- Legal cannabis sales in the U.S. will reach $27 billion by the end of 2022, a jump of seven percent over 2021.
- Governments in Oregon and Washington have taken steps such as moratoriums on new licensing to combat chronic oversupply.
- New markets will be the significant sales driver until 2026, as the number of non-legal states is rapidly dwindling.
It is widely known that the cannabis market is booming. As more states legalize either adult-use or medical marijuana, new cannabusinesses continue to make their debut and cater to an ever-growing customer base. New research has just been published from BDSA that takes a look at the cannabis market forecast and what exactly is causing the industry to swell.
A Look at Cannabis Growth
The report projects annual global cannabis sales to grow from $30 billion in 2021 to $57 billion in 2026, a compound annual growth rate (CAGR) of almost 13 percent. In the United States, cannabis sales will grow from $25 billion in 2021 to $42 billion in 2026, which will make up 75 percent of total global cannabis sales. Despite an inflationary environment and concerns about recession that dampened consumer spending, legal cannabis sales in the U.S. will reach $27 billion by the end of 2022, a jump of seven percent over 2021 sales of $25 billion.
“The ‘hockey stick’ trend of sales growth seen in the early years of legal cannabis has passed, and economic and regulatory headwinds are exerting pressure on legal cannabis markets,” Roy Bingham, CEO of BDSA, said. “Still, our updated forecast predicts that steady gains in developing U.S. markets will continue to drive single-digit annual growth in total U.S. legal sales in 2022, with continued growth prospects out to 2026.”
The Rise & Fall of State Markets
Adjustments to mature market forecasts stem partly from the continuation of the erosion of price in environments with high retail per capita numbers. Governments in Oregon and Washington have taken steps such as moratoriums on new licensing to combat chronic oversupply.
While sales have plateaued and even fallen in some of the most mature markets such as California, Colorado, Washington, and Oregon, driven by declines in retail prices and a challenging macroeconomic situation, newer markets continue to see brisk sales growth. An example of this is the Illinois market, which is expected to bring in approximately $2 billion in total sales in 2022, a 14 percent increase over 2021 sales.
The total U.S. market continues to see top line growth, though some of the most established markets are starting to see sales slow. These markets may soon face saturated consumer penetration as BDSA data reports that the past six-month adult adoption topped 50 percent in fully legal markets in the spring. A slowed adoption rate will leave firms competing on high supply and low prices. Actual losses have come for the first time in some mature markets, such as Nevada. The first-mover advantage has been negated by access in newer markets, prices receding, and regulatory reforms stalling.
“Though mature legal cannabis markets in the U.S. saw sales soften in 2022, the cannabis market is still forecast to see top line growth in 2022, driven by strong sales in new and emerging markets, such as the populous states of New Jersey and New York,” added Bingham. “The U.S. will continue to dominate global sales over the next few years, but we see potential from emerging global markets such as Germany and Mexico.”
New markets will be the significant sales driver until 2026, as the number of non-legal states is rapidly dwindling. So far in 2022, New Jersey has launched adult-use sales, with New York expected to follow suit later this year. The launch of these two markets represents an expansion of legal cannabis access to approximately 22 million adults, who are forecast to contribute roughly $5 billion to the $42 billion legal sales total in 2026.
Medical Market Experiencing Declining Sales
While the most dramatic sales declines are expected to hit mature adult-use markets, medical markets have also been affected, as patients have access to increasing variety and lower prices in neighboring adult-use markets. This trend of declining medical sales is also present in the medical channel of states that recently have passed adult-use legalization, such as Arizona, which launched adult-use sales in early 2021.
Since then, medical sales have sharply fallen. BDSA projects annual dollar sales in Arizona’s medical channel will be 30 percent lower than the 2021 annual dollar sales total and roughly half the annual sales total seen in 2020 — the last full year of medical-only sales. By contrast, the Colorado medical channel still saw modest growth in annual sales for roughly two years after the launch of its adult-use market in 2014.
Anytime cannabis becomes legalized in a state, there will of course be a huge spike in sales and demand, but once the excitement dies down, it changes to normal sales with regular customers stocking up on their favorite products. The slow growth in certain states is not necessarily a bad thing, it just means the local market is beginning to stabilize.
As a whole, the cannabis industry is not going away anytime soon, if at all, and dispensaries can expect more growth as states continue to legalize adult-use and medical marijuana.