As we near the end of 2022, the cannabis industry is clearly at an inflection point. Between the current macroeconomic situation, uncertainty from a lack of progress on federal reforms, and significant declines in the wholesale market across the US, it seems clear that the initial phase of hockey-stick growth is behind us in the most mature cannabis markets.
With that said, there is still plenty of room for optimism in the industry. New market openings and rapidly growing consumer participation are expected to drive total US cannabis sales from ~$27 billion in 2022 to ~$42 billion by 2026. Already in 2022, we’ve seen two markets start adult-use sales: New Mexico and New Jersey. And it looks like with Rhode Island sales could start as early as the end of this year. As price pressures drive down sales in mature markets, these new markets, especially in the Northeast, are expected to take over as the top contributors to US cannabis sales growth out to 2026.
Consumer participation rising faster than ever
Price pressure and economic factors may have driven some of the most mature markets to stagnate in late 2021, but that should not be taken as a sign of a disengaged consumer base. BDSA Consumer Insights show that the share of those who report consuming cannabis is higher than ever, with 51 percent of those in adult-use states and 41 percent of those in medical-legal states claiming to be past six-month consumers.
Furthermore, newly legal markets are seeing consumer participation grow faster than before. The Arizona market, which legalized cannabis in the 2020 general election, and launched sales less than 90 days later, saw its past six-month consumer rate grow from just 28 percent in spring 2020 to a whopping 56 percent in spring 2022. The New Jersey market, which also legalized in 2020, has seen its consumer participation more than double, going from just 21 percent in spring 2020 to 46 percent in spring 2022. This rapid growth we are seeing in new markets stands in contrast to some more mature markets, such as California, which had just 33 percent reporting past six-month consumption in Spring 2020, a full two years after the launch of adult-use sales in the state.
Northeast region projected to become a cannabis industry powerhouse
Many, especially those in the tri-state area, are counting down the days and months, until we see New York and Connecticut formally open their adult-use markets in 2022 and 2023, respectively. By that time, the Northeast region – from Maine to New Jersey – with New Hampshire being the only exception – will have fully open adult-use retail. And given the size of the tri-state population and annual tourism to the region, the Northeast, (and specifically the tri-state area of New York, New Jersey, and Connecticut) is very likely to become a new epicenter of cannabis growth for the industry. New York and New Jersey are expected to contribute a combined ~$5 billion to total US cannabis sales by 2026, making them the third and fourth largest contributors to GLOBAL cannabis sales growth by 2026.
Florida is forecast to become a dominant force in legal cannabis
With mature markets like California and Colorado showing signs of stagnation due to oversupply and illicit competition, many expect the Florida market to have the most potential for growth, and for good reason, given the ~17 million adults over the age of twenty-one who live in the state. Florida’s medical market is already especially strong, with patients making up ~3 percent of the state’s total population, and retail sales more than doubling to reach ~$1.8 billion in 2021.
BDSA forecasts adult-use sales to launch in 2025, and add almost $900 million to the legal sales total for that year. Given the strong sales in the medical era, the strong retail footprint, and rapidly growing consumer participation (within the medical channel and not) BDSA forecasts Florida to be the top contributor to total US sales growth, with the state forecast to add ~$2.9 billion in sales by 2026.
