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AndCan Index Shows Monthly Cannabis Demand For First Time

The marijuana industry is one step further in mainstream recognition with the release of the Inaugural AndCan Index, which some are referring to as the “Dow Jones Industrial Average for the Cannabis Market.” Released by the Anderson Economic Group (AEG), the Index looks at the demand for cannabis on a state-by-state basis.

For those of us who don’t pay attention to economics, it might be hard to grasp what a big deal something like this; many of us have only heard about the Dow when flipping through news channels. The Dow Jones Industrial Average (DJIA) follows how 30 large American publicly-traded companies’ stocks traded in a given day. Similarly, AEG’s AndCan Index uses rigorous metrics to track demand for cannabis products in all states, recording information from states that have legalized as well as taking into account latent, or unobserved, demand.

The index shows some interesting data points: Since January 2015, demand for legal cannabis products has risen 13.5% nationally. Since last November’s election, when four additional states voted to legalize recreational cannabis, demand has risen by 2.4%. The last month included in the report, April 2017, saw a 1.1% decrease in demand, the largest single month decrease recorded by the Index. An AEG consultant noted that despite the drop, “All indications are that this drop is but a detour on an otherwise steady path in the growth of the cannabis market.” They don’t seem particularly concerned.

The methodology at the foundation of the report has been in development for years, being presented at economist’s conferences and adjusting based on expertise from numerous professionals. It tracks “hundreds of thousands of data points,” including from sales of both recreational and medical cannabis in states that have legalized. Adjustments have been made to track the potency of the product purchased, as well as the market-share of the products and differences in pricing from state-to-state. They also endeavored to be realistic about demand shifts when a state goes from illegal to legal: “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.”

This sort of analysis of demand, and AEG’s state-by-state breakdown in the resulting publication, The Market for Legal Cannabis Products in the 50 United States, is completely new. It can serve to help businesses and investors better understand the market, and it might also provide valuable information to researchers. Overall, it’s one step further to legitimacy in the larger market.