Regulations on the number of cannabis retailers has resulted in very different state markets in the U.S.
We’ve been at this for 10 years in Washington and Colorado, having published the first issue of Marijuana Venture just when those two states were opening their adult-use markets. In that time, I’ve witnessed incredible growth in the industry, many ups and downs, and an even bigger number of rules and regulations.
Each state is different, and at this stage of the game you’d think that any new state considering legalizing adult-use weed would send out teams to review the existing markets. This would make total sense as the jurisdiction about to legalize a new industry would have lots of information to glean and could shape its laws in a way that would offer the best possible opportunities for new businesses, while ensuring — or at least trying to ensure — success. However, we’re talking about government, bureaucrats, lobbyists and the usual reluctance of humans to do the right thing right away.
Some state laws can seem haphazard, and often completely arbitrary. Take Washington and Oregon, for example. Both states are in the Northwest, reliably blue and early to legalize adult-use marijuana. But the similarities end there, and the two states have vastly different rules and regs. Oregon allows vertical integration, Washington does not. Oregon has no limits on licenses or outside investments, Washington limited in-state residents to five retail locations and about 500 in the entire state. All Washington cannabis must be sold in sealed packages with a UPC number, Oregon allows deli-style sales out of big jars. Washington stores can only sell state-licensed cannabis and paraphernalia, Oregon’s pot shops can sell anything in their stores except guns, tobacco and alcohol. (Years ago, I heard there was even a pot shop in Portland that sold pets!) Washington has about 7.5 million residents and roughly 500 pot shops. That equals about 16,000 people per store. In Oregon, there are 787 retailers for 4.2 million residents. That equals about 5,000 per store. Assuming for a minute that the rate of consumption per capita is about the same between the two states, it would seem obvious that stores in Washington would be doing a much higher volume of sales per location than in Oregon — and they do! Washington stores average about $205,000 in sales per month, compared to Oregon stores at less than $100,000 per month.
With so many in this industry suffering and complaining about high taxes, depressed prices, crummy margins and a host of other issues, are there any states that seem to shine as an ideal place to launch? Well, yes and no. If you’re just looking at numbers, Oklahoma gets the worst grade. With just over 3.9 million residents and 2,387 licensed cannabis dispensaries, Oklahoma has just 1,675 people per dispensary — by far the lowest ratio in the country. Montana isn’t far behind with 2,580 people per store. At the other end of the scale sits Illinois, which has close to 13 million people and only about 200 pot shops. That’s about 65,000 people per store. Arizona is next at about 41,000 per. (Of course, New York is the least saturated market of all, with one shop per 200,000 residents, but that’s because the adult-use program is relatively new and the state has been issuing licenses so slowly.)
Does this tell us anything? Well, if you’re looking for volume, Oklahoma is likely going to suck, and Illinois would be a much better bet. However, laws change, and sometimes other factors contribute to retailers’ success. Montana has a low population per store, but borders Idaho and Wyoming, two very red, very anti-marijuana states. It also has lots of summer tourism. I hear a lot of Yellowstone vacationers and Idaho cowboys regularly visit Big Sky Country for some of Montana’s finest.
Onward and upward!