Market Forecast Release Notes - February 2023

February 2023 Release Notes and FAQ for BDSA's Market Forecast

Table of Contents

About BDSA Legal Cannabis Forecast

Methodology

United States

Major Markets

Canada

BDSA Legal Cannabis Forecast 

BDSA’s legal cannabis forecast covers all states, territories and provinces of the United States and Canada as well as key global markets. The forecast considers demographic information, usage rates, registered medical cannabis patients, spending for the medical and adult-use channels, retail count, supply-chain structures, spending by product category (US and Canada only), illicit spending and other key industry metrics. 

Methodology

US Legal Cannabis Markets

Forecasts of medical spending are based on patient counts, in-state legalization dynamics, neighboring state market movements and state and federal governmental actions. Many medical markets provide actual numbers of registered patients and provide user-base histories where available. When official numbers are unavailable, patient counts are based on population, comparable market analysis, retail availability, conditions list and estimated patient pools with qualifying conditions. Post-adult-use legalization patient estimates and forecasts are based on comparisons to prior transitions in similar markets and the additional adult-use market 
dynamics.

A baseline per-patient spending number is utilized, derived from actual spending data from BDSA’s Retail Sales Tracking (RST), and other states that provide revenue data. The current iteration of the forecast includes updated baseline spending estimates that incorporate an increased amount of actual historical data from the tracking service and economic data specific to each market.

Adult-use spending forecasts are based on estimates of the population of legal adults consuming, derived using the long-running annual survey by the federal government’s Substance Abuse and Mental Health Services Administration (SAMHSA) as a base. Adult-use annual spending per consumer in each market is forecast based on a US baseline derived from RST data, adjusted, as with medical spending, for local market regulatory and economic conditions.
Forecasting the launch of future medical and adult-use markets involves analyzing a state’s decriminalization and legalization history, the status of existing cannabis laws and legalization efforts, opinion polls, political climate and demand, discussions with key industry players and advocacy groups as well as publicly available data.
 
Canada Legal Cannabis Markets 
Forecasts of medical spending are based on patient counts. The Canadian government provides numbers of registered patients in each province and national-level medical cannabis spending on a regular basis. Post adult-use legalization patient and spending forecasts are based on comparisons to prior transitions in USmarkets, with consideration for national and provincial specifics.
Adult-use spending forecasts are based on estimates of the population of legal adults derived using Canadian government data on cannabis usage at the national and provincial level. Adult-use annual spending per consumer in each market is based on both government data for national spending, in-store spending by province, national and provincial economy as well as comparable US data.
 
International Legal Cannabis Markets 
International medical markets range from limited markets where certain cannabis- based pharmaceuticals like Sativex are prescribed on a case-by-case basis and only sold in pharmacies, to markets with a liberal list of 
qualifying conditions and broader distribution. Medical spending estimates per country are based on estimated legal patient counts and a baseline spending-per-patient number. Actual historical or current registered patient counts are used where available, but a majority are estimated as a percentage of population using existing market trends as a base, then adjusting for qualifying conditions, available supply, openness of market, number of pharmacies/dispensaries and other relevant factors. An estimate of baseline medical spending per consumer is applied to patient counts to estimate medical spending. This per-consumer estimate starts with a US-centric baseline derived from BDSA’s RST data and adjusted for relative GDP per capita and other economic factors.

United States 

BDSA forecasts total legal cannabis sales in the United States to grow 14% to $29.8 billion in 2023, from an estimated $26.1 billion in 2022. That represents an increase from the sluggish growth seen in 2022 and will be driven by expansion in new and recently launched markets.
Key drivers in 2022 included:

• Price Compression Total US growth slowed considerably in 2022 to just 2.3%, compared with 34% in 2021 and 60% in 2020. This slow-down was driven by rapid price declines over the year across markets and product categories.
• Mature Markets The year saw the first overall spending contractions in many “mature” markets. Longterm adult-use markets California, Colorado, Nevada, and Oregon all saw overall spending declines in 2022, down a combined -14%.
• New/Recent Adult-Use Growth New Jersey and Montana both saw triple-digit and New Mexico double digit growth following the launch of adult-use channels in 2022. Adult-use markets in their second and third years, including Arizona, Michigan and, Illinois, also contributed significantly to growth in 2022.
• Medical Market Softness Following a pandemic-era resurgence, medical spending and patients began to decline again in 2022 in most markets that also have an adult-use channel. Additionally, several medical-only markets including Maryland, Oklahoma, and Pennsylvania saw slight to moderate declines in advance of any adult-use rollouts – expected in 2024 in the former two, 2025 in the latter.

Key drivers in 2023-27 include:

• New Markets Six new adult-use markets launched in 2022, five if New York’s minimal introduction is excluded. Five more will open in 2023, a few of those including Missouri have already begun sales, and BDSA forecasts eight more openings by 2027. Sales from adult-use in these new and recent markets will drive significant growth through 2027.
  • Additionally, there exists the possibility of legislative action within the next couple of years to legalize medical or adult-use in a number of states not currently modeled in BDSA’s forecast. These include Minnesota (adult-use), Wisconsin (medical), and several south-eastern states.
• Mature Markets BDSA expects to see a resumption of modest growth across most “mature” markets 2024-27. Over that time, markets that added adult-use in the 2018-2021 timeframe will drift toward maturity, and annual growth will moderate. 
• National Regulation BDSA assumes no comprehensive US federal regulations on cannabis within the forecast period. There is a possibility of partial reform, such as cannabis banking, within the next few years. This would be beneficial for the industry but is unlikely to significantly impact this forecast.

Major Markets

Arizona 
Arizona managed to get its adult-use market operational in record time in early 2021, just months after authorization via ballot measure in November 2020. While the introduction of adult-use to the state helped increase total spending by 24% to $1.27 billion in 2021, Arizona saw less than 1% gain in total spending in 2022, as growth of 56% to $768 million in the adult-use channel just barely managed to offset deepening medical declines of 35%. Like many “mature” markets, Arizona average prices for cannabis products declined sharply in 2022, falling -19%, though units still grew strongly 25%).

BDSA forecasts slightly improved growth of just over 1% in 2023, with total sales rising to nearly $1.3 billion. Adult-use is expected to grow 13% to $867 million while medical sales declines slow to just under -17% to $424 million. Total legal cannabis spending in Arizona is forecast to grow at a 2022-27 CAGR of just over 2% to top $1.4 billion in 2027. Though declining, the state’s medical market is expected to stay slightly stronger than most as sales shift to the adult-use channel – which will account for about 75% of total spending in 2027.

California 
BDSA estimates total legal cannabis sales in California shrank by more than -10% to just under $5.1 billion in 2022, down from a peak of nearly $5.7 billion in 2021. Average retail prices across product categories slid nearly -12% over the year with a 2% increase in units.

Note that, in late 2022, the California Department of Tax and Fee Administration (CDTFA) restated previously reported tax and sales figures from Q1 2019 through Q3 2022 upward by a total of nearly $1.3 billion over that time. BDSA’s Retail Sales Tracking and Market Forecast products have aligned with those restated figures.

High taxes, operational costs, and other issues in California have resulted in a difficult climate for cannabis businesses, several of whom have exited the market in the past year. Still, state and local regulators seem committed to reforms to ease tax and regulatory burden on legal market participants and combat illicit production/distribution – though changes will likely take some time to have significant effect.

BDSA currently forecasts a further -2.3% decline this year, with total spending falling to just under $5 billion. On the assumption efforts by regulators to control illicit competition and reduce tax and regulatory burden are somewhat effective, combined with expected retail expansion and other factors, BDSA expects the market to resume low-to-mid-single-digit growth over the next few years. California spending is expected to grow at a 2022-27 CAGR of just over 5% to reach nearly $6.6 billion in 2027.

Colorado 
Colorado’s total legal cannabis spending declined for the first time ever in 2022, with a -21% drop to just over $1.7 billion. Both the state’s medical and adult-use channels saw losses in the year, following a pandemic-era growth spurt. Patients began to decline again, dropping -17% to 71.5k, after two years of resumed growth. Average retail prices declined -6% in 2022 and units fell –16%.

BDSA forecasts an additional -4.6% reduction in total sales in 2023, with just under $1.7 billion in medical and adult-use spending. Slight overall growth is expected in 2024, and beyond, with total legal cannabis spending forecast to grow at a 2022-27 CAGR of 1% to just over $1.8 billion in 2027. At that time, adult-use spending is expected to account for nearly 93% of the total.

Florida 
Florida’s medical-only market grew 27% in 2022 to more than $2.2 billion in sales. Registered patients reached 779k at year-end, about 3.5% of the state’s population. The dispensary footprint expanded significantly though spending per patient decreased slightly. An additional 22 treatment centers are authorized based on current levels of registered patients, and the roll-out of those will boost 2023 results.

BDSA forecasts medical spending in Florida to grow 15% to nearly $2.6 billion in 2023 and an additional 8% to almost $2.8 billion in 2024. Adult-use legalization in the next two years is possible, with a 2024 ballot measure on track and facing no organized competition as yet. BDSA assumes that measure passes, with rapid implementation through existing dispensary locations in 2025 – the measure would allow additional locations to be licensed but does not require regulators to do so.

Adult-use sales are forecast to begin in 2025 and reach $873 million that year. The addition of adult-use, alongside a medical market that will shrink but should remain stronger than many, is forecast to drive total sales upward at a 2022-27 CAGR of 15% to reach $4.5 billion in 2027.

Illinois 
Illinois completed its third year of adult-use sales in 2022, with adult-use spending rising 12.5% to $1.5 billion alongside the first decline in medical spending – with sales slipping -11.5% to $350 million, though patients grew slightly to 137k following a 2021 decline. Total legal cannabis sales in Illinois grew at just over 7% in 2022 to nearly $1.9 billion.

BDSA forecasts slightly higher sales growth in 2023 as the state deploys an additional 185 “correctional” retail licenses over this year and possibly 2024. Total legal cannabis sales are forecast to rise at nearly 15% to almost $2.2 billion in 2023. In 2027, BDSA forecasts total sales to top $2.6 billion, having risen at a 2022-27 CAGR of almost 7%. Adult-use is expected to account for around 90% of total spending in 2027.

Maryland 
Maryland’s medical-only market shrank for the first time in 2022, contracting -10% to $491 million, though patients grew by 10% to 162k. In November 2022, voters approved Maryland Question 4, legalizing possession and use by all adults beginning of July 1, 2023. State authorities must still complete and implement regulations before legal adult-use sales can begin, and that could take some time.

BDSA currently expects sales to begin in early 2024, though there is a possibility that regulators will manage expedite the process and, sans delay from legal challenges and other issues, begin sales sometime between July and the end of the year. Thus, BDSA forecasts another year of medical-only sales, declining -2.3% to just under $480 million in 2023, followed by rapid growth in adult-use following launch in 2024.

Despite near-term medical-only declines, the expected new adult-use channel will help drive the market upward at a 2022-27 CAGR of 22%, taking total legal cannabis sales in Maryland to more than $1.3 billion in 2027.

Massachusetts
Total legal cannabis spending grew 8% to more than $1.7 billion in 2022, driven by adult-use spending growth of 11% to nearly $1.5 billion. Medical sales declined 6% to $265 million in 2022, following two years of increases during the pandemic era. Average prices across both channels and all products fell ~-21% in 2022, alongside a 37% increase in units.

BDSA forecasts Massachusetts’ total legal cannabis sales to grow 3.6% to $1.8 billion in 2023, led by a 6% increase in adult-use to almost $1.6 billion. Medical sales are forecast to see a decline of 11% to $236 million. Total spending is forecast to rise at a 2022-27 CAGR of 1.6% to nearly $1.9 billion in 2027. Adult-use sales are expected to account for 93% of the total in 2027.

Michigan 
Michigan’s adult-use market growth slowed in 2022 but still saw an increase of 54%, rising to just over $2 billion, while medical sales declined sharply (-47%) to $254 million after a return to slight growth in 2021. Total legal cannabis sales were up 27% to nearly $2.3 billion in 2022, considerably less than the 81% rise seen in 2021. While average prices declined nearly -37% over 2022, units saw a rise of 101%.

BDSA forecasts total market growth of 4% in 2023, with sales nearing $2.4 billion. Adult-use sales growth is expected to slow to 7.5%, climbing to nearly $2.2 billion, while medical sales decline a further -24% to $192 million. Total legal cannabis sales in Michigan are forecast to grow at a 2022-27 CAGR of 3.5% to reach almost$2.7 billion in 2027 

Missouri 
Legal cannabis sales in Missouri’s medical-only market grew strongly in 2022, rising 84% to $386 million as the state’s registered patients grew 26% to 204k by the end of the year. Missouri voters passed an adult-use ballot measure in November 2022 and regulators acted quickly to get the regulated system up and running by early 2023 – delivering $8.5 million in adult-use sales during the first weekend. 

BDSA has increased its forecast for Missouri’s first-year adult-use sales to $650 million, alongside a -20% decline in the medical market as registered patients begin to shift to adult-use purchasing. Patients are expected to decline -10% to 184k, still nearly 3% of the state’s population. Adult-use sales are expected to grow briskly in the first few years, leading total sales in the state upward at a 2022-27 CAGR of nearly 30% to reach $1.4 billion in 2027. Adult-use is expected to account for nearly 87% of spending in 2027.

Nevada 
Total legal cannabis spending in Nevada declined for the first time in 2022, slumping -15.5% to $866 million after hitting a peak of $1 billion in 2021. That reduction in total spending comes as the state saw tourism returning to near pre-pandemic levels, with visits up ~30% during the first three quarters of 2022 – though convention attendance has yet to see a recovery. Average retail price across cannabis product categories was down -14%, with units down -4%, yielding that total spending decline.

BDSA forecasts a further decline of -2.7% in 2023, on the assumption that price declines will stabilize some during the year – ARPs tipped up slightly in the final months of 2022. Adult-use spending is expected to drop a further -1.7% to $778 million while medical continues to drop quickly, declining -13% to $65.4 million.

The long-term forecast for Nevada shows a return to minimal growth, with total sales rising at a 2022-27 CAGR of 2.6% to reach $983 million by 2027, still some way from the market’s 2021 peak.

New Jersey 
New Jersey approved adult-use in November 2020 and sales began in April 2022. BDSA Retail Sales Tracking data shows adult-use sales reached $365 million during the year, while medical spending fell -8.5% to an estimated $228 million — as registered patients declined for the first time. BDSA estimates total legal cannabis spending grew 138% to $593 million in 2022.

Initial prices in the state’s adult-use market are quite high but likely to decline substantially in the near term. Flower ARP in late 2022 was >2x the average of other BDSA-tracked markets during the period, and nearly 4x the lowest. Other product categories were similarly considerably higher than average.

Total sales in New Jersey are forecast to grow 89% to more than $1.1 billion in 2023. BDSA forecasts the state’s market growing at a 2022-27 CAGR of 37% to top $2.8 billion in 2027.

New York 
After repeated delays, New York officially launched adult-use sales with a single dispensary. Though those minimal 2022 sales are smaller than BDSA and others had previously forecast, the state’s dispensary roll-out is expected to pick up pace in 2023. The regulatory delays have resulted in a surge of open illicit activity which will have a negative impact on the market unless addressed.

BDSA expects 646% growth in total sales in 2023 as the state shifts from medical-only sales of $169 million in 2022 to a combined market of nearly $1.3 billion in its first full year of adult-use sales. BDSA forecasts total legal sales in New York will grow at a 2022-27 CAGR of nearly 75%, reaching $2.7 billion in 2027.

Oklahoma 
Oklahoma’s medical-only market shrank for the first time in 2022, dropping -17% to $781 million—just below 2020 sales. Registered patients also declined (-3.2%), from 386k at the end of 2021 (9.4% of population) to 374k at the end of 2022. Local regulators have been considering ways to rein in unintended exploitation of its lightly regulated program, and many from the agricultural sector and the industry itself have asked the state for more regulation on growing and supply chain structure to combat illicit competition.

BDSA forecasts continued declines in registered patients and sales, with medical spending declining -8.5% to $715 in 2023, as the market right-sizes in patient spend and begins to face further regulation. That trend will continue if Question 820 passes in the special election planned for March 7, 2023. BDSA’s forecast assumes that will pass and regulators will move quickly to implement a regulated system, with sales beginning in 2024 at $285 million. BDSA forecasts total sales growing at a 2022-27 CAGR of 2.9% to $902 million, as rapid growth in adult-use is largely offset by losses in medical market sales.

Oregon 
Total legal cannabis sales in Oregon grew nearly 10% to $1.19 billion in 2021. However, weak third and fourth quarters in 2021 led into declines in 2022, compounded by price compression and lower demand. BDSA estimates total sales fell -18.5% to $969 million in 2022. Medical spending fell -38% to $61 million, while adult-use sales declined -17% to $908 million.

BDSA forecasts total legal cannabis sales in Oregon will see another slight decline in 2023, to $966 million. Slight growth is anticipated 2023-27 given government policy changes, licensing moratoriums, and other efforts aimed at curbing the supply glut that has plagued the state’s markets. BDSA expects total sales to grow at a CAGR of 1.7% 2022-27 to reach nearly $1.1 billion in 2027.

Pennsylvania 
Strong growth in 2021 took Pennsylvania’s medical cannabis program to $1.21 billion. Though registered patients continued to grow in 2022, rapidly declining prices brought total spending slightly lower, yielding the first-ever decline in that market. Sales slid -5.8% to $1.14 billion in 2022. BDSA forecasts a slight recovery in 2023, with sales again topping $1.2 billion. BDSA forecasts adult-use legalization in 2023-24 with adult-use sales starting in 2025 at $497 million. In 2027 total sales are forecast to reach $1.9 billion, with adult-use accounting for 62% of the total.

Washington 
BDSA estimates legal cannabis sales in Washington decreased -15% to $1.25 billion in 2022, in line with shrinkage seen in nearly all mature markets during the year. BDSA forecasts a flattish upward growth (<1%) in 2023 followed by slight recovery through the end of the forecast period — growing at a CAGR of 2.8% 2022-27 to just over $1.4 billion. 

Canada 

BDSA estimates total legal cannabis spending in Canada grew by 12% to $4.2 billion in 2022. Data from the Canadian government and BDSA partner Hifyre showed adult-use spending declining (-1.8%) quarter-on-quarter for the first time ever in the first quarter of 2022, with sales slightly smaller than in the third quarter of 2021. Adult-use resumed growth in the second and third quarters before a slight decline in the fourth—through the fourth quarter was still 11% higher than the comparable period in 2021. Medical sales rose 1% in the first quarter, though BDSA estimates show further reductions in that channel over 2022 and beyond.

Cannabis 2.0 products had grown rapidly in Canada since introduction but have risen in share more slowly in 2022. Edibles share of total adult-use spending rose slightly to the 8% to 9% range in Alberta, British Columbia, and Ontario. Vapes reached 22% in Alberta, 17% in British Columbia and Ontario in 2022. Quebec still does not allow vape products to be sold via adult-use channels. Pre-rolls gained considerable share, reaching the 28% to 35% range in Alberta, British Columbia, and Ontario, 20% in Quebec.

Ontario fostered rapid growth in adult-use retail outlets over the past two years and, though growth has slowed, the province was still the only one to gain significant overall share during 2022. According to Hifyre data, Ontario gained nearly 4 percentage points of share during that period, while Quebec lost 2.7 points. Others are fairly stable.

BDSA forecasts adult-use sales in Canada to grow 14% to $4.4 billion in 2023. Medical sales are forecast to decline -9% to 277m, with patients falling from 237k to 227k. Total legal cannabis spending is forecast to grow at a CAGR of 6.3% from $4.2 billion in 2022 to $5.7 billion in 2027. Adult-use sales accounted for 93% of total sales in 2022. That is expected to grow to 96% in 2027.