Legal cannabis sales in the United States will soar from $27 billion in 2021 to $42 billion in 2026, according to a new report from the cannabis analytical firm BDSA.
According to the report, U.S. cannabis sales will represent 75% of total global cannabis sales, which will reach $57 billion in 2026. The report also states that the U.S. market will experience a compound annual growth rate (CAGR) of almost 13% between 2021 and 2026.
According to the report, the newly-legal marijuana markets will be the significant sales drivers until 2026. It also says that two new legal cannabis states - New York and New Jersey - are expected to contribute around $5 billion to the $42 billion in legal sales in 2026.
The report predicts a continued decline in medical cannabis sales as more states adopt adult-use cannabis programs. For instance, BDSA predicts that in Arizona, where recreational marijuana sales began in 2021, medical sales will be 30% lower than the 2021 annual dollar sales total by the end of 2022.
New and emerging cannabis markets will drive growth
The BDSA report also mentions slowing sales in more mature cannabis markets. In a press release, BDSA stated that while sales have plateaued or fallen in mature cannabis markets, in newer legal states like Illinois, there was a 13% increase in sales from 2021 to 2022. In addition, BDSA predicts that newly legal New York and New Jersey will contribute around $5 billion to the nationwide legal sales total in 2026.
“Though mature legal cannabis markets in the U.S. saw sales soften in 2022, the cannabis market is still forecast to see top-line growth in 2022, driven by strong sales in new and emerging markets, such as the populous states of New Jersey and New York,” BDSA CEO Roy Bingham said in the press release.
“The ‘hockey stick’ trend of sales growth seen in the early years of legal cannabis has passed, and economic and regulatory headwinds are exerting pressure on legal cannabis markets,” Bingham said, adding, "our updated forecast predicts that steady gains in developing U.S. markets will continue to drive single-digit annual growth in total U.S. legal sales in 2022, with continued growth prospects out to 2026.”
In recent years, a growing number of states have legalized recreational cannabis. These include Montana, Vermont, Arizona, and New Jersey in 2020 and Connecticut, New York, Virginia, and New Mexico in 2021.
Marijuana legalization has opened new legal cannabis markets across the country, but the promise of federal cannabis legalization has still not been realized. Speaking to Rootwurks this week, Bingham said that the figures don’t factor in the possibility of federal marijuana legalization. Still, federal legalization would tremendously impact the industry, especially because it would allow for interstate commerce in marijuana, according to Bingham.
"Federal legalization would be a massive thing"
“If federal change would even it all out, if you could have supply from the most efficient [legal cannabis states], that would be a massive thing. Suddenly you would have grown facilities optimized for the whole nation or large regional areas of the country.”
When asked about any predicted developments in cannabis innovation, Bingham stated that, like in mature markets, there will be “an evolution from [cannabis] flower to concentrates to edibles” and that BDSA expects to see more widespread improvements in cannabis tech.
“I think there will be continued innovation in terms of products, and we see continued price decreases in mature markets. It’s a bit of a two-edged sword, it means that products are more accessible to more consumers, and in an economically challenging environment cant be a bad thing, but at the same time, it means margin tightening for manufacturers and retailers,” Bingham said.
When asked if any demographic changes are expected in the marijuana consumer base in the coming years, Bingham said, “you’re looking at such a widespread consumer base now that every demographic is now well represented, including half of all adults in legal adult-use states.”
In the early days of the COVID-19 pandemic, recreational marijuana retail stores, medical marijuana dispensaries, and clinics were declared “essential businesses” and were allowed to stay open despite lockdown restrictions. As people stayed home - and dispensaries stayed open - legal cannabis sales surged. This led many analysts to predict the dawn of a new era of prosperity and mainstream acceptance of cannabis and drove many cannabis companies to ramp up production to meet the demand.
Now, more than two years after the dawn of the pandemic, Bingham said the cannabis industry is in a much different place.
The cannabis industry post-COVID 19 pandemic
“I don’t think there’s a significant ongoing impact of the pandemic now. I think we’re all more concerned about the economic environment, and of course, what we're seeing now is not high unemployment or high loss of income, it's people pulling back because they’re concerned that there might be.”
The latest BDSA report forecasts a significant drop from the figures found in a March 2022 BDSA report. That report predicted that U.S. sales would reach $46 billion by 2026. The figure also represents a marked contrast to the June 2022 forecast by MJBizDaily, which stated that retail cannabis sales in the U.S. will be upwards of $52.6 billion by 2026.
