Arizona
Rec-sales launch
January 22, 2021
Medical sales launch
December 6, 2012
Market size
$1.242 billion*
*Total sales according to state data for January-November 2023.
Total sales
$4.023 billion ($2,420,957,909[rec] $1,602,986,360 [med])
2021 – $1,363,448,765 ($598,994,107[rec] $764,454,658[med])
2022 – $1,418,152,223 ($900,157,771[rec] $517,994,452[med])
2023 (Jan-Nov) – $1,242,343,281 ($921,806,031[rec] $320,537,250[med])
Operators
Arizona has issued 170 licenses, but the market itself is hardly limited to 170 operators. One cannabis operator license allows for one retail location, a processing facility and a cultivation site without limitations on canopy size or restrictions on leasing a portion of the cultivation or manufacturing space to a third-party business.
Arizona Dispensary Association president Lilach Mazor Power says there are an estimated 400 cannabis brands operating in the state today.
Active licenses:
170
Arizona’s cannabis industry has grown tremendously from its initial medical launch in December 2012, developing into more than a $1.5 billion industry in 2023. Its unique license structure, where one license grants access to retail, processing and cultivation, as well as the right to lease a portion of operations to third parties, has made its 170 operator licenses among the most valuable in the country.
Growing up
Arizona’s license structure has undoubtably benefited many of its operators who have for the past 14 years seen limited competition and relatively stable prices. But a number of factors have been destabilizing the market, chief among them the decreasing retail value of cannabis products.
“With the pandemic in 2020 and the launch of adult-use sales the following year, Arizona had tripled its business in two years over 2020 and 2021,” says Arizona Dispensaries Association president Lilach Mazor Power. “But then, in 2023, we’re seeing more people, we’re dispensing more products, but we’re making less money because the price of a product in Arizona had decreased by 35% in the last 18 months.”
Part of that decrease in value is from the consolidated number of retail owners; Power says about 80 ownership groups control the state’s 170 dispensaries and the increasing number of product brands, which she estimates to be about 400. She says the influx of product has pushed some brands to sell at a loss just to generate cash-flow and some retailers are lowering prices to bring in more customers.
“There is a bottom to that and we’re hitting that bottom because people are not making money,” she says. “But hopefully the fact that there’s more competition and less money available will make people realize that we need to start running real businesses with real profit.”
‘Flat is the new win’
Power says the ongoing joke among Arizona retailers is that “flat is the new win.”
“That’s because you are dispensing more, seeing more customers, but it’s still a 35% lower price per unit,” she says. “We’re seeing it across the board; some people’s sales are flat, some are 10% more, some are 10% less. Overall, sales are pretty flat, but product dispensing is higher. We’re working harder for less.”
Like many adult-use markets, the state is dealing with the growing pains that come with maturity, but Power hopes rock-bottom for Arizona, where an eighth of flower still retails for an average of $15, doesn’t go as low as it did for states such as Washington and Oregon, where the price for an eighth dropped as low as $5.
In addition to the lower price points at retail, operators are also dealing with new requirements for packaging, testing and tracking, all of which are ultimately good for the market, Power says, but are still more expenses for the operator.