Emerging US cannabis markets and themes to watch in 2022 and beyond

All signs point to continued cannabis industry growth in the United States in 2022, particularly in states where markets for adult use may open. Despite the challenges faced by companies already involved in the legal cannabis industry, such as high taxes, compliance barriers, regulatory issues and the black market, growth is expected.

According to the Whitney Economics US Cannabis Business Conditions Survey, only 42% of operators surveyed say their businesses are profitable, while 20% break even and 37% are not profitable. These results are consistent for companies operating in both mature and immature markets in the United States. Despite this very real and measurable problem, the industry is expected to continue to grow.

States where adult markets are coming

Seven states have already approved adult use of cannabis, and processes are in place to set program rules, issue licenses, and initiate sales. These seven states are Connecticut, Montana, New Jersey, New Mexico, New York, Vermont and Virginia.

While 2022 sales won’t start for each of these states, all eyes are on them, particularly the states in the Northeast, where populations are high and sales are expected to be significant. According to Headset, the overall market estimates for 2025 for each of these seven states are:

• Connecticut = $2.2 billion
• Montana = $0.8 billion
• New Jersey = $7.0 billion
• New Mexico = $1.6 billion
• new York = $15.1 billion
• Vermont = $0.5 billion
• Virginia = $6.5 billion

Collectively, these seven states could add $33.7 billion to the U.S. cannabis market in just three years, and $24.3 billion of that money would come from the tri-state area of ​​Connecticut, New Jersey, and New York.

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States where cannabis could be legal for adult use

Among the states that haven’t yet approved adult-use cannabis, a few are drawing a lot of attention, as they are most likely to approve it through legislation or through ballot initiatives that would allow residents to vote on adult-use policies in November 2022 .

Florida offers one of the largest potential markets for adult use, but it seems unlikely that a ballot initiative will clear all the necessary hurdles by 2024. Wyoming is also considering an election measure for 2024. States that could receive adult-use cannabis in the November 2022 vote include Arkansas, Maryland, Missouri, Ohio, Oklahoma and North Dakota.

Other states where advocacy groups or legislators have taken action to legalize adult-use cannabis in the next few years include Delaware, Hawaii, New Hampshire, Pennsylvania, and Rhode Island.

With the upcoming introduction of adult cannabis sales in Connecticut, New Jersey, and New York, which will have both medical and adult cannabis markets alongside Maine, Massachusetts, and Vermont, it seems logical to start from Delaware, Maryland, New Hampshire, Pennsylvania, and Rhode Island will follow suit in the not too distant future, legalizing adult-use cannabis throughout the Northeast.

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What companies can expect

Multi-state operators, large corporations and ancillaries are expected to continue growing in 2022. However, the consolidation will become even more active and intense than it already is. In an industry where fewer than half of companies are profitable, competition is becoming increasingly fierce.

In its research, Whitney Economics found that 39.4% of respondents believe the industry is moving in the right direction, while 41.5% believe the industry is not moving in the right direction. Another 20% had no opinion on the subject.

Interestingly, operators in new emerging markets have a more positive view of the direction the cannabis market is going (70.2% have a positive view) than operators in mature markets, who are more pessimistic (only 34.5% have a positive view) .

Looking at sentiment data based on operator sectors, farmers and retailers are the most pessimistic about the direction the industry is going (only 31.1% and 32.1% respectively have positive opinions), compared to manufacturers (48th .1% positive), testing labs (50.0% positive), and ancillary businesses (56.9% positive).

Another key finding from the Whitney Economics survey is that vertically integrated operators are more positive about the direction the industry is taking than other operators, and the more companies are included in their vertical activities, the more positive sentiment is. Here’s the breakdown:

• Vertically integrated 2 or more companies = 38.56% positive
• Vertically integrated 3 or more companies = 42.9% positive
• Vertically integrated 4 or more companies = 45.2% positive

Not surprisingly, larger companies with more control over the supply chain and the markets they serve are more confident about the industry’s future than smaller companies with limited or no control. This result paints an interesting picture of what future growth in the U.S. cannabis industry could look like.

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Obstacles that keep getting in the way

Every day we all see the news about high taxes, compliance hurdles, the black market and more. All these obstacles make it very difficult – if not impossible – for operators to generate profits. Whitney Economics survey results show just how big the problem really is, with just over one in three (37%) operators reporting they are profitable.

As the industry grows, more challenges will come with it, so in 2022 operators will need help to solve existing problems. According to the survey, the top five issues keeping operators up at night are:

1. Lack of banking or financial services = 57%
2. Market and Price Volatility = 56%
3. Big company competition = 42%
4. taxation = 39%
5. Too much competition = 38%

When asked about the top issues facing the US cannabis industry as a whole, operators gave similar answers, with the top five being:

1. Lack of access to bank or investment capital: 70.9%
2. Interstate Trade – Allows trade from state to state: 65.5%
3. Large corporations are crowding out small handicraft businesses: 57.7%
4. taxation = 45.4%
5. Market saturation – too many licenses: 43.6%

And when asked what their top regulatory concerns are, the top five issues were identified as follows:

1. Access to banking and other financial services: 64%
2. Market saturation – too many licenses: 50.6%
3. taxation: 48.8%
4. Unauthorized Market Competition: 45.5%
5. Big company competition: 41.9%

The biggest concerns for operators include a lack of banks, competition and taxation. In order for the U.S. cannabis market to continue to thrive and prosper in the future, these issues need to be addressed sooner rather than later.

RELATED READING: Outlook for the cannabis industry in 2022

Key insights into emerging US cannabis markets and trends

Growth in the U.S. cannabis industry is set to continue in 2022 and beyond. However, there are issues that need to be addressed in order to make this a fully functioning industry. Until then, companies will continue to struggle to turn a profit and keep their doors open for another year.

You can track all cannabis licensing data and connect with legal operators to grow your business in 2022 and beyond by subscribing to the Cannabiz Media License Database. And to follow mergers, acquisitions and more in the cannabis industry, you can subscribe to Cannabiz Intelligence™. Schedule a demo to get started.