Virginia is likely to be a medium adult-use cannabis market compared to other states in the mid-Atlantic United States. Virginia's overall population is 8.6M, with approximately 6.4M residents (~74% of the total state population), above the age of 21. The majority of the state's population is concentrated in northeast Virginia on the border with Washington DC and Maryland, around Richmond in central Virginia, and around Norfolk on the Atlantic coast. The most sparsely populated areas of Virginia are in the western half of the state, on the borders with West Virginia (medically legal), Kentucky (illegal), and Tennessee (illegal). Virginia also borders North Carolina (illegal, but decriminalized), Washington DC (recreationally/medically legal), and Maryland (medically legal and decriminalized).
A comparison to Virginia's potential adult-use market is Michigan, because the size of the states are similar (MI has a population of 7.4M and VA has a population of 8.6M). Virginia also has an operating medical cannabis market similar to Michigan, although the medical market is fairly small. One important assumption we make in this forecast is the ability for medical retailers to become adult-use retailers when adult-use sales start in 2024. This assumption has not yet been formalized in law, and there are still many nuances being legislated. Given these assumptions, Michigan's first 12 months of recreational sales (December 2019 - November 2020) were used as a baseline for our Virginia forecast. It is also worth mentioning that while the COVID pandemic was at its peak during Michigan's first year, the monthly sales data does not suggest the pandemic affected Michigan's sales, and therefore no adjustments were made to account for it.
High level year one estimate
Michigan year one total recreational sales and 21+ population were used to calculate the Virginia year one per capita spend of $61.39. Despite experiencing heavy supply constraints in Michigan's early months of recreational sales, we have kept this non-adjusted per capita spend as we anticipate potential supply issues in Virginia due to the small size of the existing medical market and uncertainty about the ability for medical retailers to immediately become recreational retailers when the market opens. Additionally, we did not adjust the Virginia population upwards to compensate for cross border shopping, since there is not as much tourism in Virginia and attitudes towards cannabis tend to be less favorable in the Southern United States. Finally, applying the Michigan first year per capita spend to Virginia's 21+ population results in a topline adult-use cannabis sales forecast of $447M for the first complete year of sales in Virginia.
As with any market, we will continue to watch Virginia as it continues its progress towards adult-use legalization. In the meantime, sign up for a demo of Insights Premium to learn how you can keep track of industry growth and find opportunities in the market.
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