5 of the oldest hashish markets within the U.S. are going through declining year-over-year gross sales figures for the primary time since launching their respective industrial retail packages for grownup use.
After pandemic peaks equated to file development throughout a lot of the trade in 2021, Colorado and Oregon dispensaries are actually going through the brunt of 2022’s correction, whereas Nevada and Washington retailers are also on observe to report double-digit downturns when it comes to % decreases to their gross sales totals this 12 months. And California, which started adult-use retail extra not too long ago, on Jan. 1, 2018, is also amidst a shrinking regulated market (so far as gross sales go).
Apart from Alaska, which doesn’t tax gross sales to finish customers and due to this fact doesn’t maintain data pertaining to these transactions, in response to its Division of Income, these 5 states characterize essentially the most mature adult-use markets within the U.S. In addition they characterize a few of the oldest medical markets, too, with California pioneering that reform entrance in 1996.
And age has one thing to do with the developments of 2022, in response to Cooper Ashley, analytics supervisor, and Mitchell Laferla, knowledge analyst, at hashish knowledge and analysis firm Headset.
“The largest contributing issue as to if a market is rising this 12 months is the place it’s at in its market maturity,” the analysts stated through electronic mail. “The separation will not be truly geographical in nature, quite it’s about legacy markets (California, Nevada, Colorado, Oregon, Washington) versus new markets (Massachusetts, Michigan, Illinois).”
Particularly for states that observe adult-use gross sales individually from medical gross sales, Maine, which launched its adult-use retail program in October 2020, Michigan (December 2019) and Arizona (January 2021) skilled the biggest % will increase for adult-use gross sales by means of the primary three quarters of 2022 in comparison with the identical time interval in 2021, in response to knowledge collected by CBT.
Editor’s word: CBT’s analytics for this text have been derived from knowledge from the Arizona Division of Income, California Division of Tax and Payment Administration, Colorado Division of Income, Illinois Division of Monetary and Skilled Regulation, Maine Workplace of Hashish Coverage, Massachusetts Hashish Management Fee, Michigan Hashish Regulatory Company, Nevada Division of Taxation, Oregon Liquor and Hashish Fee, and Washington State Liquor and Hashish Board.
Whereas Michigan and Arizona’s adult-use retail markets skilled in extra of 55% development by means of the primary 9 months 2022 (in comparison with 2021), factoring within the shrinking medical markets in these states supplies a extra full image of total development.
Michigan’s mixed adult-use and medical gross sales figures by means of the third quarter of 2022 characterize a 27% improve over 2021, whereas Arizona’s mixed figures characterize a 5.4% improve. (See “Newer Markets & 2023 Predictions” part beneath, which features a extra thorough evaluation of up-and-coming state marketplaces.)
“Michigan, for instance, is the expansion chief in 2022, and, as a state, it’s nonetheless rising to fulfill the demand in a rec market that’s  years previous,” the Headset analysts stated. “In Washington, for instance, which has a really established adult-use market of almost a decade, they’re seeing the double-digit slides. In Washington, the market converged on native demand a number of years after gross sales started, so, with out the ‘development section’ seen in Michigan, Massachusetts [and] Illinois, they’re getting hit the toughest by a few of the well-known trade pains equivalent to worth compression.”
Washington’s mixed adult-use and medical retail gross sales shrank 13% within the first three quarters of 2022, in comparison with the identical timeframe in 2021, whereas Oregon and Colorado’s market declines have been additional exacerbated by factoring in each affected person and shopper gross sales figures.
However why are Oregon and Colorado’s markets experiencing deeper downturns than a state like Washington, which is simply as mature within the hashish house?
“There are in all probability a number of causes that Colorado and Oregon are loss leaders,” the analysts stated. “Oversupply may positively be contributing as each have been within the information for such points this 12 months. Oregon particularly has issued a licensing moratorium till 2024 to assist with an oversaturated market. Pricing is unquestionably a problem in each of these markets. [We] additionally imagine that each Colorado and Oregon had a few of the largest gross sales surges in the course of the pandemic, so, in a means, that they had the furthest to fall available in the market correction.”
For instance, Colorado’s mixed adult-use and medical gross sales grew 63% from February to July 2020—highlighting the month proper earlier than COVID shutdowns started within the U.S. to the quick aftermath of a pandemic growth for hashish gross sales—in response to knowledge from the state’s Division of Income.
Stepping again to take inventory of the larger image, Colorado’s month-to-month gross sales averaged almost $192 million from March 2020 to Could 2021—in the course of the entirety of the pandemic growth—representing a 35% improve from the $145 million month-to-month common from January 2019 to February 2020 (a pre-COVID baseline).
Now within the post-pandemic market correction, Colorado’s mixed adult-use and medical month-to-month hashish gross sales averaged almost $150 million by means of the primary 10 months of 2022—a lot lower than the growth interval, however slightly greater than the pre-pandemic market.
So far as worth compression goes, Colorado’s median market price for unprocessed dried flower from cultivator to retailer hit a quarterly peak at $1,721 per pound in January 2021. That fee fell almost 62% to $658 to pound as of Oct. 1, 2022—the bottom worth because the state launched its adult-use market in January 2014.
Primarily based on 2022 month-to-month gross sales averages by means of October, Colorado’s mixed adult-use and medical retail market is projected to hit $1.8 billion for the 12 months, a bit shy of 2021 and 2020 tallies.
Right here’s a snapshot of yearly gross sales totals because the state carried out each industrial markets:
Yr Colorado (Whole Gross sales) 2021 $2,228,994,553 2020 $2,191,091,679 2019 $1,747,990,628 2018 $1,545,691,080 2017 $1,507,702,219 2016 $1,307,203,473 2015 $995,591,255 2014 $683,523,739
Very similar to Colorado, adult-use pioneer Oregon is on its approach to a double-digit decline in 2022.
Month-to-month gross sales peaked at almost $111 million (mixed adult-use and medical) in April 2021 however have steadily declined since, to lower than $80 million in October 2022, in response to knowledge from the Oregon Liquor and Hashish Fee (OLCC).
Oregon’s month-to-month gross sales averaged greater than $99 million from March 2020 to Could 2021—in the course of the pandemic growth—representing a 49% improve from the almost $67 million month-to-month common from January 2019 to February 2020 (a pre-COVID baseline).
Now within the post-pandemic correction, Oregon’s mixed adult-use and medical hashish gross sales averaged almost $84 million by means of the primary 10 months of 2022.
The post-pandemic market downturn comes as common adult-use retail costs for flower have dropped from $161 per ounce within the fall of 2020 to an all-time low of roughly $116 per ounce in November 2022, in response to OLCC. The common wholesale worth additionally dropped to an all-time low of roughly $600 per pound in current months.
RELATED: Oregon Cannabis Prices Swing From Pandemic Peaks to Record Lows
Primarily based on 2022 month-to-month gross sales averages by means of October, Oregon’s mixed adult-use and medical retail market is projected to file roughly $1 billion in gross sales after coming simply in need of $1.2 billion in 2021.
Right here’s a snapshot for the final 5 years:
Yr Grownup-Use Medical Mixed 2021 $1,084,418,885.02 $99,671,244.70 $1,184,090,129.72 2020 $1,001,772,323.73 $109,255,234.20 $1,111,027,557.93 2019 $726,003,565.94 $69,130,251.65 $795,133,817.59 2018 $584,635,176.55 $63,757,258.58 $648,392,435.13 2017 $423,949,620.66 $69,881,980.62 $493,831,601.28
Market maturity, oversupply, worth compression, much less demand, the illicit market, basket sizes, licensing constructions, taxes and myriad different components can impression gross sales development/declines in numerous state-legal hashish markets.
In 2022, pricing drove numerous the gross sales woes in legacy markets, in response to Cooper and Laferla.
“For instance, in Nevada, which we take into account a mature market, has seen common basket measurement shrink by 12.6 % year-over-year whereas common low cost has elevated 7 share factors within the final 12 months,” the analysts stated. “In October 2021, common low cost was 12.8 % and has elevated linearly to 19.8% in October of this 12 months.”
Common merchandise worth and equivalized quantity costs (the worth per unit of product, equivalent to worth per gram or milligram) fell principally throughout the board, which drove down that basket measurement, they stated.
“After which retailers are discounting closely on prime of that to attempt to make up for low margins with producing extra shopper quantity,” the analysts stated. “Nonetheless, that simply results in extra worth compression, razor skinny margins and smaller gross sales totals.”
In Nevada, that’s factored into the state’s $532 million in mixed adult-use and medical gross sales by means of the primary seven months of 2022, representing a 15.6% lower in comparison with the identical time interval in 2021, in response to knowledge from the state’s Division of Taxation.
Primarily based on month-to-month developments by means of July 2022, Nevada’s mixed adult-use and medical retail market is projected to file almost $900,000 in gross sales for the 12 months after eclipsing the $1 billion mark in 2021.
Right here’s a snapshot for the final 4 years:
Yr Nevada (Whole Gross sales) 2021 $1,042,148,599 2020 $786,480,038 2019$701,700,416 2018$579,561,580
The nation’s second-oldest adult-use hashish market, Washington’s state trade has run the gamut in recent times, from wildfires in 2020 to a heat dome in 2021 and a deadly dispensary shooting in 2022.
And regardless of being among the many highest taxed markets within the U.S. (together with a 37% hashish excise fee), the Evergreen State has managed to considerably reduce the impression of the post-pandemic correction in contrast to some of its friends—notably Colorado, a fellow pioneer that additionally launched adult-use gross sales in 2014.
And but Washington’s gross sales surge in the course of the pandemic, that includes a 33% improve in common month-to-month gross sales in comparison with pre-pandemic month-to-month averages, tracks intently with Colorado’s 35% gross sales surge. Nonetheless, worth compression has steered Washington’s retail figures to a 13% year-over-year slide by means of the primary three quarters of 2022, in response to knowledge from the state’s Liquor and Hashish Board.
Primarily based on month-to-month developments by means of September, Washington’s mixed adult-use and medical retail market is projected to come back simply shy of $1.3 billion in gross sales in 2022, after eclipsing $1.4 billion in every of the earlier two years.
Right here’s a snapshot for the final 4 years:
Yr Washington (Whole Gross sales) 2021 $1,475,218,076.89 2020 $1,429,744,017.90 2019 $1,115,474,486.58 2018 $1,018,867,193.25
California’s hashish retail market stood in an attention-grabbing spot in 2022: caught trending nearer to a few of the extra mature markets within the West regardless of an adult-use gross sales launch that aligns intently with Massachusetts.
By the third quarter of 2022, California’s adult-use dispensaries recorded simply greater than $4 billion in gross sales for the 12 months, representing a 7.5% lower from the identical interval in 2021, in response to the state’s Division of Tax and Payment Administration (CDTFA). In the meantime, Massachusetts, which launched a industrial adult-use market in November 2018, 11 months after California, is experiencing 13.5% sale development by means of the third quarter of 2022.
The distinction between one state’s gross sales decline versus one other state’s development on this occasion affords a look past the simplicity of market maturity as a driving issue for these developments. For starters, California has expansive rural areas in San Bernardino, Los Angeles, Riverside and Kern counties—where the illicit market can thrive—and elsewhere all through the state. Specifically, San Bernardino County is roughly twice the scale of Massachusetts with 5 million fewer folks.
Subsequent, whereas California’s Division of Hashish Management (DCC) has made strides in increasing the state’s licensed retail footprint—together with by greater than 20% in its first 12 months after taking the streamlined reins because the state’s regulatory physique—it nonetheless has an extended methods to go. As of earlier this 12 months, California had roughly 2.4 dispensaries per 100,000 residents, a lot fewer than its Pacific Coast neighbors, making it tougher to reply demand in sure areas of the state.
And for Massachusetts, till Vermont launched gross sales in October 2022, it was surrounded by 5 different states that had but to implement adult-use retail packages. Whereas Massachusetts’ flower costs did plummet to an all-time low of $220 per ounce on common at adult-use retail in October, that compression wasn’t essentially impacted by competitors from bordering markets or the dimensions of the illicit operations as seen in California.
One factor working in California’s licensed operators’ favor in 2022 was the state’s elimination of its cannabis cultivation tax—a $161 fee per pound—on July 1.
Primarily based on month-to-month gross sales developments by means of September, California’s adult-use retail market is projected to hit roughly $5.3 billion in gross sales in 2022 after recording almost $5.8 billion in 2021. (Editor’s word: CDTFA first reported roughly $5.2 billion in gross sales for 2021 however has since added roughly $600,000 to that determine resulting from amended or late tax returns.)
Right here’s a snapshot for the final 4 years:
Yr California (Grownup-Use Gross sales) 2021 $5,773,379,111 2020 $4,700,062,872 2019 $2,802,907,192 2018 $1,980,376,977
Newer Markets & 2023 Predictions
Whereas California nonetheless stands alone as the biggest hashish market on the planet, Michigan will take over the second spot within the U.S. when 2022 retail figures are finalized within the books.
Michigan’s mixed adult-use and medical hashish gross sales are projected to succeed in almost $2.3 billion by the tip of the 12 months, in response to knowledge from the state’s Hashish Regulatory Company. That’s a 28% improve from the almost $1.8 billion in gross sales from 2021.
The newer development markets stay the “most attention-grabbing,” Headset’s Cooper and Laferla stated.
“Michigan and Illinois are excessive inhabitants states, so [we] assume they’ll find yourself being actually huge markets comparatively,” the analysts stated. “Michigan is already a $2-billion market in 2022, the second largest that we observe behind California with Illinois an in depth third.”
By November, adult-use gross sales in Illinois have surpassed $1.4 billion in 2022, a 13.5% improve from 2021, in response to knowledge from the state’s Division of Monetary and Skilled Regulation. And mixed adult-use and medical gross sales have eclipsed $1.7 billion by means of November, in response to Headset.
Illinois, with roughly 13 million residents, and Michigan, with roughly 10 million, characterize the second and third most populous states which have totally carried out a industrial adult-use retail market.
“Everybody needs to know when these markets will degree out; in actuality it’s very tough to foretell,” Cooper and Laferla stated. “Nonetheless, we might already be seeing small indicators that they’re converging on demand. Michigan, for instance, had 52 % model development between 2020 and 2021. From 2021 to this 12 months, model development has solely been 4.5 %, indicating that issues are probably slowing down.”
Massachusetts, a state of roughly 7 million folks, has recorded roughly $1.6 billion in mixed adult-use and medical hashish gross sales by means of November, representing a 7.5% improve from the identical 11-month interval in 2021, in response to knowledge from the state’s Hashish Management Fee.
“For newer markets, [we] can be stunned to see such massive development once more in 2023, particularly provided that they’re experiencing numerous the pricing problems with the market at massive,” the analysts stated.
Arizona, which launched adult-use gross sales on Jan. 21, 2021, has skilled considerably slower development in its total hashish retail market, as its medical gross sales have dipped at a sharper fee than adult-use gross sales have grown in current months.
In February 2022, when each markets peaked, adult-use gross sales have been at $73 million and medical gross sales have been at $58 million, in response to the state’s Division of Income. Quick ahead to September, adult-use gross sales remained $73 million whereas medical gross sales dropped to $32.5 million. The general market shrank by roughly $26 million throughout these eight months.
Primarily based on present developments by means of the third quarter, Arizona’s mixed 2022 gross sales figures will intently mirror the $1.36 billion of adult-use and medical hashish gross sales from 2021.
And in Maine, which carried out its adult-use retail program in October 2020, dispensaries are projected to file roughly $158 million in adult-use gross sales in 2022 primarily based on developments by means of November, roughly doubling the $82 million in adult-use gross sales recorded in 2021, in response to knowledge from the state’s Workplace of Hashish Coverage.
Past that, 5 state markets totally carried out adult-use gross sales in 2022, together with Montana (Jan. 1), New Mexico (April 1), New Jersey (April 21), Vermont (Oct. 1) and Rhode Island (Dec. 1).
As well as, New York regulators proceed to work towards launching adult-use retail earlier than the tip of the 12 months, whereas Connecticut plans to commence adult-use gross sales on Jan. 10, 2023, and Missouri and Maryland, which handed poll measures in November, additionally may ignite industrial packages in 2023.
Regardless of the 2022 slides skilled in legacy markets, newer markets in states like these “probably will bolster complete U.S. market gross sales” within the 12 months to come back, Cooper and Laferla stated.