The COVID cannabis bubble has burst – Cannabis (Weed)

When governments around the world – including in so-called “liberal democracies” – put their citizens under house arrest in March 2020, people started using many more substances, including cannabis.

However, this boom was artificial. Fueled by stimulus checks, unemployment insurance, and general fear and hopelessness about the future, the great cannabis boom of 2020 is now over.

Sales are slowing, retail stores are closing their doors, financing is drying up and consumer demand has returned to pre-corona levels.

In other words, the COVID cannabis bubble has burst.

What the data says

The data comes from Headset, which uses real-time sales reports from cannabis retailers through their POS systems.

What they found was stunning. Year-over-year sales growth in U.S. cannabis markets in Colorado, Nevada, Oregon, and Washington is declining.

From March 2020 to 2021, Colorado revenue grew 25.8%. In the first few months of 2020, Colorado saw a 63% increase.

But now, Colorado’s average monthly sales are down 11.3% year over year.

The same goes for Oregon. Despite a 36.6% annual growth between March 2020 and March 2021, Oregon has recently seen declines of up to 20%.

But despite these declines, long-term trends show positive growth. The data shows that there was indeed a COVID cannabis bubble. One that’s popped now.

The COVID cannabis boom bubble

The chart above shows monthly sales in Colorado, Nevada, Oregon, and Washington before and after the first year and a half of COVID.

As we can see, cannabis sales have exploded in the first six months of the pandemic. Colorado’s sales rose 63% over the same period, up from 43% in 2019.

Sales remained high through the end of 2020. There was a spurt of growth in the second quarter of 2020, followed by steady increases of 20% to 40% year over year through early 2021.

But then sales started to drop.

The COVID cannabis bubble is beginning to deflate

In the second half of 2021, COVID took a back seat, especially in the US. Governments lifted restrictions, stimulus checks dried up and the sense that this was the end of the world faded from memory. Life returned to some semblance of “normal”.

And cannabis sales started falling. This trend continued into early 2022. In the second quarter of 2021, year-on-year growth began to slow as sales stabilized.

Through July 2021, Colorado, Oregon, and Washington all posted negative year-on-year growth, followed shortly thereafter by Nevada and California.

You can see from the graphs just how dramatic that surge was in 2020 and what it means now as sales return to pre-pandemic levels.

It could appear like -10% revenue growth since June 2021. But the long-term trends are hopeful.

What if the COVID cannabis bubble never happened?

Somewhere in an alternate universe there is no World War I and no Federal Reserve. So the rest of the 20th century is characterized by prosperity, innovation and freedom instead of constant wars, genocide and centralizing states.

In this alternate universe, no sane citizen of a republic or constitutional monarchy would allow a government-ordered private sector shutdown. Mainly about a flu virus with a 99% survival rate.

What does the cannabis industry look like in this alternate reality?

Headset data can remove the COVID-cannabis bubble from the equation. The chart below shows total monthly sales in the US cannabis markets, excluding sales data collected between February 2020 and February 2022.

With no COVID cannabis bubble disrupting the market, you can see a clear uptrend from early 2020 through 2022.

So while cannabis sales appear to be collapsing, a market correction is occurring. The COVID cannabis bubble has burst and now we can see real market growth. (Or as real as it can be in a fiat debt-based economy).

Long term cannabis trends

Comparing June 2019 to June 2022, we can see that sales have increased in all markets. Colorado had the slowest growth at 4%, but that makes sense since their arbitrage advantage with cannabis is now over. As more states legalize, fewer people travel to Colorado to buy legal weed.

Despite a 20% drop in monthly sales, Oregon is up 25% over the past three years.

The decline in sales in recent months is not an indication of a long-term trend. In fact, the opposite is the case. The COVID cannabis bubble has been unique and sales should now stabilize as the market corrects to pre-pandemic normalcy.

However, the market is still in correction mode. The bad news is that we haven’t seen the end of layoffs and retail chain closures yet.

The good news is that long-term trends are still showing growth across all cannabis markets.

footnote(s)

https://www.headset.io/industry-reports/an-analysis-of-declining-growth-in-recent-us-cannabis-sales