Whether you're already a business owner or investor in the cannabis industry, or simply keeping an eye out for your next business opportunity, you need reliable data to gauge where each market is headed and how product categories are expected to perform. This is why over the past few months, Headset has developed a methodology to provide a long term forecast for the US and Canadian markets that includes total sales estimates, as well as estimates at the category level. To give you a complete picture of where we were, where we are now, and where we are headed in each market, we'll be updating forecasts at the end of every quarter and will include the previous calendar year, the current calendar year, and the following calendar year.
This report takes into account the recent adult-use legalization of New York, New Jersey, and Arizona and estimates the US market at just over $28 billion in annual sales by 2022. Canada is estimated to reach $4 billion in annual sales in 2022. From a category perspective, shares do not change much in the US from 2021 to 2022, although Flower trends are projected to dip and bounce back with the introduction of NY, NJ, and AZ. Category shares in Canada are estimated to be more stable moving from 2021 to 2022.
These forecasts will include 13 Canadian provinces and territories and 36 US states and jurisdictions* with any level of legalization (recreational and medical), and the data will be presented in the aggregate for each calendar year. Typically, Headset only forecasts one forward looking month at a time and in this new framework, forward looking forecasts will cover at minimum five quarters (15 months) and at maximum eight quarters (24 months).
*All states where we collect data (AZ, CA, CO, FL, IL, MA, MI, NV, OR, and WA) and AK, AR, CT, DE, DC, GA, HI, IA, LA, ME, MD, MN, MO, MT, NH, NJ, NY, ND, OH, OK, PR, RI, PA, UT, VT, and VA.
Both the US and Canadian legal cannabis markets are forecast to grow through 2021 and into 2022. Because of the smaller population, the Canadian market forecast of $4B for this year is much smaller than the $23B forecast for the US, and trends are developing somewhat differently going from 2020 to 2021 to 2022. It should be noted that the US 2022 forecast, and the 2021 forecast to some extent as well, is influenced by the recent adult-use legalization in New York, New Jersey, and Arizona.
The smaller Canadian market is forecast to more than double the US growth rate from 2020 to 2021, but the growth rates are much closer in 2022. This is because growing from a smaller base can make larger jumps in percentages easier, and the Canadian market is also newer compared to the US, where the largest markets are more mature. The converging growth rates in 2022 are a result of the Canadian market maturing and large US states (NY, NJ and AZ) being added to the US recreational markets. More US states could also decide to legalize medical or recreational cannabis, and these changes would be reflected in future forecasts.
Our category market view focuses on US and Canada separately. These views give insight into the market structure and how the trends in each category might develop going forward. The data includes category contributions to growth, which allows for an analysis of shifts in preferences. However, like with the total market view, the categories included and their shares are dependent on current levels of legalization and current regulations and are subject to change.
As you can see, category shares do not change much in the US forecast going from 2020 to 2022. There is a dip in the Flower share in 2021, but that trend is reversed with the new recreational markets (NY, NJ, and AZ) entering the mix.
These contributions represent the percent share each category makes up of the total sales volume growth. From 2020 to 2021, Flower contributes less to the total growth than its share (46%) might suggest. However, from 2021 to 2022 its contribution grows to 49%, mostly at the expense of Vapor Pens and Pre-Rolls.
In Canada, Flower share falls slightly in 2021 and remains stable in 2022. The main categories gaining share are Vapor Pens and Pre-Rolls. Overall, the Canadian category shares are more stable than category shares in the US.
As the Flower category share remains stable over time in Canada, that category increases its growth contribution, ending at 56% from 2021 to 2022. The growth contribution for Pre-Rolls is also improving, which will account for about 21% of total growth in Canada.
Category mix is typically quite different in mature, established markets when compared to newly legalized markets. This is because in newly legalized markets, Flower is usually available first and other categories follow later. Therefore, at the beginning, newly opened markets have larger Flower shares as a percent of the total. Flower share in Canada goes from 58% in 2020 to 56% in 2021-2022 as the market matures, but in the US Flower there is slight growth in Flower share in 2022. This is because three new recreational markets are added (AZ, NJ and NY) in 2021 and 2022. Since Canada is federally legalized, similar changes would not occur there but will likely happen again in the US as more states legalize cannabis.
In the previous slides, we estimated that by 2022, total annual cannabis sales will reach $28 billion in the US and $5 billion in Canada. We also saw that the Canadian market is estimated to double the growth rate of the US in 2021, but growth rates are much closer in 2022 with the addition of three new adult-use markets in the US(New York, New Jersey, and Arizona). Flower category share dips in the US in 2021, but bounces back in 2022 with the addition of NY, NJ, and AZ. Category share in Canada is more stable than in the US, with Vapor Pens and Pre-Rolls gaining share into 2022.
Stay tuned for the next projections report, data will be refreshed in early July. Projections are a great measurement to gauge potential growth, and Headset provides many other resources to ensure you’re up to date with the industry. To understand the major players in legal markets, keep an eye on our best seller lists, which reflect best selling products by category in real-time. Our Insights tools provide even more detailed views of market data. Sign up for a demo of Insights Premium to discover trends and opportunities in the market, or get started for free with Insights Pulse.
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