California cannabis may be in trouble.
The state has seen an 8% dip from last year in the amount of legal marijuana purchased by consumers, the first time the state has seen a downturn in sales since the legal market launched in 2018, SFGate reported.
Consumers bought $5.3 billion worth of cannabis in California last year, according to statistics from the state Department of Tax and Fee Administration. That’s down by $473 million from 2021.
The dip in sales is likely the result of several factors, but the bottom line is that the “legal market is on the brink of collapse,” cannabis consultant Hirsh Jain told SFGate.
In the first year of sales five years ago, California marijuana companies sold $2 billion worth of cannabis. By 2021, that jumped to $5.7 billion.
The state has struggled for years to get a handle on its illicit cannabis market, which is likely the primary factor driving the decrease, since untaxed and unregulated cannabis is far cheaper than legal weed and there’s a vast surplus of both legal and illegal marijuana in the state.
But other hurdles have also played a role, Jain told SFGate, ranging from difficulties in getting new legal stores opened to supply chain hurdles to depressed wholesale prices for licensed cannabis farmers. All of that has also meant severe market contraction in California, alongside ballooning debt across the industry.