While established cannabis markets had their ups and downs in 2022, cannabis also found new homes in several states across the nation. Seven new states implemented cannabis programs over the course of the year, including large population centers like New York and New Jersey. Additionally, in the first two months of 2023, three new states launched adult-use or medical markets. Here, we’ll dive into these ten openings, their impact, and what’s on the radar for 2023.
Explore our 2023 Cannabis Market Forecasts
Successful Cannabis Markets
Of the seven states that implemented a cannabis program in 2022, six were adult-use markets: Montana, New Mexico, New Jersey, Vermont, Rhode Island, and New York. Only one - South Dakota - was medical. Among these openings, two states stand out from the rest of the pack.
New Mexico and Montana exceeded expectations for first-year per capita cannabis spending. During an adult-use market’s first year in operation, sales typically total between $55-$70 per adult resident of the state. For instance, Illinois clocked in at $68 per adult and Michigan hit $58. However, New Mexico and Montana are among the new trend of states exceeding this mark.
Prior to 2022, the record for the largest adult-use market opening was held by Nevada. Aided by a healthy tourism industry around the city of Las Vegas, Nevada’s recreational market reached $171 in sales per adult resident during its first year in operation. The next state to break the $100 first-year barrier was Arizona, reaching $111 per adult.
In the market’s first full year, the Montana cannabis market set a new record. Adults in the state spent, on average, $236 on cannabis. New Mexico’s cannabis market is expected to be close behind. By the time its first full year concludes, the state is forecast to reach approximately $183 per adult.
Though groundbreaking, these developments are not altogether surprising as all these states have one thing in common – each had an extremely robust medical cannabis infrastructure that was allowed to serve adult-use customers, and each has added significant numbers of licenses after legalizing adult-use. While states such as Illinois still only have one dispensary per 87,000 adult residents, New Mexico has one retailer per 5,500 adults and Montana has the most dispensaries per adult in the nation at one per 2,400, despite being just a year old.
How big is the U.S. cannabis market? Get the toplines in our updated 2023 forecast
East Coast Recreational Cannabis
Between April 2022 and January 2023, five of the nine states in the Eastern U.S. began adult-use cannabis sales, joining Massachusetts (November 2018) and Maine (October 2020). With such a short amount of time between market launches, legal East coast cannabis will have an explosive 2023, with adult-use cannabis market value expected to nearly double year-over-year to $3.8 billion. The growth in the East will contribute to 40% of the total cannabis sales growth expected in the country over the next year.
From a regulatory standpoint, none of the latest five markets to launch in the East is poised for immediate success. Each has medical markets that are considered to be below the maturity threshold of 3% adult enrollment. Connecticut, Rhode Island, and New Jersey come close, with figures in the mid-to-high 1% range, but New York and Vermont either barely scratch or fail to reach even 1%.
No state exemplifies adult-use growing pains better than the New York cannabis market. When adult-use cannabis sales began on December 29th, only one store was authorized. Then, it took nearly a month before a second retailer opened its doors to the public. The slow roll-out makes it unclear when more licenses will be granted.
But with a maximum of just 175 licenses, New York will still have some of the fewest retailers per capita in the nation while contending with well over one thousand unlicensed sellers, even ignoring more informal channels. New York is likely to experience a slow first year and severe growing pains throughout the next few, even as it grows to become the third-largest cannabis market in the nation by 2028 driven by the sheer size of its population.
Future Cannabis Market Openings
Connecticut and Missouri began adult-use sales early into 2023 while Mississippi implemented its medical program. Connecticut is the last of five Eastern states to implement adult-use sales within a year of one another, starting with New Jersey in April 2022. Ten days into the new year, Connecticut began allowing medical dispensaries to open their doors to more than just registered patients. The state’s first-year sales are still expected to reach $180 million.
Mississippi saw its first retailers opening their doors towards the end of January. Though the state has granted a large number of licenses, many were not operational in time for the launch. However, resulting supply shortages and supply chain issues should be quickly rectified as more businesses become functional. With its less restrictive approach to licensing, Mississippi is expected to reach or surpass mature patient enrollment rates (3% of the adult population) within the next few years.
Only weeks later, Missouri became the third state to start cannabis sales in 2023. Regulators made good on the state’s successful 2022 adult-use ballot initiative in just three months, the second fastest turnaround, just two weeks behind Arizona’s record. With a robust medical program turning dual-purpose, Missouri cannabis is forecast to have a strong opening year. The state will reach $444 million in annual adult-use sales before the end of 2023 and hit $1.4 billion by the end of 2028.
Maryland is the last state that is expected to begin sales during 2023. But when will Maryland begin cannabis sales? Without delays, Maryland dispensary doors are expected to open in July and the state is set to have a slightly above-average market opening, even as it is likely to experience some growing pains. By the end of 2024, however, the state will easily surpass $500 million in annual sales.
2023 is set to see lots of growth driven by new markets and will be a strong year as a result. Get in touch with Brightfield to ensure your brand experiences a piece of that growth.
Published: 3/15/2023
