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Rising Cannabis Giants in 2023: The Billion-Dollar Market Analysis
Explore the eight states dominating the billion-dollar cannabis club in 2023, alongside new and familiar markets shaping the future of this booming industry.
2023’s Billion-Dollar Cannabis States: A Mixed Bag of New and Familiar Players
2023 is a significant year for the cannabis industry in the United States. Eight states have risen to the challenge of hitting the billion-dollar mark in total retail sales. But what’s interesting is that this number is actually one less than what was seen in 2021.
The heavyweights like California, Colorado, and Washington continue to dominate, easily maintaining their 10-figure sales. However, dwindling numbers in Oregon and Nevada have nudged them out of the billion-dollar bracket.
On the other hand, Missouri emerges as the promising newcomer, to exceed $1.3 billion in both adult-use and medical sales.
The New Wave of Cannabis Markets
But to gauge the U.S. cannabis industry only by its giants would be an injustice. 2023 is not just about the established players. There are nine new states among the 20 that have implemented commercial adult-use cannabis sales since 2022’s beginning.
What took seven years for the first 11 adult-use programs is now achieved by these nine emerging markets in just 18 months!
Nationwide Growth and Future Projections
These new entrants are contributing to a projected nationwide growth of 12% in cannabis sales by the end of 2023, with a total reaching $29.6 billion. Market intelligence provider BDSA highlights that the 12 largest adult-use markets will be responsible for over two-thirds of this total.
Here’s an intriguing insight into 2023’s top-performing retail markets.
(Note: Florida’s thriving medical market is also poised to cross the billion-dollar threshold this year, but the analysis here is confined to adult-use states only.)
A Significant Share of Nationwide Sales
These numbers shed light on an intriguing aspect of the U.S. cannabis industry: Combined, the eight states’ 2023 cannabis sales estimates are projected to eclipse $17 billion. This represents nearly 60% of the nationwide total, a staggering figure when you consider that these states comprise less than 30% of the U.S. population. The disproportionality emphasizes the economic significance and growth potential of the cannabis market in these key areas.
California: The Undisputed Leader of Cannabis Markets
California continues to hold the crown as the world’s largest cannabis market in 2023, even with the projected challenges ahead.
A Closer Look at the Numbers
Despite facing a 7.1% year-over-year market decline, California is projected to record an impressive $5 billion in adult-use sales for 2023. This projection is rooted in the first-quarter taxable sales reported to the California Department of Tax and Fee Administration (CDTFA).
But the grand 10-figure estimate is no anomaly. Ever since California launched adult-use sales in January 2018, it has been a nationwide leader. The inaugural year itself saw adult-use dispensaries report a staggering $1.98 billion in taxable sales.
A Shift in Reporting
While the CDTFA’s focus has traditionally been on “taxable sales” (including cannabis, cannabis products, and other retail sales like T-shirts), a new change in 2023 has brought a refined focus.
Based on first-quarter data, the actual amount of cannabis sold that’s subject to California’s excise tax is expected to be around $3.5 billion, or approximately 69% of the “taxable sales.” This nuanced data allows for a more accurate comparison with other state markets.
Prior to 2023, the tracking of this more specific figure – the lower amount derived from sales subject to the state’s cannabis excise tax – was not in place.
A Market Like No Other
California’s dominance in the cannabis industry remains unchallenged, reflecting the state’s forward-thinking approach to legalization and market regulation. As it stands, the Golden State continues to pave the way for innovation and growth within the sector, providing lessons and insights for emerging markets nationwide.
Michigan: A Standout Growth Story in Cannabis Sales
Michigan has emerged as a fascinating anomaly among the billion-dollar cannabis markets, notably for its impressive year-over-year growth.
A Closer Look at Michigan’s Thriving Market
Michigan’s cannabis sales figures are nothing short of extraordinary. Retailers in the state are expected to record over $2.9 billion in both adult-use and medical cannabis sales in 2023, a robust 27% increase from the previous year. This projection, provided by the state’s Cannabis Regulatory Agency, paints an optimistic picture of the industry’s future.
What’s even more exciting is that this $2.9 billion projection might be on the conservative side. Upward sales trends in June ($260.8 million) and July ($276.7 million) exceeded the 2023 monthly average of $243.3 million, signaling that Michigan’s second half could very well propel total sales over the $3 billion mark for the year.
An Unmatched Demand
Michigan’s appetite for cannabis is unparalleled. In 2023, the state boasts the highest demand among adult-use states in the nation, with an average monthly spend of $23.42 per capita. This spending rate is more than three times that of California, a startling comparison provided by a CBT market analysis.
A Rising Star
Michigan’s outlier status in the cannabis industry isn’t just about impressive numbers. It reflects a rapidly evolving market, adapting to changing consumer needs and behaviors. The state’s unique position highlights the dynamic nature of the cannabis industry and offers a glimpse into what might be possible for other markets aiming for exponential growth.
Illinois: A Steady Player in the Cannabis Industry
While some states boast rapid growth and others experience declines, Illinois presents a unique case in 2023 with a seemingly stagnant cannabis retail market. Yet, there’s more to the story.
A Flatline with a Twist
Illinois is projected to report more than $1.9 billion in combined adult-use and medical sales this year, based on data up to July from the state’s Department of Financial and Professional Regulation. This estimate indicates a marginal increase of roughly $10 million (or 0.5%) compared to 2022.
Interestingly, this modest uptick comes despite Missouri, sharing over 350 miles along the Mississippi River with Illinois, launching adult-use sales in February 2023. Missouri’s entry into the market marked a first among Illinois’ five bordering states.
The Impact of Bordering States
The effect on Illinois was immediate. Adult-use sales attributed to out-of-state residents fell from 31% in 2022 to 25.5% in the first half of 2023. This shift accounted for an average difference of approximately $6.5 million per month.
Though these numbers may suggest a plateau, they shouldn’t overshadow Illinois’ consistent performance. 2023 marks the state’s fourth consecutive year cracking the $1-billion benchmark, a testament to the stability and resilience of its cannabis market.
A Symbol of Stability
In an industry marked by rapid changes and growth spurts, Illinois stands as a symbol of stability. Its performance in 2023 highlights the complex interplay between state markets and how regional developments can shape the industry. The Land of Lincoln offers lessons in maintaining steady growth and adapting to external influences.
Massachusetts: A Resilient Market Amid New Challenges
In the face of fresh competition in New England and fluctuating prices, Massachusetts remains a prominent figure in the cannabis industry in 2023. The Bay State’s story is one of resilience and adaptability.
Standing Strong in Fourth Place
Despite a slight 0.1% decline from the previous year, Massachusetts is projected to be the fourth-largest cannabis market in the U.S. this year, with over $1.75 billion in adult-use and medical sales. This projection is drawn from sales data through July, provided by the state’s Cannabis Control Commission (CCC).
Competing with New Entrants
Licensed Massachusetts dispensaries reported their highest sales month in July 2023, at $154.6 million, an achievement made all the more notable considering recent launches of adult-use sales in Vermont (October 2022), Rhode Island (December 2022), New York (December 2022), and Connecticut (January 2023). The Bay State’s ability to hold its ground amid new competition speaks to the strength of its market.
Navigating Price Changes
Massachusetts has also maintained its overall sales total even as the average price for adult-use flower dipped significantly. According to the CCC, the price dropped from $288 per ounce in July 2022 to $176 per ounce in July 2023—a striking 39% decrease over 12 months.
A Model of Resilience
Massachusetts’ experience in 2023 offers a snapshot of a market that can navigate new challenges, whether it’s competition from neighboring states or shifting consumer prices. The state’s continued success serves as a testament to a well-regulated and resilient industry, and a model for how other markets might adapt to similar challenges in the future.
Colorado: Facing Challenges in a Maturing Market
Once a pioneer of the adult-use marketplace, Colorado’s cannabis market is facing some headwinds in 2023. Sales figures are showing a decline, reflecting a more complex and mature market landscape.
A Year of Decline
Colorado’s cannabis sales are projected to reach an estimated $1.57 billion in combined adult-use and medical sales for 2023, an 11.5% drop compared to 2022, based on data from the state’s Department of Revenue (DOR). The state’s monthly sales through the first half of 2023 are averaging nearly $17 million less when compared to the monthly average for all of 2022.
A Continuing Trend
This decline is not a sudden change; it’s a continuation of a trend that saw a 21% year-over-year slip that Colorado retailers experienced in 2022. Despite the challenges, Colorado has maintained its position, cracking the billion-dollar mark every year since 2016.
A Return to Earlier Performance
The sales figures projected for 2023 align more closely with how the state performed in 2018. While this may seem like a step back, it reflects the maturation of a market that has been at the forefront of the cannabis industry.
Lessons from a Pioneer
Colorado’s experience serves as an essential case study in how a once-booming market can level off and face new challenges. The state’s performance in 2023 may offer insights for other markets that will inevitably face similar growing pains as they evolve and mature.
Arizona: A Rapid Start Followed by Stabilization
Arizona’s entry into the adult-use cannabis market was nothing short of explosive. After an impressive first year, the state now faces a period of stabilization.
A Lightning-Fast Launch
Arizona launched adult-use cannabis sales in January 2021, just 80 days after voters passed Proposition 207 in the November 2020 election. The market hit the ground running at full speed, with licensed retailers selling more than $1.36 billion in adult-use and medical cannabis during that inaugural year, according to the state’s Department of Revenue.
A Shift Toward Stability
However, Arizona’s emerging retail market has seen a stabilization in growth since its explosive start. The state’s 2023 cannabis sales are projected to mirror 2021’s total at $1.36 billion, based on monthly averages through May. This figure represents a slight 2.7% decline from the previous year’s $1.4 billion total.
Navigating the New Normal
After a robust beginning, Arizona’s cannabis industry is navigating a new normal. This stabilization might be perceived as a loss of momentum, but it could also be a sign of a maturing market that is finding its equilibrium.
An Important Milestone
Arizona’s experience in 2023 highlights an essential phase in the life cycle of a burgeoning market. The rapid growth phase is often followed by a period of stabilization as the market matures and finds its balance. Other states looking to launch adult-use cannabis sales may find valuable insights in Arizona’s journey from rapid expansion to a more measured and sustainable growth trajectory.
Missouri: The Newcomer Joins the Billion-Dollar Club
Missouri’s entrance into the adult-use cannabis market has been nothing short of impressive. Launched in February 2023, the state’s cannabis industry is already projecting significant sales, establishing itself as a key player in the U.S. cannabis space.
A Strong Start
Since launching adult-use sales on February 3, 2023, Missouri has wasted no time in making its mark. Based on monthly sales data through July, Missouri dispensaries are projected to sell $1.35 billion in combined adult-use and medical cannabis in 2023, as reported by the state’s Department of Health and Senior Services. What’s even more impressive is that this figure excludes any adult-use sales for January.
Small State, Big Impact
With roughly 6.2 million residents, Missouri will become the least populated state to cross the 10-figure sales threshold this year. The state’s success in reaching such a significant milestone in such a short time is a testament to its strong market dynamics and effective regulatory framework.
A Singular Achievement
Missouri’s rapid ascent to the billion-dollar club sets it apart as the lone newcomer to reach this level in 2023. Its unique trajectory and robust growth provide valuable insights for other states considering the implementation of adult-use cannabis sales.
As Missouri continues to evolve, its performance and the strategies that have contributed to its success will likely become a point of study and emulation for others. The state’s initial achievements have already demonstrated what’s possible with the right combination of regulation, market forces, and consumer demand.
Washington: A Maturing Market with Resilience
Washington’s cannabis market continues to demonstrate resilience and maturity, even as it faces challenges. Its ability to sustain high sales volumes reflects an established and adaptive industry.
A Shift in Sales Trends
State cannabis sales in Washington are projected to reach $1.23 billion in combined adult-use and medical transactions this year, representing a 4.8% decrease compared to 2022, according to data from the state’s Liquor and Cannabis Board.
A Peak and Subsequent Decline
This trend comes after Washington’s retail market peaked at $1.43 billion in 2020 and $1.48 billion in 2021—years that were followed by a 12.3% slip in 2022. While some markets might falter after such a decline, Washington’s has shown signs of stabilization.
Slowing the Bleeding
Nonetheless, the reduction in sales has appeared to slow, indicating that the market is finding its new equilibrium. In fact, 2023 will mark Washington’s sixth consecutive year as a billion-dollar retail market. This continued success, despite a contraction in sales, illustrates the strength and stability of Washington’s cannabis industry.
A Symbol of Stability
Washington’s experience provides a lesson in the resilience of a well-established cannabis market. Even as trends shift and external factors apply pressure, a strong regulatory framework and consumer base can help maintain significant sales volumes. Other states with maturing markets may find Washington’s continued success as an inspiring case study for navigating inevitable ebbs and flows in the industry.
Robust Markets: Strength Beyond the Billion-Dollar Club
While the spotlight often shines on states that achieve billion-dollar cannabis sales, it’s essential to recognize the formidable and growing markets that are thriving just below that mark. Several states with both mature and emerging programs are demonstrating strong performances in 2023.
Mature Programs Holding Strong
In Oregon and Nevada, mature adult-use programs continue to generate significant sales, despite not reaching the billion-dollar milestone. These states have created sustainable markets that continue to perform well, reflecting thoughtful regulation, consumer demand, and strategic business practices. Both are projected to surpass $700 million in cannabis sales for 2023, maintaining their position as key players in the industry.
Emerging Stars on the Rise
In addition to established markets, emerging programs in states like Maryland and New Jersey are showing great promise. With projected sales also exceeding $700 million in 2023, they are paving the way for the next wave of major cannabis markets. Their rapid growth and robust sales underscore the broader trend of cannabis acceptance and economic potential across the nation.
A Varied Landscape
These states illustrate the varied and vibrant landscape of the U.S. cannabis industry. From well-established markets to rising newcomers, there is strength, growth, and resilience at many levels of the market. It’s a reminder that success in the cannabis space isn’t confined to a select few giants; it’s a dynamic and evolving field where innovation, strategy, and adaptability can lead to remarkable achievements.