[PPT] - LEGALIZATION OUTCOMES C OLORADO T WO Y EARS I N PRESENTED BY Adam PowerPoint Presentation

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LEGALIZATION OUTCOMES

COLORADO TWO YEARS IN

PRESENTED BY Adam Orens, Founding Partner

aorens@mjpolicygroup.com www.mjpolicygroup.com

Marijuana Policy Group

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ABOUT

 Leaders in economics, finance & policy  Market intelligence – policy design  Colorado MED cannabis economist

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‒ Market sizing ‒ Demand estimation ‒ Market analytics ‒ Business modeling and planning ‒ Government consulting

FOUNDED IN 2014

Experience in 17 states, 2 countries:

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Regulated medical market emerges

HISTORY OF COLORADO CANNABIS LAWS

Pre-2000

ILLEGAL

Federal Schedule I drug

2000 – 2009

LEGAL for medical purposes

 Unregulated market  Caregiver model  “Red card”

2010 – 2012

2001 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

 Licensed dispensaries  Vertical integration required  3 license types: Cultivation; “MIP;” Retail

2012 2013 2014 2015

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Regulated market opens

HISTORY OF COLORADO CANNABIS LAWS

November 2012

Amendment 64

 Popular vote in favor of legal:

– Possession – Regulation – Taxation

 Tax revenues were a major selling point for the campaign

January 2014

2001 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

 67 metric tons of marijuana sold legally (~$670 million)  $75 million in tax revenues

2012 2013 2014 2015

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HISTORY OF COLORADO CANNABIS LAWS

Year-end 2015

The market grows

 Market grows to $996 million  $137 million in tax revenues

2001 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Regulated market opens

January 2014

 67 metric tons of marijuana sold legally (~$670 million)  $75 million in tax revenues

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FEDERAL RESPONSE

US Dept. of Justice: Cole Memorandum

 Prevent distribution to minors  Prevent $$$ from going to criminal syndicates  Prevent diversion  Prevent regulated system from being used as a “cover”  Prevent violence and use of firearms in cultivation  Prevent DUI and other adverse public health consequences  Prevent cultivation on public lands  Prevent marijuana use on federal property

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NECESSITY IS THE MOTHER OF INVENTION

Marijuana Enforcement Division

 Former gambling regulators  Strong central surveillance and security  Licensing, watching, tracking

Seed-to-sale tracking

 “METRC”  RFID tags on every plant  Immature > Veg > Flower > Harvest > Package

Denver is cannabis silicon valley

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LEGAL JURISDICTION

State Authority:

 Employee and facility licensing  Public health and food safety  Tracking

County / City Authority:

 Each county or city can “ban” stores, cultivators,

r manufacturers.

 322 legal jurisdictions in CO: 218 districts: “banned,” 31 partially “banned,” 73 districts “allowed”

Tax Methodology: Alcohol used as model

 License Fees + Excise Tax + Sales taxes

The power to ban

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SUPPL Y AND DEMAND

 Use prevalence  Demand  Pricing  Medical vs. adult use  Product mix  Economic impacts  Supply channels

&

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PAST MONTH PREVALENCE — 18+

6.5% 7.3% 7.5% 7.8% 8.1% 9.2% 9.8% 11.3% 11.0% 10.4% 12.7% 14.9% 6.2% 6.1% 6.0% 6.0% 5.9% 6.0% 6.4% 6.8% 6.9% 7.1% 7.4% 8.0%

0% 2% 4% 6% 8% 10% 12% 14% 16%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Colorado U.S.

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YOUTH MARIJUANA USE

7.6% 8.1% 9.1% 10.2% 9.9% 10.7% 10.5% 11.2% 12.6% 6.7% 6.7% 6.7% 7.4% 7.0% 7.6% 7.5% 7.1% 7.2%

0% 2% 4% 6% 8% 10% 12% 14%

2006 2007 2008 2009 2010 2011 2012 2013 2014 Colorado U.S.

Past 30-day marijuana use, 12-17 years

ld, 2006 - 2014: NSDUH

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PREVALENCE AND DEMAND

Frequency

f use:

Low Mean High users demand

<1

240 361 721 29.2% 0.4%

1- 5

2,625 4,039 5,756 24.5% 4.0%

6- 10

2,138 3,289 4,686 7.5% 3.2%

11- 15

1,476 2,271 3,237 3.2% 2.2%

16- 20

3,728 5,735 8,172 5.8% 5.6%

21- 25

19,888 24,478 29,067 8.1% 24.0%

26- 31

66,007 81,240 96,472 21.8% 79.8%

Total:

96,103 121,412 148,112 Thousand Grams

(LBS):

211.9 267.7 326.5 Thousand Lbs

Total:

96.1 121.4 148.1 Metric Tons

Total: (Oz)

3,390 4,283 5,224 Ounces Usage Amounts: Share of ..

Note: 20% of users = 80% of Demand

Heavy users: 3x as much demand per day

(Units: thousands of grams)

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20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000

2014 2015

Metric Tons

Tourist <1 days/mo. 1-5 days/mo. 6-10 days/mo. 11-15 days/mo. 16-20 days/mo. 21-25 days/mo. 26-31 days/mo.

Cohorts for Use Days per Month 130.3

total metric tons

147.8

total metric tons

7% 10% 65%

DEMAND

62% 65% 10% 19% 7% 9%

7% 4% 3% 3%

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55.2% 41.0% 44.8% 59.0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2014 2015 Adult Use Medical

MEDICAL VS. ADUL T USE

 Adult Use – 88% growth  Medical – 6% growth

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PRICING — FLOWER

$6.87 $5.61 $14.82 $10.25 $22.79 $9.98

$0 $5 $10 $15 $20 $25 $30

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Medical $/Gram - CO Adult Use $/Gram - CO Recreational $/Gram - WA

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PRODUCT MIX — MEDICAL

77.3% 14.1% 6.3% 2.4% 73.1% 19.3% 6.4% 1.2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Flower Concentrate Infused Edible Infused NonEdible 2014 2015

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70.1% 11.6% 14.7% 3.6% 67.0% 17.0% 13.6% 2.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Flower Concentrate Infused Edible Infused NonEdible 2014 2015

PRODUCT MIX — ADUL T USE

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ECONOMIC IMPACT

9,821 jobs 4,223 jobs 14,044 jobs

+ = + =

$996 Million

Total Impact

Secondary Impact

Direct Impact

Manufacturing Retail Cultivation

Colorado Cannabis Market

$1.39 Billion $2.39 Billion

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20 40 60 80 100 120 140 160

2014 2015

Metric Tons

Regulated Market - Medical Regulated Market - Adult Use Unregulated Market (Homegrows, Caregivers, Grey Market, Black Market)

130.3

total metric tons

147.8

total metric tons 26.5% 40.9% 32.6% 29.7% 42.7% 27.6%

ELEMENTS OF SUPPL Y

Regulated market

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SUMMARY

Prevalence and demand  Casual users  Prices  Concentrate sales  Economic impact  Regulated market serving nearly 75% of demand

$

75%

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DISCUSSION

Legalization

 Prevalence, users, demand   Potency, product safety   Arrests, incarceration costs, illicit market   Social indicators - ???

Prohibition

 Prevalence, users, demand   Incarceration persists, illicit market prevails  Social indicators - ???

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REGULATORY ISSUES

 Potency  Standard dosage  Product safety  Advertising  Diversion  Authority

MEDICAL CANNABIS

Grams Strain KEEP OUT OF REACH OF CHILDREN

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Adam Orens Founding Partner Marijuana Policy Group 1999 Broadway Suite 2200 Denver, Colorado 80202 www.mjpolicygroup.com info@mjpolicygroup.com

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SOURCES

 https://www.colorado.gov/pacific/sites/default/files/Market%20Size%20and% 20Demand%20Study%2C%20July%209%2C%202014%5B1%5D.pdf.  http://cdpsdocs.state.co.us/ors/docs/reports/2016-SB13-283-Rpt.pdf.  MPG Marijuana Impact Model (forthcoming).  National Survey on Drug Use and Health, 2012-2014, Colorado prevalence.