Debra BorchardtHeadset is predicting in a new report that the total annual United States cannabis market has the potential to reach $45.8 billion by 2025. Despite its current challenges, California is expected to remain the number one market. Headset is projecting that the state’s market will reach $7.7 billion in just three years. The report becomes a little more interesting when a few surprises pop up in the list.
Florida
Headset believes Florida will rise to become the second-place market with a projected $3.2 billion in sales by 2025. This is pretty surprising considering that Florida is a medical-only state. Headset’s new report notes that in 2021, Florida is estimated to process around $1.3 billion in sales just in the medical market alone. The analytics company thinks that by 2025, there is about a 50% chance that Florida will begin adult-use sales. yet so far attempts to get such legislation passed have failed. The report is also quick to point out that there are a limited number of operators in the state and the barrier to entry is high. In addition to that, the report also states that the current Florida MSO’s are fighting to protect their first-to-market advantage, which could impact growth in sales.
New York
Even though New York is a medical-only state at this time, adult-use sales could begin in 2023. Headset is forecasting the market to become the third-largest in the country with sales of $2.86 billion. That’s a lot of growth in just two years, especially for a brand new program. In addition to that, the illicit market in New York is strong and thriving. The legal market is currently a limited license state, with low adoption. Despite all that, Headset sees great potential in the state since its potential market population is over 15 million, which is similar to Florida. The report also suggests that New York operators could convert quickly.
Arizona
The Arizona market was not likely to be on the bingo card for the top five cannabis markets, but Headset is forecasting sales to reach $2.79 billion by 2025. The most recent month’s sales have reached $181 million growing from last year’s $85 million. The state is already legal for both medical marijuana and adult-use cannabis.
Illinois
It’s no surprise to see Illinois hit the top five with a projected market of $2.5 billion in sales. This fully legal state has benefited from being the first in the midwest area. It has certainly captured lots of customers from surrounding states that haven’t moved as quickly. The most recent confirmed sales in a month were $144 million.
Here are some of the surprises within the report:
New Jersey
While not as robust as New York, New Jersey is forecast to reach sales of $1.6 billion by 2025. The report read, “With medical operators waiting at the chance to convert their medical operations to adult-use around March of 2022, we are anticipating electrifying growth in the coming years for the Garden State. Regulators are working rapidly to establish a foundation and mobilize this market expected to garner a 21+ population of nearly 7 million in 2025. New Jersey’s limited licenses are almost entirely owned by MSOs, with 2021 being an incredibly active year for acquisitions of prior independent operators in the market. Given the established foundational medical market, we expect to see a quick turnaround for collocated operators once licenses are awarded in the coming months.”
Virginia
Headset says it sees the potential of the Virginia cannabis market hitting $1.3 billion by 2025. “Although current regulations allow for adult-use sales to begin in 2024, we do see a possibility for this timeline to be slightly expedited. Despite having a less robust medical market than New Jersey as a foundation for adult use, the momentum for the advancement of the cannabis market in Virginia is indisputable.”
Ohio
Move over Illinois, Headset says that Ohio has established itself as one of the most exciting emerging cannabis markets in 2021. The report is projecting sales to reach $1.6 billion and rivaling New Jersey. “By 2025, census data is predicting that Ohio will present a massive addressable market of 8.8 billion potential adult-use consumers over 21+. It is no wonder that we are seeing an ever-increasing call for cannabis legalization in the Buckeye state. Ohio’s current medical market is steadily growing with the potential to reach half a billion in sales by the end of 2021 despite being a limited license market. The medical cannabis in Ohio seems to be bursting at the seams with demand as regulators are seeking to expand both licensing limitations as well as access for patients in the state.”
What about the current hot states? Michigan is forecast to reach $2.4 billion in sales, while Massachusetts is in the middle of the pack at $1.6 billion. The ground zero state for the modern legal adult-use market – Colorado slips to $2.1 billion in sales. Not too shabby and still in the top, but losing its first to market luster.
Methodology
Headset said it employed separate methodologies depending on current market status and data availability.
“For markets that we are currently offering Insights Premium data, we leveraged the per capita spends based on individual market data. We then applied growth rates (CAGRs) based on historical growth in each individual market. Assumed growth rates in per capita spend varied between 2% and 8% per year (which were compounded over the next four years). Additionally, we applied growth (or contraction) based on 21+ population estimates in 2025.”
“For markets that are less mature, we needed to apply a different methodology due to the limited access to current and historical sales trends. In order to forecast these markets, we accounted for three unique factors for each state.” The report posted the following method:
- First, we leveraged census data to account for current population totals and demographic breakdowns as well as forecasted totals for 2025 estimates.
- Then we calculated an assumed per capita spend for both medical and adult-use markets based on comparable operating markets, CPI data for alcohol sales, and assumed medical percent participation of total 21+ populations in each market.
- And last, we compiled estimations for the likelihood of legalization for medical and adult-use markets in every state that does not have current operating cannabis markets. In order to account for the probability that each state will advance cannabis legislation (medical and adult-use), we took into account the current state of cannabis laws, any active campaigns or bills for cannabis advancement as well as any known limitations to enacting medical and adult-use cannabis. In building this model, we are able to attribute a weight to the likelihood that we will see active cannabis sales in the medical and adult-use markets. We also have taken into account the estimated turn-around for the timeline it would take for a market to get up-and-running through comparing similar markets that have completed or are actively working on legalization.
