Cannabis: A Unique, High Risk Industry
Sales of recreational marijuana are expected to surge this 4/20 in Washington DC and the eight states where it is legal. But the industry’s growth outside of the unofficial holiday is not mere puffery.
The legal marijuana industry is expanding rapidly, generating $7.2 billion in revenue in 2016 by some estimates and creating a plethora of jobs in the states that have approved its sale for medicinal and/or recreational use. These jobs are not limited to only dispensary employees and cannabis growers -- the industry encompasses many other related, but perhaps less visible business opportunities, including security.
The marijuana industry has numerous unique security concerns, in large part because the product is a Schedule 1 federally controlled substance. As a result, most banks will not accept money from or provide credit to marijuana-related businesses. Similar concerns regarding federal legality have led some major security and transport providers, such as ADT, UPS, and FedEx, to implement strict policies not to take on business from marijuana-related clients.
While there have been numerous efforts to pass legislation at the federal level to make it easier for banks to accept marijuana-related cash, none have gained enough traction so far. In the meantime, business continues to boom, and growers and stores are investing heavily in security services. The large amounts of cash on hand -- coupled with the high value of and difficulty of tracing the products themselves -- make pot shops, growers, and related businesses prime targets for theft.
In addition, most states and localities require pot shops to meet specific security criteria, such as installing and operating video surveillance systems on premises.
The result is a rapidly growing opportunity for niche, regional security players that specialize in marijuana security services.
Pot Shops Require a Wide Variety of Security Services
Armed guards are perhaps the most prominent type of security service utilized by pot shops and growers. These security officers are utilized as a physical deterrent to potential criminals; veterans of the Armed Forces looking to readjust to civilian life often staff these positions.
Cash-in-transit is another key service utilized by the pot industry. These services are used not only to transport and protect the highly valuable product from fields and processing facilities to the shops, but also to transport the large amounts of cash earned (especially during tax season).
The video surveillance systems utilized by marijuana businesses also offer myriad opportunities for security providers. The systems must be designed and installed, supporting demand for security consulting and systems integration services. In addition, many of these systems are monitored, part of larger alarm systems. Furthermore, some local and state laws require video feeds to be maintained for a pre-determined amount of time, leading some businesses to outsource data storage and management.
In addition to the heightened threat that marijuana businesses face from potential criminals, their own employees often contribute a significant potential for loss. Anecdotally, most shops see between 60% and 70% of their losses stem from employee theft. As a result, employers in the marijuana industry are particularly vigorous users of pre-employment screening services in an attempt to minimize their internal vulnerability.
Although marijuana-related security services only account for a small portion of the $60 billion US private security services market, they will experience among the fastest growth opportunities of any end use market.
Learn More About the US Private Security Services Market
For more information, see the Private Security Services in the US study by The Freedonia Group. At 154 pages with 70+ tables and charts, this comprehensive report provides vital information on market environment factors such as pricing patterns, legal and regulatory issues, and technology and product development. In addition, the study includes analysis on the following:
- Revenue data
- Demand by service type and market
- Industry composition
- Market share
- And much more
About the Author:
Katherine Brink is an industry analyst at The Freedonia Group, where she writes industry studies focused on the security and consumer goods markets.