Industry & Investment

U.S. Recreational Cannabis Sales Data

January 5, 2018 / By 3C Team

So you’re considering getting into the cannabis business. To help you with your initial research, we compiled sales data and trends from states reporting the highest recreational cannabis sales in 2017. Note: We included California, as recreational cannabis is now legal (for adult use only) as of January 1, 2018. It’s highly likely that California will become the largest recreational cannabis market in the world in 2018.

Recreational Cannabis

California Cannabis Product Trends

California, while only selling cannabis legally to patients with a recommendation from a doctor, led the country in legal cannabis sales with approximately $2.5 billion in sales in 2017 according to BDS Analytics. By comparison, Colorado, the first state to legalize cannabis for adult recreational use, had approximately $1.5 billion in annual dispensary sales. Washington had the next highest sales volume with roughly $900 million in legal marijuana sales. Oregon rounds out the top four with nearly $500 million in dispensary revenue.

In 2017, California accounted for approximately one third of all legal marijuana sales in the USA. In spite of the record breaking wildfires in both northern and southern California (which destroyed more than two dozen cannabis farms), with the legalization of cannabis for adult recreational use in 2018, we would expect that legal cannabis sales in California will represent over 40% of total U.S. dispensary sales.

So what are Californian’s buying at dispensaries? In 2017, over 50% of medical marijuana purchases were flower, with about 1 in 4 patients buying concentrates and about 1 in 10 buying edibles to ease their symptoms. Breaking down the concentrate category a bit further, we find about 60% of sales were vape pens and vape cartridges. By contrast, wax accounted for just under 10% of U.S. dispensary sales and shatter purchases were about 6% of all cannabis concentrates sold legally in California.

Colorado Cannabis Sales Trends

The state of Colorado has received significant tax revenue after becoming the first state to legalize recreational cannabis in 2014. Since then, dispensary sales and tax revenues have skyrocketed. In calendar year 2017, marijuana tax revenue in Colorado is projected to be approximately $245 million (based on the first 11 months of actual data), a 27% increase from $193 million in taxes paid to the state the previous year. If we extrapolate the latest four months of marijuana tax revenue data for fiscal year 2018 (August 1, 2017 – November 30, 2017), we can project that Colorado will receive approximately $273 million in marijuana tax revenue for fiscal year 2018 on expected combined sales of over $1.8 billion from both medical marijuana and recreational cannabis. Note: State legislators raised the the tax rate on recreational cannabis from 10% to 15% in July, 2017. This new percentage is what is now being used to calculate tax revenue from the sale of recreational cannabis for fiscal year 2018. As we can see, cannabis sales in Colorado are continuing to climb at a steady pace.

Nevada Cannabis Sales Trends

According to the Las Vegas Review-Journal, marijuana sales in Nevada jumped from $27.7 million in September, 2017 to $37.9 million in October, 2017, a whopping 37% increase in just one month to set a new record for the state. The record breaking sales occurred despite the fact that tourists have nowhere to legally consume marijuana. Taxes on marijuana sales in Nevada are projected to reach $120 million within two years. According to Fortune, nearly $3.7 million in tax revenue was generated from the combined sales of recreational cannabis and medicinal marijuana during the first month of legal recreational cannabis sales in July, 2017. Similarly to Colorado, cultivators in Nevada are charged a 15% tax on wholesale cannabis. This money is earmarked for state schools. Dispensaries pay a 10% tax on retail marijuana sales. This revenue is set aside in the state’s “rainy day fund.” On top of this tax windfall for Nevada, the department of revenue has raised $6.5 million from license and application fees from entrepreneurs who are ready to jump into the legal marijuana business. These numbers may help tip the scales as government officials in other states consider whether or not to legalize recreational cannabis in their state.

Data Source: Nevada Department of Taxation. Estimated is based on 10% compound growth rate projected by Nevada Sen. Tick Segerblom.

 

Oregon Cannabis Sales Trends

According to the Oregon Recreational Marijuana Forecast published by Economist, Josh Lehner, in June, 2017, the forecast for recreational cannabis sales and subsequent tax revenue is “highly uncertain.” The report did have some interesting sales data however. In its first year of legalized recreational cannabis sales, Oregon, followed a somewhat similar pattern to Colorado, outpacing Washington (with sales figures adjusted based on each state’s adult population).

The report explains that there may be several reasons for the disparity in recreational cannabis sales between Oregon and Washington. First of all, surveys have shown that a higher percentage of people in Oregon use cannabis compared to Washington. Secondly, Oregon has lower tax rates which ultimately translates into lower prices for cannabis consumers. The third reason is that Washington legalized marijuana one year before Oregon did and many recreational use customers in Oregon were apparently crossing the border to buy marijuana in Washington. This may help explain why there was somewhat of a drop in sales in counties located in the southwest of Washington in the year following adult use legalization in Oregon. Finally, unlike Colorado and Washington, which had few dispensaries located in major metropolitan areas at first, consumers in Oregon already had access to medical marijuana dispensaries located throughout Portland and other major population centers. The cannabis sales revenue forecast for 2018 is not certain, however the Office of Economic Analysis projects that dispensary sales will remain strong this year, with increasing revenue not quite as strong as it was in the second year of sales in Colorado.

Which Cannabis Products Are People Buying?

According to the Seattle based cannabis data analytics firm, Headset, in 2017 approximately 60% of all dispensary purchases in the state of Washington were of cannabis flower. Concentrates, were a distant second place to cannabis flower at approximately 15% of total cannabis product sales. The third most popular products was somewhat of a tie between vape pens and pre rolls at approximately 10% of all dispensary purchases in Washington last year. The remaining 5% was a combination of tinctures, topicals and capsules. Note that Headset mentioned that human error, duplicate counting and/or incorrect labeling of cannabis products provide some margin of error.

According to the Washington State Liquor and Cannabis Board, in fiscal year 2017 (July 1 – June 30), cannabis sales skyrocketed to a record $1.37 billion. The 43% sales increase from 2016 brought in just under $315 million in excise tax revenue for the state, compared to just over $185 million the previous year. Together that is one half billion dollars in marijuana tax revenue for the state of Washington over the past 2 years. So far, the data for 2018 shows that cannabis sales in the state of Washington are on track to surpass last year’s numbers by a modest 14% at $1.6 billion.

Data Source: Washington State Liquor and Cannabis Board.

 

Overall Cannabis Industry Trends in 2017

One statistic worth noting is that throughout the collection of one set of cannabis consumer data, female respondents outnumbered males by 15%. Cannabis Consumer admitted that this data may be flawed simply due to the difference in the percentage of women and men who were willing to fill out a survey. That being said, over the past year, women have been the fastest growing consumer demographic in the rapidly expanding cannabis industry.

Cannabis Consumer also found that 30% of survey respondents stated that they edibles that are 10 milligrams or less. About 18% of consumers said they prefer edibles that are between 10-25 milligrams. In addition, data showed that people are often eating cannabis edibles in microdoses

California Cannabis Product Trends

Some of the other cannabis trends of 2017 that will likely continue in 2018 are:

Small batch, boutique cannabis brands have been gaining popularity in California and Colorado and we predict that this trend will continue into 2018. Similar to craft beer brewing, small batch marijuana products appeal to cannabis connoisseurs. In addition to small batch cannabis flower, the popularity of gourmet edibles will continue. The expansion of microdosing-friendly products will certainly continue in 2018. Microdosing is one of the best methods to attain the beneficial effects of medicinal cannabis without feeling an overwhelming sensation of being high. This can be particularly effective for patients who need to manage pain, or other symptoms of a chronic illness, throughout the day. Microdosing is also a great way for new recreational consumers to try cannabis, as the effects are more subtle.

Cannabis Industry Predictions for 2018

Overall industry expansion will occur as California rolls out legal cannabis for adult recreational use. This will include new marijuana varieties, brands, cannabis products, dispensaries, ancillary companies and plenty of fresh capital from investors. More states will vote to legalize medical marijuana and/or cannabis for adult recreational use as the tax revenue has clearly been a boon to the states which have legalized marijuana thus far. In addition, the cannabis industry has created thousands of new jobs in these states.

This year we predict that we will see more advanced cannabis extract formulations that provide a consistent dose of a wider variety of cannabinoids, terpenes, and other phytochemicals. These more advanced extracts will allow for a more predictable and reliable cannabis experience. As the general public becomes more familiar with the medical benefits of cannabis and new cannabis consumers become comfortable with the appropriate dosage for their body weight and desired effect, sales of cannabis products will climb higher and higher. In addition, the cannabis industry as a whole is becoming increasingly more professional, developing its own ethical standards, safety regulations and third party lab testing ahead of anticipated federal regulations down the road.

The future of the U.S. cannabis industry looks bright. We look forward to continuing to work with cannabis business owners to help them to develop their operations and best practices for scalability and safety. As the marijuana industry matures and new state markets open up, we feel that it’s imperative for cannabis business owners to follow the rules, demonstrating professionalism and a safety first mindset. We encourage our clients to be completely transparent with their operations, striving to exceed state regulations in anticipation of cannabis legalization on the federal level.

Cannabis companies will continue to develop their brands and strive to deliver high-quality cannabis products to consumers who are becoming more and more discerning. Those in the industry who build the strongest brands with the most consistent, high-quality and innovative cannabis products will find that there is plenty of demand for their products. These cannabis industry leaders will play a key role in creating cannabis product sales trends into the future.

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