While some state markets continue to grow, the earliest adult-use states are seeing shrinking total sales. Do you think enthusiasm/interest in legal cannabis is slowing down?
Tahir Johnson | CEO | Simply Pure Trenton
“Enthusiasm for legal cannabis isn’t slowing down. I believe that in each market the curiosity and novelty of purchasing cannabis in a dispensary drives people into dispensaries in high volumes in the early days of legalization, but over time, as access to cannabis becomes more normalized, the principles of supply and demand begin to take effect.”
George Fernandez | CEO | Modern Canna
“Total sales may be declining, but this doesn’t necessarily indicate a decrease in interest for cannabis. The markets are just stabilizing after initial booms, and competition is increasing. Markets just need to adjust to regular consumer patterns. Consumer interest in cannabis continues to be strong, driven by factors like ongoing destigmatization, the expanding variety of cannabis products and the scientific research supporting its medicinal benefits.”
Otha Smith III | CEO | Tetragram
“I believe saturation/competition and normalization are the main contributors to shrinking sales in mature markets. When consumers have several dispensaries and brands to choose from, competition among businesses increases — consequently leading to price competition and thinner profit margins, impacting overall sales growth. Secondly, as cannabis becomes more normalized and readily available, the initial excitement and novelty starts to fade, resulting in more stable and predictable sales patterns.”
Steve Levine | Partner | Husch Blackwell
“No, people are just spending their dollars in different places. Earliest adult-use states are not seeing as many out-of-state customers because those customers live in a state that has legalized in some form or have a state that is closer in proximity. Further, ‘intoxicating hemp’ products continue to flourish nationally and the customer purchasing flower or edibles in the state-legal marijuana market is now turning to online ‘intoxicating hemp’ products that can be purchased with a credit card and shipped directly to their house. This is a huge competitive advantage to businesses selling ‘intoxicating hemp.’”
Will Smith | President | Bud Bar Display
“I don’t think interest is slowing down, but I think decreased sales are the result of a growing black market. Neither the illegal growers or their buyers pay taxes. The black market growers also have little concern for product safety; this makes it critical that we fight to stop these black markets. When the country becomes legal, and interstate transport is permissible, I think it will help prices stabilize while also helping established brands become stronger. We will also see the development of new products, which could also play a role in increasing legal sales overall.”
Keya Denner | Partner | Constangy, Brooks, Smith & Prophete
“I do not believe that enthusiasm is slowing. Rather, each state faces unique challenges in regulating cannabis and some of the downward trends may be explained by ‘growing pains’ in the legislative and regulatory process. The regulatory systems imposed in some states could be hampering sales and pushing consumers back to the black market. But those consumers can be recaptured with changes to the way states regulate sales, access and available product offerings.”
David Brookshier | Operations Director | Confidence Analytics
“I think that the issue of lower total sales in the early adopter states is far more complex and multifaceted than increasing or waning interest in cannabis as a whole. We are in the middle of very uncertain economic times, and I think many folks are faced with choices in their budgets, and some are choosing to reduce their monthly spend on cannabis, or are perhaps pivoting to more ‘efficient’ options that provide better bang for their buck. There is also the more recent and topical issue of hemp products and the diversity of cannabinoids that are being sold without any regulatory oversight under the Farm Bill, for pennies on the dollar. Why would a consumer choose to purchase 100 milligrams of cannabis-derived THC edibles for $20-30 when you can order 100 milligrams of hemp THCA-derived edibles online, shipped straight to your door, for a fraction of the cost?
Even beyond edibles, there are countless companies out there right now offering to ship pure hemp-derived THCA isolate straight to your door, for anywhere from $1-3 per gram. It can be very difficult for licensed producer/processors to compete with these companies that don’t have to pay licensing fees, are not being held to the same stringent regulations, and are selling products without being subjected to the same 37% tax rate as regulated products, allowing them to massively undercut prices.
Another consideration: With more and more states around the country legalizing recreational or medical cannabis and increasing consumer access to safe and tested products, there is less incentive for folks to visit our beautiful state simply for ‘cannabis tourism.’
And finally, I think we saw a bit of an artificial peak of cannabis consumption during the pandemic when everyone was working remotely and just trying to get by in any way they could, including heavily self-medicating. I think for Washington state, we actually reached a bit of a plateau prior to the pandemic, and after the temporary sales spike, we are simply returning to that natural plateau, or potentially slightly under it due to the previously mentioned factors.”