Editor’s note: A version of this article was first published on cannabisbusinesstimes.com in December and has been updated to reflect current sales trends. The original version also includes insights into Nevada, California and Washington’s cannabis markets, in addition to predictions for new markets in 2023.
Five of the oldest cannabis markets in the U.S. had declining year-over-year sales figures in 2022 for the first time since launching their respective commercial retail programs for adult use.
After pandemic peaks equated to record growth across much of the industry in 2021, Colorado and Oregon dispensaries faced the brunt of 2022’s correction, while Nevada and Washington retailers, as of press time, also are on track to report double-digit downturns in terms of percent decreases to their sales totals in 2022. And California, which began adult-use retail on Jan. 1, 2018, also has a shrinking regulated market (as far as sales go).
These five states represent the most mature adult-use markets in the U.S., with the exception of Alaska, which does not tax sales to end users and therefore does not keep records pertaining to those transactions, according to its Department of Revenue. They also represent some of the oldest medical markets, too, with California pioneering that reform front in 1996.
And age has something to do with the trends of 2022, according to Cooper Ashley, analytics manager, and Mitchell Laferla, data analyst, at cannabis data and research company Headset.
“The biggest contributing factor to whether a market is growing this year is where it’s at in its market maturity,” the analysts said via email. “The separation is not actually geographical in nature, rather it’s about legacy markets (California, Nevada, Colorado, Oregon, Washington) versus new markets (Massachusetts, Michigan, Illinois).”
Specifically for states that track adult-use sales separately from medical sales, Maine, which launched its adult-use retail program in October 2020, Michigan (December 2019) and Arizona (January 2021) experienced the largest percent increases for adult-use sales in 2022 compared to 2021, according to data collected by CBT.
Editor’s note: CBT’s analytics for this article were derived from data from the Arizona Department of Revenue, California Department of Tax and Fee Administration, Colorado Department of Revenue, Illinois Department of Financial and Professional Regulation, Maine Office of Cannabis Policy, Massachusetts Cannabis Control Commission, Michigan Cannabis Regulatory Agency, Nevada Department of Taxation, Oregon Liquor and Cannabis Commission, and Washington State Liquor and Cannabis Board.
While Michigan’s adult-use retail market experienced more than 55% growth in 2022, and Arizona’s adult-use retail market was on pace to experience 43% year-over-year growth, based on data available as of press time, factoring in the shrinking medical markets in those states provides a more complete picture of overall growth.
Michigan’s combined adult-use and medical sales reached nearly $2.3 billion in 2022, a 28% increase over 2021, while Arizona’s combined figures from January to October of 2022 represent a 3.8% increase compared to the same time period from 2021.
“Michigan, for example, is the growth leader in 2022, and, as a state, it is still growing to meet the demand in a rec market that is [3] years old,” the Headset analysts said. “In Washington, for example, which has a very established adult-use market of nearly a decade, they are seeing the double-digit slides. In Washington, the market converged on local demand several years after sales began, so, without the ‘growth phase’ seen in Michigan, Massachusetts [and] Illinois, they are getting hit the hardest by some of the well-known industry pains such as price compression.”
Washington’s combined adult-use and medical retail sales shrank 13% in the first three quarters of 2022, compared to the same timeframe in 2021, while Oregon and Colorado’s market declines were further exacerbated by factoring in both patient and consumer sales figures.
But why are Oregon and Colorado’s markets experiencing deeper downturns than a state like Washington, which is just as mature in the cannabis space?
“There are probably multiple reasons that Colorado and Oregon are loss leaders,” the analysts said. “Oversupply could definitely be contributing as both have been in the news for such issues this year. Oregon specifically has issued a licensing moratorium until 2024 to help with an oversaturated market. Pricing is definitely an issue in both of those markets. [We] also believe that both Colorado and Oregon had some of the largest sales surges during the pandemic, so, in a way, they had the furthest to fall in the market correction.”
Here’s a closer look at both markets.
Colorado
Colorado’s combined adult-use and medical sales grew 63% from February to July 2020—mirroring the rapid growth cannabis retailers in the U.S. experienced in the immediate aftermath of COVID shutdowns—according to data from the state’s Department of Revenue.
Stepping back to take stock of the bigger picture, Colorado’s monthly sales averaged nearly $192 million from March 2020 to May 2021—during the entirety of the pandemic boom—representing a 35% increase from the $145 million monthly average from January 2019 to February 2020 (a pre-COVID baseline).
Now in the post-pandemic market correction, Colorado’s combined adult-use and medical monthly cannabis sales averaged $148 million through the first 11 months of 2022—much less than the boom period, but a little more than the pre-pandemic market.
As far as price compression goes, Colorado’s median market price for unprocessed dried flower from cultivator to retailer hit a quarterly peak at $1,721 per pound in January 2021. That rate fell nearly 62% to $658 per pound as of Jan. 1, 2023—the lowest price since the state launched its adult-use market in January 2014.
Based on 2022 monthly sales averages through November, Colorado’s combined adult-use and medical retail market is projected to hit nearly $1.8 billion for the year, a bit shy of 2021 and 2020 tallies. (December data was not available as of press time.)
Oregon
Much like Colorado, fellow adult-use pioneer Oregon’s $995 million in total cannabis sales for 2022 represents a 16% decrease from 2021.
Monthly sales peaked at nearly $111 million (combined adult-use and medical) in April 2021 but have steadily declined to less than $80 million in December 2022, according to data from the Oregon Liquor and Cannabis Commission (OLCC).
Oregon’s monthly sales averaged more than $99 million from March 2020 to May 2021—during the pandemic boom—representing a 49% increase from the nearly $67 million monthly average from January 2019 to February 2020 (a pre-COVID baseline).
Now in the post-pandemic correction, Oregon’s combined adult-use and medical cannabis sales averaged just less than $83 million per month in 2022.
The post-pandemic market downturn comes as the average adult-use retail price for flower has dropped from $161 per ounce in the fall of 2020 to an all-time low of roughly $116 per ounce in December 2022, according to OLCC. The average wholesale price also dropped to an all-time low of $550 per pound in December, a 42% decrease from the beginning of 2022.
Oregon’s combined adult-use and medical retail market just missed the billion-dollar benchmark in 2022 after recording nearly $1.2 billion in 2021.
