Nevada Cannabis Businesses Betting Big on Tourism and the 2016 Legalization Vote

The cannabis industry has been keeping a close eye on Nevada, and with good reason. In 2013, a full 13 years after Nevada initially approved medical marijuana, we finally saw approval of retail cannabis distribution and production in our state. Unfortunately, right now there are not many Nevada patients, which begs the question of what Nevada growers, producers, and retailers are going to do.

Marijuana and NevadaNevada has so far allowed only 12,000 licensed patients to purchase cannabis at one of the 66 dispensaries that (hopefully) will open over the next year or so. Nevada, right now, has roughly one cultivation facility for every three dispensaries, which means Nevada has approximately 180 patients per dispensary and only 60 patients per commercial grow. If you are scratching your head  thinking that those numbers don’t add up, you are right. Businesses are not going to invest millions to get a Nevada cannabis grow operation up and running just to be able to supply 60 people on a regular basis, unless they are betting on the future, which most are.

Nevada’s Medical Marijuana Future. Nevada welcomes more than 40 million visitors a year. With an obvious eye to those tourists, Nevada is the only state in the country to allow full reciprocity with other states’ medical marijuana programs. About 0.34% of our population currently carries a medical marijuana card. If we apply that same percentage to the tourists that come to Nevada, that nets an additional 140,000 patients a year. Though these are transient visitors, that is still an approximate daily number and that is a lot more potential customers for the dispensaries. Medical cards among Nevada residents have also been on the rise and many expect the number of Nevada cannabis patients to hit around 60,000 within the next few years.

Recreation is Nevada’s Big Bet. Even 200,000 potential medical patients is not enough to sustain a profitable business for the number of marijuana businesses the State of Nevada has approved. The big bet comes with the 2016 election, at which time Nevadans will vote on recreational use. The national media seems to believe that a yes on recreational vote is a done deal in Sin City, but that unfortunately is not the case. Nevada is still a conservative state at heart. We are also home to the Las Vegas Sands Corporation, and its billionaire founder Sheldon Adelson. Adelson recently spent millions in a successful bid to stop medical marijuana in Florida. It’s possible he will launch a similar opposition effort here, though we have reasons to believe that he will not.

If Nevada does vote yes on recreational marijuana in 2016, current cannabis licensees will likely have first crack at recreational licenses. At that point, 41 million new potential customers will clearly create opportunities for Nevada cannabis businesses to thrive. Even our high prices, due in large part to stringent testing requirements (on average, 1/8 oz. costs about $60-$70 — about double the cost in Colorado — due to stringent testing requirements) won’t be enough to keep the industry down. We are, after all, the city where you can buy 100 bottles of Dom, a fireworks show, and a private 737 flight on the same menu.

If Nevada legalizes recreational, we should also expect our state to add retail consumption to the list of licensees. These retail establishments would likely be similar to the coffee shops seen in Amsterdam. We anticipate that current licensees will also have the first opportunity to get these licenses as well.

So though Nevada’s current licensees will likely have some tough times in the short term, come November they may well be sitting on a golden egg. Until then, we expect Nevadans will still gamble on buying and selling their licenses, like we discussed here and here.

3 responses to “Nevada Cannabis Businesses Betting Big on Tourism and the 2016 Legalization Vote”

  1. Phillip, you say testing regulations account for double the prices in Nevada. On average it costs around $600 to test 5 pounds of marijuana flower or the same price for 15 pounds of trim. Production runs of edibles and concentrates have no lot size limit at this point and tests for those cost on average less than $200. Can you show me the math you are using? Let’s take 5 pounds of flower (the most expensive to test), which yields 640 eighths. So the cost of testing is less than $1.00 per 1/8 (less than 1.5% of the cost of a $70 eighth can be attributed to testing). So if there was no testing required you could save a dollar on each 1/8. I think people would pay that dollar to know that their MJ doesn’t have metals, pesticides, e.Coli, Salmonella, mold, mycotoxins, and to be able to know the potency and terpene of the product they are selecting is accurate.

  2. Interesting article. I am wondering why you think Sheldon Adelson won’t launch an opposition campaign to legal adult-use cannabis in Nevada?

    • Seems like wishful thinking. Adelson already hired former NV assemblyman Pat Hickey (whored out by the billionaire backing despite his hippie roots and personal neutrality on the issue) to run the ant-rec campaign.

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