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You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
How the cannabis market is doing depends a lot upon where one is thinking about. In the early days of legal cannabis in North America, the story was very simple: New legal markets would grow strongly due to the consumers of the illicit market shifting into them.
Colorado, the first U.S. state to legalize for adult-use, had legal cannabis sales of $683.5 million in 2014, its first year of adult-use. Medical sales in 2014 accounted for more than half at $380.5 million, which was 16% growth from 2013. In Colorado, medical patients could save on the tax charged for adult-use. In 2015, the state generated almost $1 billion in sales, growing 46%. After peaking in 2022 at $2.2 billion, that state has seen a significant decline since then.
In 2024 (through August), Colorado has generated a total of $948.6 million, mainly in adult-use sales. Medical sales and adult-use sales are each down 10.4% . The relatively mature market, legal for adult-use for more than a decade now, is shrinking. We report on several markets here, and the decline in Colorado is not unique. Canada, another mature market, declined in July by 3.9% from a year earlier and are down 0.8% in 2024 compared to 2023.
Looking at other U.S. states, we are publishing updates on four, including Florida, Illinois, Michigan and New York. We also publish a monthly review of data from BDSA that covers these states and several others. Our September BDSA data showed that growth overall is quite slow.
I have warned about Florida’s medical cannabis market, which has fallen further in terms of patient growth since the last update. Medical cannabis patient growth is slowing, and competition has picked up a lot. Cannabis investors are expecting adult-use to pass, which will likely boost revenues, but how this will play out exactly is not known.
This week, we published about Illinois and Michigan, two large Midwest markets, and both declined sequentially pretty fiercely. In fact, both declined compared to a year ago. This seems to be more than just Ohio going legal for adult-use. New York, on the other hand, is soaring, as we detailed recently. New Jersey was strong in September, but the growth of legal dispensaries open in NYC could weigh on that state.
How a state’s legal cannabis market does depends upon many factors, including its market structure, its regulation, whether there was a medical market before adult-use, how mature the legality is and how many states nearby are also legal (tourism potential). Another factor can be actions of the illicit market to regain customers. Of course, the amount of cannabis consumption in total can impact a program, especially one that is large and mature. How the economy is doing can play a role on cannabis consumption, and this may explain why these mature markets are showing declines. Beer sales are declining too by unit volume and overall sales.
Revenue growth is important to cannabis investments, but it is not the only factor. Perhaps more important to investors is earnings growth. Earnings certainly depend upon revenue, but cannabis investors are facing a huge potential booster to cash flow: the elimination of 280E taxation. Again, the DEA is on track to reschedule cannabis from Schedule 1 to Schedule 3, and this would end the tax. Still, cannabis investors should spend time to understand better the geographical exposure of their investments.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Illinois Cannabis Sales Slump In September
New York Cannabis Sales Continue to Surge
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Sincerely,
Alan
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