How profitable is the Medical Cannabis business?

1x1.trans - How profitable is the Medical Cannabis business?

How profitable is the Medical Cannabis business?

Unless you’ve been living under a rock, then you probably know that a lot of countries have lifted the ban on the sale and use of medical cannabis this past year, including Australia. This has opened up a lot of business opportunities for those willing to enter this highly difficult industry, because although it has been legalised, medical marijuana is still highly regulated.

For example, only a few dispensaries are allowed to have a medical cannabis selling license in any one region, which limits the number of distributors per area. And then there’s the fact that customers are required to have a prescription in order to purchase medical cannabis, and there is so much paperwork involved in the whole process that most GPs are still sceptical about prescribing it to their patients. For now, patients are only allowed to take it in vaporizer or oil form only, and are prohibited from smoking it.

The Business of Medical Cannabis

The good news is that the Australian government has recently legalized the export of medical cannabis, thus opening market up for local producers of medical cannabis beyond the 3 million Australians that currently take it for chronic pain. Australia now joins the ranks of similar countries that allow the export of medical cannabis such as the Netherlands, Uruguay and Canada.

According to recent stats the global medical cannabis market is expected to grow beyond $55 billion by the year 2025. While the legalization of medical cannabis in Australia has made it easier for physicians to prescribe and provide it to their patients, its legalisation for global export will significantly boost the country’s developing medical cannabis industry which will now rival that of Canada and the Netherlands. Of course, first preference will still be given to Australian patients, even those who’re overseas.

Medical Cannabis as opening for Exponential Profits of Recreational Marijuana

While the recreational use of medical cannabis is still prohibited in Australia, proposed reform on the subject has caused a new debate to arise on the topic within the Australian parliament. This has led to interesting developments, such as medical cannabis giant Canopy Growth Corporation taking out the Australian patents for many of its popular products, most of which are used for both medical and recreational purposes.  

Canopy Growth Corporation is not only publicly listed on the Australian stock exchange but is worth a whopping $5.6 bn, and with the help of the Crosby Textor research firm, is in discussions with the relevant arm of the Australian government to potentially legalise cannabis for recreational use, due to the belief that once medical cannabis has been legalised in a country, it is only a matter of time before it is legalised for recreational use as well.

For example, Canada legalised medical cannabis in 2001, and is now planning to sanction it for recreational use as early as August 2018, opening up a plethora of opportunities for the country’s medical cannabis industry.

The Profitability of Medical Cannabis

Going back to the profitability of medical cannabis, those in the know say that a retail dispensary of medical marijuana can rake in about $3500 to $5000 per square foot, while profit margins can range anywhere from 30% to 45%. To put this in context consider the fact that big brands like Tiffany &Co typically make $4 221 per square foot.

In places like California in the US, for example, medical cannabis sales are projected to reach $23 bn by the year 2030, while most medical cannabis suppliers in the state are reportedly either breaking even or fully profitable, either way they are financially thriving.

However, the biggest money-spinners seem to be concentrates, infused products and cultivation, with the latter often seeing profitability within the very first harvest. Research also shows that about 91% of companies that manufacture cannabis-infused products are able to reach break-even status within the first year, which is due in part, to the low start-up costs associated with infused businesses, when compared with the high capital requirements of a retailer or cultivator, for example. This makes it easier for the former to turn a profit, and proves that the medical cannabis business is only set to soar from here, and whoever gets a foothold in the industry within these early stages, will have the opportunity to win big -time.

Visit icannabis.com.au to keep up with the latest updates and developments on medical cannabis in Australia.

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