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Demand for legal marijuana up and down

NEW YORK, NY—June 27, 2017—The demand for legal cannabis products in the United States declined by 1.1% in April 2017, according to the inaugural release of the monthly AndCan Index, which closely monitors demand across every U.S. state.

“All indications are that this drop is but a detour on an otherwise steady path in the growth of the cannabis market,” said AEG consultant Peter J. Schwartz, who oversees the AndCan Index as well as the firm’s report on The Market for Legal Cannabis Products in the 50 United States.

AndCan Index data shows that since January 2015, the demand for legal cannabis products has grown by 13.5% nationwide—and since last November’s election, when four states voted to legalize recreational use of marijuana, overall U.S. demand has increased by 2.4%. The April decline marked the second largest single-month drop in demand on record.

The AndCan Index builds from more than two years of comprehensive coverage of the cannabis market in the U.S. by Anderson Economic Group, a rigorous methodology that has been presented at two conferences of professional economists, and more than two decades of business consulting experience worldwide.

“We’ve applied to the cannabis industry the same kinds of sophisticated data analytics and exacting methodology that we employ in our consulting work on a regular basis,” said Schwartz, “We have developed for the first time what truly is a Dow Jones Industrial Average for the cannabis market.”

How the AndCan Index is constructed 

The AndCan Index originates from hundreds of thousands of data points, including recreational and medical sales in states where the sale of cannabis products are legal (where available for Alaska, Colorado, Oregon, and Washington). It also includes calculations for latent (unobserved) demand across the country.

Adjustments are made based on the concentration of cannabis in products that are sold both medically and recreationally—a highly-potent marijuana cigarette is indicative of greater demand for cannabis than a low-potency, cannabis-oil-infused beverage, for instance—as well as the market-share of these products, and pricing differences from state-to-state.

In those states where legal sales are not available, we estimated latent demand from survey data on marijuana usage, alcoholic beverage consumption and spending, and demographic data. Estimates are made for each state based on that state’s unique data.

Monthly data on actual purchases in states where the products are legal are the primary drivers of month-to-month variation in the AndCan Index. As states change their laws, the index captures the transition from unobserved demand to observed demand without the distortion that would be caused by incorrectly assuming that all taxable sales in newly-legalized states represent growth in consumer demand.

Historical data began at the start of 2015. All values are indexed to the period of the November 2016 U.S. general election. The index structure means that any value greater than 100 indicates that the market demand has increased since the baseline period of November 2016.

The AndCan Index is based on months of intense work, plus years of Anderson Economic Group’s experience in assessing the demand of legal cannabis products. The original methodology behind the index was presented in a technical paper authored by the firm’s CEO, Patrick Anderson, in May 2015 at the National Association for Forensic Economists International Meeting in Amsterdam. An updated analysis was later presented to economists at the January 2016 Allied Social Sciences Association Conference in San Francisco. Comments from other economists from these conferences, as well as additional research by Anderson Economic Group consultants, have been incorporated into the AndCan Index.

The same market expertise is used in the publication The Market for Legal Cannabis Products in the 50 United States—AEG’s 270 page, state-by-state analysis, now in its second edition. This publication is the leading source on the economics of the cannabis industry. It covers actual and potential market size, indicative business value, tax revenue, alcohol beverage cannibalization, legal status, and political momentum.

The result is the most accurate representation of legal cannabis product demand that is available today. “For years we’ve seen the momentum in this market,” Schwartz said, “But finally it has now been quantified—as accurately as that of any other commodity.”

Stay up to date with the latest cannabis news from a Texas perspective by following the Texas Cannabis Report social media pages.

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1 Comment

  1. Lee Adkins
    July 4, 2017 at 12:51 pm

    Thanks for keeping us Texans informed on cannabis related new across the state Stephen. You do great work which is most appreciated. Keep up the good work!