing MJ policy on the ballot earlier this month (and a sizeable 40 mm user base), excitement at the conference was palpable, until day 3. The announcement of Sen Jeff Sessions as AG, raises big questions.

Sessions as AG. A Bearish Contrast to Encouraging Momentum

Heading into the election, the biggest fear for the legal / emerging cannabis industry in a Trump administration scenario was the appointment of Chris Christie (R Governor, NJ), who is staunchly anti-drug. The announcement that Jeff Sessions (R Senator, AL) would be appointed as Attorney General presents an uncontemplated, and potentially more bearish outcome for the legal cannabis industry, as Sessions noted as recently as April that "good people don't smoke marijuana." While an unexpected election outcome has resulted in this heightened risk of industry disruption, it coincided with record levels of approval from the electorate at the state level, with a record 8 states (out of 9) passing cannabis laws (evenly split between adult and medical use).

Republicans = States Rights?

The hope for the industry is that either:

1) legal cannabis is not a priority for the administration (as Sessions is well-known for his views on immigration, which align with the President-elect),

2) the administration will not want to curb the sizeable tax revenues seen in states where recreational cannabis is legal, or

3) that state's rights, which are often touted by Republicans, will be upheld (which sentiment was echoed during the campaign). What is more, any challenge to these laws would likely face opposition at the state/local level. Legal cannabis for either medical or adult use has been a voter-led initiative.

. Indeed, of the 28 states that have legalized medical cannabis use, 50% have been passed by ballot (and 80% of the first 10 states). As well, 100% of the states that have legalized cannabis for adult use have done so by ballot.

As such, over 60% of the U.S. population now will have access to medical cannabis and over 20% of the population now lives in a state that has sanctioned (and hopefully will commercialize) adult use of cannabis. The broadening access to legal cannabis reflects a clear shift in consumer sentiment, which we would hope the administration also appreciates. Indeed, recent polling suggests that close to 60% of the population supports legal cannabis, including over 70% of millennials.

Cannabis Is Far From Fringe

Sessions' commentary on cannabis would indicate a belief that perhaps cannabis use occurs on the fringes of society. That is far from the reality in the U.S. According to government survey work, there are close to 33 mm admitted cannabis users in the U.S. today. As such, 13.5% of consumers over the age of 12 are willing to admit to government surveyors that they are actively consuming a Schedule I controlled substance. What is more, a staggering 114 mm consumers (or 46.9%) are willing to admit to the U.S. government that they have tried cannabis.

And, These Numbers Are Likely Far Too Low. As was seen in both CO and WA, when these states adopted adult use laws (in 2012, two years ahead of implementation), there was a ~27% increase in reported cannabis incidence, over the subsequent two survey periods (through 2014, the year that adult use was commercialized). As such, the number of admitted cannabis users in CO and WA increased by a collective ~430k, to ~1.84 mm, between the 11/12 and 13/14 survey periods (the most recent available, though national data for 2015 would suggest these numbers increased further more recently).

We acknowledge that perhaps that jump in reported incidence reflects the response bias rolling off. As well, there was already strong underlying consumption (as CO and WA reported overall incidence above the national average). These higher rates of incidence perhaps created a cohort effect when it comes to trial, or category re-engagement. However, if we assume that just half of that increase was due to a response bias rolling off, that would imply that there are in fact 37 mm annual cannabis users in the U.S. (as opposed to close to 33 mm). If 75% of the increase in incidence is assumed to be the absence of the response bias, that would imply an even bigger 40 mm total addressable market.

To be sure, regardless of the drivers (larger than expected user base vs. new category entrants), industry revenue growth in the current adult use states has been clearly robust. In CO, the most established adult use state, retail revenues are up ~50% YTD (through September), tracking at close to $1 bn in annualized sales. Meanwhile, retail sales in WA are up over 100%, while newly opened OR has already seen over $150 mm in retail sales.

Given our upwardly revised estimate for the total user base, it would imply a bigger nearly $60 bn industry (based on 75% response bias and holding our estimate for $1,000 / year annual consumer spending in the category). However, with the formation of the current administration, there is clear uncertainty around the current regulatory landscape. As such, we opt to maintain our conservative estimate for a total industry of ~$50 bn in 2026, assuming national access for adult use (spanning 2 more Presidential election cycles, and 4 more ballot election cycles).