- Jeff Ostrowski Palm Beach Post Staff Writer
Brian Booth of Boca Raton has struggled with seizures and weight loss since a car crash, and he says medical marijuana helps him manage his health where prescription drugs failed.
Chalk up his testimonial as a marketing victory for pot proponents, who see the potential for Florida’s cannabis sector to blossom into a billion-dollar industry in the near future.
There’s a catch, though: Booth says he spends just $40 a month on medical marijuana, a budget too modest to sustain the cannabis industry’s optimistic financial projections.
Since Florida voters overwhelmingly legalized medical marijuana in 2016, the state has experienced a green rush.
A Canadian cannabis company in 2017 paid $40 million for one of Florida’s seven licensed pot purveyors. And in January, a New York marijuana venture upped the ante, paying $48 million for another Florida licensee.
iAnthus Capital, the company that last month spent $48 million on GrowHealthy, said when it announced the deal that it expected Florida pot sales to top $1 billion in 2020.
However, even the analyst who produced that estimate acknowledges that it’s built on assumptions about Florida’s future permissiveness that might prove optimistic.
BDS Analytics of Colorado and The Arcview Group of California team up to produce “The State of Legal Marijuana Markets,” an annual publication that fetches the premium price of $597 a copy.
The report estimates Florida’s medical marijuana market will approach $1.1 billion in 2020. Forecasts by two other analysts predict Florida pot sales will remain below $1 billion in 2020.
BDS Analytics’ projection is based on 350,000 Floridians signing up for the pot program and spending an average of nearly $259 a month, said Tom Adams, principal analyst at BDS Analytics.
“The bottom line is medical marijuana patients consume a lot of cannabis,” Adams said.
However, those consumption patterns could be hampered by the limited types of pot products for sale in Florida’s dispensaries. So far, Florida doesn’t allow the sale of marijuana that can be smoked, although Orlando attorney John Morgan has sued to overturn that rule.
Nor does Florida permit “edibles” -- the cannabis-infused candies, cookies, drinks, granola and other items sold in pot shops in California and Colorado.
That leaves only “concentrates,” cannabis oils and extracts taken orally or inhaled through a vaporizer.
Weed remains illegal at the federal level, leaving states to create their own rules. In addition to limiting the type of products that can be sold, Florida also insists that one company handle the product from the farm to the store. That prohibits dispensaries from selling a variety of brands.
In another challenge, many municipalities and landlords give cannabis dispensaries the cold shoulder. So 15 months after 75 percent of Palm Beach County residents voted in favor of medical marijuana, just two pot shops are open for business in the county, both in Lake Worth.
“A concentrate-only market, totally vertically integrated, with a very limited number of stores, is going to move very, very slowly,” Adams said. “On the other hand, the demographics are just perfect in Florida. The boom is in older folks rediscovering what they haven’t touched since college.”
Indeed, Floridians seem eager to try medical marijuana. As of Feb. 9, nearly 77,000 patients had joined the state registry of pot patients, according to the Florida Department of Health. Some 50,000 new patients won permission to use medical marijuana in just six months.
Randy Maslow, president of iAnthus Capital, said he’s comfortable with the $1 billion estimate. Smokable weed -- “flower,” in industry parlance -- is losing ground to other forms of cannabis, he said, so Florida’s ban on that form of weed might not matter so much.
“I think that number holds pretty well, even if there’s no flower,” Maslow said. “We think it’s a reasonable calculation.”
Two other analysts have slightly less robust predictions for Florida’s marijuana industry. Matt Karnes, managing partner at GreenWave Advisors in New York, sees Florida’s sales hitting $936 million in 2020, then eclipsing $1 billion in 2021.
Karnes acknowledges the pitfalls of predicting sales for an untested industry clouded by regulatory uncertainty.
“It’s a moving target,” Karnes said. “Nobody really has the right answer.”
Another estimate, from New Frontier Data, puts Florida’s 2020 sales at $727 million.
Florida’s cannabis companies aren’t required to publicly disclose their sales statistics, so estimating revenue requires guesswork. One crucial question: How much will Floridians spend on weed?
During a tour of his new Lake Worth location in January, Curaleaf Chief Executive Lindsay Jones said patients typically spend $150 to $180 a month. Other cannabis executives and patients interviewed by The Palm Beach Post have given similar estimates of spending patterns.
Adjust BDS Analytics’ estimate of 350,000 patients to reflect spending of $180 a month rather than $259, and total sales would fall to $756 million in a year -- still a hefty figure for a nascent industry, but not as impressive as the $1 billion projection.
Even those who swear by cannabis have comparatively modest budgets. Mike Rohrbaugh of Pompano Beach said he spends $160 a month on medical marijuana to treat back injuries and severe pain from a car accident in the 1990s. He said cannabis relieves his pain and insomnia.
“I just do a draw off my vape and, boom, I sleep all night,” Rohrbaugh said. “I’m in the best health I’ve been in for 12 years.”
Those who are investing in Florida’s cannabis industry are focused on the industry’s potential rather than its challenges.
“You’re in it for the long haul,” Maslow said.
If sales prove more sluggish then expected, Maslow said, his company could adjust by opening fewer new dispensaries.
George Scorsis, head of Liberty Health Science, the company that last year paid $40 million to enter Florida’s market, is similarly optimistic.
“We feel this is going to be one of the best markets in the U.S.,” Scorsis said.
Scorsis expects Florida to allow edibles in the near future, and he’s already preparing to produce edibles at Liberty Health Science’s facility in Gainesville.
He stresses that he’s not seeking to market candies in cartoon-like shapes or other forms that would be attractive to children.
“Edibles do have somewhat of a stigma,” Scorsis said.
There’s no sales tax on medical marijuana, so the public sector wouldn’t benefit directly from increased sales. The Florida Department of Health collects a $75 fee from each person in the pot registry.
Industry observers say growing public acceptance of marijuana could compel Florida regulators to relax rules in a way that would boost pot revenues. Most states now have legalized weed in some form.
“The momentum is so strong,” Adams said, “that it’s hard to believe you won’t see the rules loosen up in Florida.”