Welcome to the party, Arizona, Montana, New Jersey, and South Dakota. These four states just legalized adult-use cannabis and we're excited to share our first projections detailing how big each new market will likely become. There are many different ways to forecast these trends, but we've chosen a simple per capita spend assumption, which looks at the trends in current adult-use states and determines the sales volumes in those states controlled for the total population of the state. We then apply a few of these per capita sales totals to the population size in these four new adult-use states to come up with low, middle, and high forecasts of sales.
Here we look at the annualized sales of cannabis by state using sales totals for September 2020. We see here that state total cannabis sales and population size don't necessarily correlate. Per capita spend is highest in CO and lowest in IL. However, the IL market is new this year and growing substantially month over month.
Note: WA sales were adjusted up by 35% (the amount of excise tax paid by consumers at the register, all other states include excise tax in their sales totals). Totals include pre-sales tax, post discount, sell-thru sales of adult-use cannabis (except OR, MI, and IL, which include adult-use and medical).
Per capita sales in current markets
Using the data from the prior graph, we find the per capita sales in each market. Here we see established markets like WA and CO have much higher per capita sales than newer markets like MI and IL. This is due to new markets still working to increase production for supply to be able to meet demand as well as delays in licensure like those currently being experience in IL.
We believe these per capita totals highlight the growth opportunity in CA over the coming years as more licenses are issued and companies are better able to suit the needs of the cannabis consumers as well as recruit spending into regulated channels from the illicit market.
Per capita sales and YoY sales growth
Even in states with high per capita spend we still see excellent YoY growth suggesting the per capita spend is likely to continue to grow in states like WA and CO despite their large lead. Comparing September 2019 to September 2020, we see the YoY growth in all markets was in the double digits. NV had the lowest growth, due mostly to the effects of COVID on travel to Las Vegas with Clark County, home to Las Vegas, accounting for 80% of cannabis sales in NV.
Cannabis market projections for legalized states
Using per capita sales from other states we project AZ, NJ, MT, and SD annual sales in 2024 with the assumption that there will be three years of sales by then, shown above. These projections do not adjust for cannabis tourism, specifically in NJ we except a large sales volume to occur in border towns with NY and PA unless there is legalization in those markets. We believe the most likely forecasts assume per capita sales at about $260 annually three years after the market opens. This is similar to per capita sales in NV and WA today. In its first year, MI is already annualizing to $115 per capita and continues to see growth as new licenses are issued. This gives these four markets a forecast of $4.5B in annual revenue.
Our range of projections includes a low forecast of $105 annually per capita, which is similar to per capita sales in CA. This scenario is more likely if states are slow to issue licenses, restrict outside investment, or have difficulty increasing production. Our high forecast uses an assumption of $350 annually per capita similar to sales in CO. We believe this is possible if states are able to quickly issue licenses and companies are allowed to rapidly build facilities. In states like AZ, where a robust medical market exists, we believe these numbers are more likely to be achievable.
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