Report: U.S. sales expected to reach $25 billion
With multiple new states recently legalizing adult-use cannabis and more than 239 million Americans now living in a state with some form of legal access, New Frontier Data is projecting the adult-use and medical markets in the U.S. to reach nearly $25 billion in sales this year, according to its 2021 Mid-Year Report.
“Increasing access has led to a boost in sales across all legal markets,” said Kacey Morrissey, senior director of analytics at New Frontier Data, noting that many of the new states do have not yet have their markets open.
Wholesale prices remain sky-high in Colorado
The average wholesale price for flower in Colorado was higher than $1,300 per pound for the fourth consecutive month, according to the state Department of Revenue’s average market rates for retail marijuana that went into effect on July 1, 2021.
It’s the first time the rates have been that high for that long since Q1 of 2017.
The current average market rate for flower is $1,309 per pound, up $1 from Q2 and down $412 from Q1, when prices spiked to their highest rate since 2016 at $1,721 per pound.
The high wholesale price of cannabis has coincided with the boom of cannabis sales that began at the start of the COVID-19 pandemic. Colorado continues to hit monthly records, with $962 million in revenue through May, the most recent sales data available. Revenue for Colorado retailers is up $183 million year over year, and on pace to surpass $2.3 billion in sales. Last year, Colorado tallied $2.19 billion in total sales, with 79.8% of sales going to the recreational market.
In addition to flower, three other categories increased this quarter: trim increased from $354 per pound to $425; bud allocated for extraction nearly doubled from $525 per pound to $901 and trim allocated for extraction rose slightly, from $225 per pound $240.
Two of the seven categories decreased this quarter: wet whole plants went from $197 to $191 and seeds fell from $8 apiece to $4. The immature plant rate ($10) stayed the same.
The average market rate is the median market price of each category of unprocessed marijuana that is sold or transferred from adult-use marijuana cultivation facilities to retail marijuana product manufacturing facilities or retail marijuana stores. The July 1 average market rate was calculated based on retail marijuana transactions from March 1, 2021 through May 31, 2021 in the Marijuana Enforcement Division’s marijuana inventory tracking system.
— Garrett Rudolph
Total industry sales, including medical and recreational markets, topped $20.3 billion in 2020, a major jump from just $13.2 the prior year. New Frontier is now estimating total sales in 2021 from legal markets will reach $24.9 billion, as first-quarter sales reached an all-time high of $5.84 billion, with flower accounting for 50% of sales.
The company now estimates the market will continue to grow at a rate of about 16%, hitting $42.9 billion in revenue by 2025.
According to Morrissey, while new users contribute some to the increase, most of the growth comes as new states come online and existing consumers make the move from the illicit market to the legal one. However, the black market still dwarfs the legal market, with illicit sales accounting for more than $65 billion per year.
“It really just is a testament to what the future of the industry holds,” Morrissey said.
The report estimates that in 2020, just 28% of money spent on cannabis nationally was through the legal market, though that number is expected to jump to 42% by 2025.
Morrissey also said that new medical markets often represent the “tip of the iceberg” for a state’s potential. For example, if Florida went adult use, an additional 3 million customers could be added.
The future state markets also look different, with new, larger states taking their place among the ranks. Currently, California leads all states in cannabis revenue, accounting for a full 26% of the legal market with Colorado and Washington coming in second and third at 11% and 10%, respectively. However, by 2025, New Frontier sees California staying in the top spot, but with a market share of only about 16%, followed by newcomers New York (8%) and Illinois (8%). In fact, by 2025, New Frontier estimates that sales in Washington and Colorado, the first two states to legalize, will fall completely out of the top 10.
Morrissey said the increasing number of legal states also puts further pressure on the federal government to act, particularly on banking and finance reform, and eventually on legalization, though it does not seem to be a priority at the moment. The cannabis industry’s continued growth during the pandemic, when other tax bases faltered, will also compel more states to consider legalization. The South is the currently biggest area of the country still without legal access.
Taken together, the growth and the possibility for growth means additional capital flowing into the industry as well. Data shows mergers and acquisitions have tripled over the first quarter of 2020, with additional reporting from New Frontier showing a record $7.9 billion in investment in the industry in the first half of 2021, more than three times the amount raised in the first half of 2020.
And with $65 billion in potential revenue still going to the illicit market, Morrissey only sees more growth and more investment ahead.
“The growth potential is now proven,” she said.
— Brian Beckley
New PBS film explores the science of cannabis
The venerable PBS primetime science series NOVA will broach “The Cannabis Question” on September 29 with a new film from Sarah Holt that explores the risks and benefits as more U.S. states move toward legalization and decriminalization, as well as the impact that the War on Drugs has had primarily on communities of color.
The film also looks at the latest science on cannabis, including how it impacts the brain — including young, developing brains — and other questions about its medical efficacy and its addictive properties.
According to a press release, cannabis is growing into a multibillion-dollar industry with more than 55 million Americans saying they currently use it, “yet there’s been surprisingly little scientific investigation of the plant in the U.S.”
The documentary follows scientists such as Daniele Piomelli at UC Irvine and Yasmin Hurd at Mount Sinai Hospital, who are leading research on the endocannabinoid system — a collection of chemicals and receptors throughout the brain and body that help regulate the activity of multiple organs.
In addition to examining the potential health benefits and risks posed by cannabis use, NOVA traces the history of the criminalization of cannabis, which the press release calls “a massive public health disaster causing irreparable harm.”
Other people profiled in the film include Stanford neuroscientist Catherine Jacobson, who experimented with CBD extracts as a treatment for her son and whose work helped pave the way for Epidiolex, the only cannabinoid drug approved by the Food and Drug Administration, and Sean Worsley, a Black Iraq War veteran from Arizona who used medical cannabis to treat post-traumatic stress disorder, but was arrested in Alabama, despite carrying a medical marijuana card making it legal for him to obtain and use cannabis in his home state.
“A majority of Americans now live in states where cannabis is legal. As more people make their own choices about cannabis use, this film explores what scientists have learned so far about the potential benefits and risks,” said NOVA co-executive producer Julia Cort. “We hope The Cannabis Question will inspire people to join the national conversation about cannabis — informed by the science, and also by the story of how the plant has been weaponized against marginalized communities, causing irreparable harm.”
— Brian Beckley