No federal legalization, no problem – $71 billion worth of legal cannabis by 2030, says NFD?

Gary Allen, CEO of New Frontier Data, announced the release of the 2023 US Cannabis Report: Market Updates & Projections, providing insight into the current and future state of the American cannabis market. The report is sponsored by Cannacare Docs and includes information on sales, consumers, supply and prices for both adult and medical cannabis. Allen predicts a bright future for the industry, citing the emergence of new markets to offset the stabilization of established markets.

Even with a potential slowdown in new market growth, the industry can expect a healthy 9% CAGR through 2030, according to estimates by New Frontier Data. In fact, nine states are currently pursuing legalization of adult use, and nine others are moving towards legalizing medical cannabis if market growth could be even more robust.

Cannabis Industry Revenue Growth Forecasts

In 2022, strong consumer demand in the last operational, legal state markets propelled total annual US legal cannabis sales to approximately $30 billion. These states are forecast to see annual sales growth, with estimates of surpassing $35 billion in 2023. If state-level legalization efforts continue to outpace federal policy reform, revenue is expected to reach a whopping $71 billion by 2030, at a compound annual growth rate of 12%.

The legal cannabis industry in the US is experiencing significant growth due to several converging factors. First, new legal revenue is being generated by state markets that have recently reformed their cannabis laws and established retail markets for high-THC products. Second, there is continued demand growth in legal states as consumers switch from unregulated to legal sources.

Finally, there is a general increase in cannabis use across the country as more people recognize the therapeutic benefits of cannabis and use becomes increasingly normalized and destigmatized. Additionally, as cannabis diversifies into more medicinal and wellness uses, it continues to contribute to the growth of the industry.

The regulatory structure in each market has been a key factor in the size and growth of the legal cannabis industry in states that have legalized adult use on top of an existing medical cannabis program. Some of the key distinctions that have had the greatest impact on selling in the legitimate market are the chosen integration approach to retail access, the availability and accessibility of retail stores, and the maturity of the existing medical market.

In addition, effective tax differentials between medical and adult programs, ease of entry for new entrants into medical markets, and product type restrictions between markets are all factors that can impact sales. Finally, home grow/caregiver laws also play a role in the overall success of the legal cannabis industry.

The growing cannabis consumer base in the US

By 2023, around 54 million US adults in both legal and unregulated markets are expected to use cannabis at least once. That number is projected to grow at about 4% annually over the next eight years, with an estimated 69 million US consumers by 2030.

It’s worth noting that among the top 10 states with the highest number of cannabis users, Ohio, Florida, and Pennsylvania are expected to legalize adult-use markets soon. Additionally, North Carolina and Texas could potentially authorize full medical programs by 2025, underscoring the significant market opportunity in these states despite current cannabis restrictions.

With the exception of Washington DC, where adult possession and use of cannabis is legal but there is no legal market or sale, all of the states with the highest density of cannabis users have functioning adult use markets. As such, there is tremendous potential for legal cannabis to expand into other major consumer markets in the coming years.

Increased competition, oversupply and falling prices

The newly legalized state cannabis markets saw an inflow of dollars, taking total cannabis sales to nearly $30 billion in 2022. However, the most established adult consumption markets in the country faced fierce regional competition, oversupply and falling prices throughout the year. For the first time since their legalization in 2014, both Washington and Colorado saw annual sales decline, and the three oldest legal cannabis state markets saw double-digit year-over-year sales declines as of 2021.

The market competition caused by the activation of a new legal market within a dual rule of law market, as the new market for adult use competes with the existing medical market, and between a state’s illegal and legal markets creates downward pressure on cannabis prices. The rate of price decline is influenced by the regulatory structure of the market, with prices generally falling more slowly in limited-license markets than in perpetual-license markets and more slowly in medical markets than in adult-use markets.

The effects on the cannabis market are not determined solely by market competition and regulatory structure. Other factors also play an important role, such as the speed at which retail stores open after legalization, state tax rates, and the quality and variety of products available.

Expanding legalization and erosion of the illicit market

It is expected that by 2030, approximately 69 million US adults will use cannabis at least once a year and will purchase it from both illegal and legal markets. Even with solid sales to legitimate state markets totaling $30 billion in 2022, most of U.S. cannabis demand is still met by the illicit market, with an estimated $76 billion spent nationwide on illicit sources in 2022 become

North Carolina, Texas, and Georgia are the three largest illicit cannabis markets among states with no legal sales for medical or adult use. It is estimated that these unregulated markets combined generated $12.1 billion in 2022 and are projected to reach $18 billion by 2030 if cannabis remains illegal.

However, legalization efforts have successfully disrupted illicit markets, and the need for legal medical and adult products is increasingly expected to fill demand previously met from illicit sources. In 2022, 28% of U.S. cannabis sales came from legal channels, but by 2030 that figure is projected to be 48%. If all 18 potential markets are legalized within their expected timelines, the legal market could supply nearly 60% of total cannabis demand by 2030.

Diploma

The cannabis market in the US is growing and changing as more people take an interest in it and it becomes legal in more states. While the illegal market currently dominates, the trend towards legalization is disrupting the criminal economy and contributing to the increasing demand for legal cannabis.

Cannabis legalization will increase market share as more states legalize it, potentially reaching 60% of global demand by 2030. The legal cannabis industry as a whole has a bright future, but issues such as regulatory barriers, regional competition, and oversupply remain to be resolved.

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