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Ohio presents a significant opportunity in the cannabis industry. It is currently one of the largest medical markets in the US, with total sales exceeding $400 million year to date. The recent legalization of recreational cannabis through a successful ballot measure is expected to propel the market to unprecedented levels in the coming year. As the seventh largest state in a region that is still relatively new to cannabis, Ohio has the potential to become a billion-dollar adult use market. This burgeoning market offers abundant prospects for brands and retailers seeking to innovate in the newest Midwestern market. In this report, we will explore the current state of Ohio's medical market and delve into its future as the 24th state to legalize adult-use cannabis.
Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business intelligence software. Headset’s data is very reliable, as it comes digitally directly from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. Thus, there is a slight margin of error to consider. In this report, we examine sales from US Headset Insights markets. This includes Arizona, California, Colorado, Florida, Illinois, Massachusetts, Maryland, Michigan, Missouri, Ohio, Nevada, Oregon, and Washington. Unless otherwise mentioned the analysis period is January through October 2023.
Ohio has seen $403M in total sales year to date in 2023. Using Maryland as a proxy we could see sales double when adult use takes effect next year.
Under Ohio’s medical program smoking is prohibited therefore banning the Pre-Roll category entirely which captures 13.4% of total sales nationally. Pre-Rolls are the fastest-growing category in cannabis.
Unconventional package sizes such as 2.83g of Flower are commonplace in Ohio’s current market, as a result of medical regulation. These will likely evaporate in favor of industry-standardized formats once adult use begins.
Luster pods capture 35.4% of total cartridge-based Vapor Pen sales in Ohio, significantly more than well-known national brands.
High item prices, a result of particular package sizes in Ohio, are decreasing steadily. As market conditions change, it is expected to significantly impact pricing.
As a medical-only market, Ohio’s customer base has a higher representation of older patrons. Although, Millennial men still spend the most generating 24.1% of total sales.
With only $402.8M in total sales year to date, OH is the smallest of Headset’s US-tracked markets. medical cannabis was legalized in 2016, however, the state’s program didn’t begin until January 2019. On November 7, 2023, Ohioans legalized recreational cannabis through a ballot measure giving the state nine months to transition to an adult market. As the 7th largest US state with a population of nearly 12 million, there are a ton of opportunities in the Buckeye State.
In July, Maryland transitioned its medical market to adult use and saw a 105% increase in total sales that month over the previous. If we were to apply that growth rate to a similarly positioned Ohio market we could see sales jump to something in the realm of $825M overnight with lots of room to grow.
Under Ohio's medical program, smoking is prohibited. As a result, the Pre-Roll category, which accounts for 13.4% of total sales nationally, is completely banned. Flower is the most overrepresented category so once adult use begins we will likely see that category shrink and see most of that market share go to Pre-Rolls. As the fastest-growing category in cannabis Pre-Rolls will represent a huge area of opportunity for brands wishing to enter the market. Headset’s Pre-Roll industry report has all the data on this growing category.
The regulatory landscape in Ohio’s medical market facilitates some unusual package sizes. The strict limits on quantities allowed per product type have shaped how brands serve the market. Across the US the most common package size for Flower is 3.5g, a standard eighth. In Ohio, the leading package size is 14.15g a six-day serving of Ohio’s 2.83g “whole day unit” for Flower. Assuming that these purchase limit regulations are not transferred to the adult-use market, these Ohio-specific package sizes will likely fade out and be replaced by industry-standard amounts.
In Ohio, the Vapor Pen market is dominated by 510-threaded cartridges, which are widely used nationwide. However, there is a notable exception, where a proprietary cartridge type called 'Luster Pods' has gained a larger market share compared to well-known national producers like Stiiizy, Airopro, Cliq, and Pax. While Stiiizy holds the strongest representation in the national market with 10.5% of total cartridge sales, Luster Pods surpass even their success in Ohio. With 33.4% of total sales in Ohio being generated by 28 different brands of Luster Pods, it is clear that this hardware type is a significant player in the Ohio market and should be closely considered by industry participants.
The prices in Ohio are some of the highest in the US even compared to other emerging markets. The average item price across all US markets excluding Ohio is $21.77 which is 71.8% less than Ohio’s October 2023 average item price of $37.39. However, when we look at the price per gram of inhalables it’s much more competitive. While average item prices are high in this medical market, the unique package sizes likely drive up item prices a bit while the actual value is much more competitive.
Mirroring the industry as a whole prices in Ohio have been falling. Between January and October 2023, the average item price fell 18.2% and the EQ price fell 28%. This likely will continue throughout the duration of the medical market before new market conditions take hold with the implementation of adult use laws.
This graph compares the proportion of total market sales in Ohio by demographic group to the proportion of sales attributed to the demographic group nationally — the index below the graph compares these values. If the index for a demographic group is greater than 100, then that group spends relatively more in Ohio than they do in the rest of the US. If the index is lower than 100, then that group spends relatively less in Ohio than they do in the rest of the country.
Similarly to the rest of the cannabis industry, Millennials and Gen X men drive the highest amount of sales in Ohio. However, since Ohio is currently limited to medical use only, older demographics are more frequent consumers compared to a typical adult use market. Across the US, Millennial males account for over 30% of total sales, while in Ohio their share drops to 24%. On the other hand, older consumers like Baby Boomers have increased their representation from 13% nationally to 20% in Ohio. Additionally, women have a higher representation in Ohio, capturing 41% of sales compared to the national average of 35%. These demographic differences likely influence product choices, with older customers tending to prefer edibles and wellness products such as Capsules, Topicals, Tinctures & Sublinguals. Younger customers, who are less represented in Ohio, tend to prefer newer formats like Vapor Pens and Concentrates.
Ohio's medical market has its unique characteristics, including market-specific hardware, unusual package sizes, and missing categories like Pre-Rolls. Additionally, it caters to an active older customer demographic. However, as Ohio progresses towards opening its adult use market, it becomes a state worth monitoring. With a population of twelve million, the domestic market alone has the potential to propel Ohio's sales to over $1 billion rapidly, making it an attractive market for new opportunities. As the market continues to mature, conditions will evolve quickly, and as always Headset will be here to provide real-time data to assist in navigating these changes.