The Illinois marijuana market is one of the most expensive in the nation and among the smallest as far as the number of brands – but it also offers plenty of opportunity for entrepreneurs, according to a new report from Seattle-based Headset.
Despite the size of the Illinois cannabis landscape – “one of the largest markets in the country,” the report begins – it’s surprisingly homogenous and dominated by just a handful of brands, which keeps prices artificially high compared to other states, Headset reported.
Illinois has just 118 active cannabis brands, and only 10 of those brands account for 68% of sales, Headset found, putting it “dead last” nationally as far as brand diversity. That’s almost 53% fewer brands than Arizona, which came in second for the fewest cannabis brands and is also mostly vertically integrated, similar to Illinois’ market structure.
By contrast, Washington state has more than 1,000 cannabis brands.
Prices in the Midwestern state are also out of step with the rest of the nation.
“The average item price in Illinois is currently 89% higher than the rest of the U.S. market,” the report stated, noting that average marijuana products there go for $33.82, which is 46% higher than Massachusetts, and 61% higher than Washington state.
The report also suggested that Illinois was suffering from a lack of retailers, since the state has just 120 dispensaries. Another 55 were just awarded permits this month, and the state now faces cross-border competition from Missouri, which launched its own recreational cannabis market in February.
Those factors and others have combined to slow Illinois market’s growth to a snail’s pace, Headset found. After the recreational market launched in 2020, the market quickly exploded by 101% in 2021, and even grew by almost 13% in 2022, but thus far this year it has grown by just 2.1%.
Illinois marijuana shops have sold more than $950 million in the first six months of 2023, making it the third largest state cannabis market in the nation, after California and Michigan, but Headset reported that on paper, “Illinois seems to be flattening out after enjoying a few years of rapid growth.”
And while the number of brands has continued to expand, that growth is also slowing, Headset found.
“The state has averaged a year-over-year increase in brand count of 28.1% since 2020. However, the rate at which new logos are popping up on shelves is slowing. Between 2020 and 2021, brand count grew by 32.4% while 2023 compared to the previous year saw an increase of 11.3%,” Headset reported.
Product prices, on the other hand, have begun to ratchet down in response to market forces, almost twice as much as comparable prices in other U.S. markets, Headset reported.
The overall scenario, the report concluded, was that Illinois “remains one of the largest in the U.S. and presents numerous opportunities for businesses.”