Last quarter, Headset provided its first long term forecast for the US and Canadian markets that included total sales estimates, as well as estimates at the category level. Now that Q2 of 2021 is over, it's time to update these forecasts. To give you a complete picture of where we were, where we are now, and where we are headed in each market, we will continue to update these forecasts at the end of every quarter and will include the previous calendar year, the current calendar year, and the following calendar year.
Last quarter, we estimated that the US market would reach about $28 billion in annual sales by 2022. With the addition of several new cannabis markets (Alabama, Connecticut, and New Mexico), we now project that the US cannabis market will surpass $30 billion in 2022. There is not much change in the Canadian forecast for 2022, but this is to be expected since the market is fully legalized. The data below also demonstrates that the cannabis industry is not only moving quickly, but there is no indication that the industry will slow down. Businesses can count on 2022 to be a year of positive growth. That said, be sure to keep a look out for future updates to forecasts, as we continue to monitor and track market growth.
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 its smaller population, the Canadian market forecast at $4B for 2021 is much smaller than the forecast for the US, which is $24B. But the trends for these two markets are developing somewhat differently going from 2020 to 2021 to 2022. The US forecast for 2022 (and to some extent 2021), is influenced by newly added legal cannabis markets (NY, NJ, CT, NM, and AL).
The smaller Canadian market is forecast to grow almost double the US growth rate from 2020 to 2021, but the growth rates are much closer in 2022. There are a couple of reasons for this:
The converging growth rates in 2022 are a result of the Canadian market maturing and large US states (NY, NJ, CT, NM, AL and AZ), being added to the US cannabis market. More US states could decide to legalize medical or recreational cannabis in the near future, and these changes would be reflected in future forecasts.
Our category market view focuses on the US and Canada separately. These views give insights into the market structure and how the trends in each category might develop going forward. The data includes category contributions to growth, which allows us to analyze shifts in consumer preferences in the market. However like with the total market view, the categories that are included, and their shares, are dependent on current levels of legalization, which can change in the future. These first two graphs summarize the estimated category sales volume by country through 2022. A more thorough analysis of category shares follows after.
Category shares are little changed in the US forecast going from 2020 to 2022. There is a dip in Flower share in 2021, but that trend is reversed with the new markets entering the mix. Share of Concentrates declines slightly, while Vapor Pen and Pre-Roll shares increase slightly.
These contributions represent the percent share each category makes up of the total sales volume growth. For example, if total shares are $100, and Flower makes up $50, it's share is 50%. If total sales grow $20, and Flower grows $12, then its growth contribution is 60% ($12/$20).
From 2020 to 2021, Flower contributes less to the total growth than its share (47%) might suggest. However, from 2021 to 2022, its contribution grows to 47%, mostly at the expense of Vapor Pens and Pre-Rolls.
In Canada, Flower share falls in 2021-2022, but Pre-Rolls gain market share. Other categories remain fairly stable.
While Flower category share drops in Canada, its growth contribution remains fairly stable in 2021 and 2022. The Pre-Roll category in Canada improves its growth contribution from 2021 to 2022, which accounts for 29% of the total growth in 2022.
While not too much has changed for the Canada forecast through 2022, the addition of several new US markets this year has significantly influenced the US forecast. We now estimate that the US market will surpass $30 billion in 2022, and that the Canadian market will reach $5.5 billion.
Stay tuned for the next projections report, which will be available in October 2021. Projections are a great measurement to gauge potential growth of the cannabis industry. Headset also provides many other resources to ensure you're up to date with industry trends. 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. You can also sign up for a demo of Insights Premium to discover trends and opportunities in the market.
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