YOY cannabis sales fell in 5 states this year, will that number triple in 2023?

For the first time since opening their individual commercial adult-use retail stores, five of the nation’s oldest marijuana marketplaces are seeing annual sales declines. Mature markets tend to create informed consumers for things like prices, the black market, and home growing.

After pandemic spikes in 2021 led to record growth across most of the sector, dispensaries in Colorado and Oregon are now bearing the brunt of the 2022 correction, while retailers in Nevada and Washington are also on the way, double-digit declines in percentage terms Report declines in their sales totals this year. In addition, the regulated market in California, which only recently, on January 1, 2018, started selling adult products, is shrinking.

According to Mitchell Laferla and Cooper Ashley of cannabis data and analytics company Headset, age has an impact on trends in 2022.

According to the researchers, the level of market maturity is “the single most important element in determining how a market will grow this year.” The division focuses more on established markets (Massachusetts, Illinois, Michigan) versus emerging areas (Washington, Colorado, Nevada, Oregon and California).

Adult retail markets in Michigan and Arizona grew more than 55% in the first nine months of 2022 (compared to 2021). Through the third quarter of 2022, sales of recreational and medical products in Michigan were up 27% from 2021, while they were up 5.4% in Arizona.

According to the headset analysts, Michigan, the fastest growing state in 2022, is still expanding to meet demand in the 3-year-old recreational equipment market. “For example, they’re seeing double-digit declines in Washington, which has a very mature adult market that dates back almost a decade. Washington’s market converged on local demand several years after sales began, ie without the “growth phase” experienced. in Michigan, Massachusetts and Illinois they are particularly hard hit by well-known industry problems such as price erosion.

Comparing the first three quarters of 2022 to the same period in 2021, medical and recreational retail sales in Washington fell 13%, while market declines in Oregon and Colorado were compounded by the inclusion of patient and consumer sales data.

But why is the cannabis industry in Oregon and Colorado going through worse downturns than Washington, which is just as advanced? Is the black market growing in these states as consumers get more information? Is the Psychedelics Boom Partly Responsible for the Slowdown in Cannabis Sales?

According to the researchers, Colorado and Oregon are likely loss leaders for a variety of reasons. Oversupply could be a factor as both have made headlines this year for similar issues. To counteract the overcrowded industry, Oregon specifically issued a license restriction through 2024. Of course, pricing is an issue in each of these markets. Additionally, it could be said that both Oregon and Colorado experienced some of the biggest spikes in sales during the epidemic, which in some ways has hit them hardest during the market correction.

COLORADO

During the pandemic boom, monthly sales in Colorado averaged about $192 million from March 2020 through May 2021, a 35% increase from the monthly average of $145 million from January 2019 through February 2020 (a pre-COVID baseline). Medical marijuana sales in Colorado continued to decline as the recreational market boomed.

Colorado’s combined adult and medicinal cannabis sales averaged nearly $150 million monthly for the first 10 months of 2022, down significantly from the boom years but slightly higher than the pre-pandemic market. This is due to the post-pandemic market correction.

Colorado’s median market price for raw dried flowers from grower to retailer hit a quarterly high of $1,721 per pound in January 2021, indicating a price drop. By October 1, 2022, the rate had fallen about 62% to $658 per pound, the lowest level since the state adult market opened in January 2014.

OREGON

Data from the Oregon Liquor and Cannabis Commission shows that monthly sales (for both adult and medicinal use) peaked at around $111 million in April 2021 but have since slowly declined to less than $80 million. Dollar in October 2022 (OLCC).

During the pandemic boom, Oregon’s monthly sales averaged more than $99 million from March 2020 through May 2021, up 49% from the average of around $67 million from January 2019 through February 2020 ( a pre-COVID baseline).

Oregon’s combined adult and medical cannabis sales for the first 10 months of 2022 averaged about $84 million, reflecting post-pandemic adjustment.

NEVADA

Various federally legal cannabis marketplaces may experience revenue growth or decline depending on a variety of factors, including market maturity, oversupply, pricing pressure, reduced demand, black market, basket sizes, licensing agreements, taxation, and a variety of other variables.

Pricing has been a major contributor to legacy markets’ underperforming sales in 2022. The average basket size in Nevada, which we classify as a mature market, is down 12.6% over the past year, although the average discount is up 7% . .

The price per unit of product, such as the price per gram or milligram, fell almost everywhere, reducing basket size.

In addition, companies offer deep discounts to make up for their low profit margins by attracting more customers. But that only leads to more price compression, extremely thin margins and lower sales volumes.

WASHINGTON

Washington state’s adult-use cannabis market, the second-oldest in the United States, has seen a variety of recent events, including wildfires in 2020, a heat dome in 2021, and a fatal store shooting in 2022.

The evergreen state has also managed to mitigate the impact of post-pandemic adjustment compared to some of its peers, most notably Colorado, a fellow pioneer that also introduced adult sales in 2014.

However, Washington’s growth in average monthly sales during the pandemic, which was 33% higher than pre-pandemic monthly norms, matches Colorado’s 35% increase in sales. However, according to data from the state’s Liquor and Cannabis Board, the price drop has pushed retail statistics in Washington down 13% year over year for the first three quarters of 2022.

CALIFORNIA

Despite an adult sales debut very similar to Massachusetts, California’s retail cannabis business fell into an unusual pattern in 2022, inching closer to some of the more developed Western economies.

California’s adult dispensaries had revenue of just over $4 billion in the third quarter of 2022, down 7.5% from the same point in 2021, according to the state Department of Taxes and Fees Administration (CDTFA) . Massachusetts, on the other hand, saw sales increase 13.5% through the third quarter of 2022, despite launching its legal adult-use market 11 months after California.

FINAL EFFECT

The decline in sales across the cannabis industry is largely due to the market correction from increased sales during the pandemic period. And it’s felt most strongly by states/parts of the industry that have sold the most during this period.

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