Witnessing the introduction of adult-use cannabis into a market can be exciting to watch. In markets that are already medically legal, adult-use legalization can result in a drastic increase in the total addressable market for operators and retailers that creates opportunities for growth across the entire supply chain. The launch of recreational sales in Arizona in the beginning of 2021 was no exception. Given a relatively robust medical market that has been active since 2012, the adult-use market in Arizona provided a new frontier of expansion for the cannabis industry. Arizona cannabis consumers showed up with strong sales, spending over $1.9 billion in total annual sales (adult-use and medical combined) in the first year. Below, we take a look at the impressive growth of Arizona’s first year of adult-use sales. All of the data was sourced directly from Headset Insights from January to December 2021.
Since adult-use legalization in Arizona, sales have clearly grown, as we can see in this graph of monthly sales for both medical and adult-use cannabis in Arizona throughout 2021. The orange line here represents monthly sales, while the purple bar indicates the cumulative sales throughout 2021.
Considering adult-use sales began in January 2021, the trajectory of growth for the first year of operation is very impressive. We can see that in January, Arizona cannabis sales reached just short of $110 million. By the end of 2021, the collective spend of Arizona consumers increased by 78%, resulting in nearly $175 million in total sales in December.
All in total, Arizona saw a staggering $1.9 billion in the first year of combined medical and adult-use cannabis sales. The majority of the market’s expansion can be attributed to the first few months, as medical operators expanded their customer base to all consumers over the age of 21. In February, total market sales grew 39% compared to January. In March, total market sales grew 29.6%. Over time, market sales stabilized month over month and hovered between -4% and +5.4% for the remainder of 2021.
In this chart, we take a look at the category sales breakdown for 2021 in Arizona. Overall, like in many markets, Flower is the clear category leader accounting for roughly 47% of all Arizona cannabis sales in 2021. Vapor Pens accounted for around 23.7% of all cannabis sales in Arizona for 2021. Concentrates came in third for category sales, accounting for 10.6% of all sales in 2021. Edibles and Pre-Rolls are the remaining categories that make up a considerable share of the Arizona market, making up 9.2% and 7.9%, respectively.
This is just from the first year, however, and there is still plenty of growth potential for these categories to garner more share of the overall market as it matures and more brands are introduced. In this next graph, we’ll see how categories shifted throughout 2021.
Although Flower accounted for nearly half of all sales through 2021, we can see that this dominance slipped throughout the year in the above graph.
In January, the Flower category was responsible for 53% of all spending in Arizona. By December, the Flower category lost 11% of its total market share, sinking down to 42%. This is a sizable portion of the total market spend, but we can see that Vapor Pens (+5%), Edibles (+2%) and Pre-Rolls (+4%) gained quite a bit of momentum. As the market continues to mature, we will watch to see how this trend develops.
Next, let’s see how the prices of cannabis products have changed in the first year of adult-use legalization in Arizona. In this graph, we explore the average item price (AIP) for all categories in Arizona in 2021.
Beverages began the year at just above $16 per unit and decreased down to $14.72 per unit by December. Products within the Capsules category experienced the largest decrease in AIP, kicking off 2021 at around $43 per unit and decreasing to just under $25 per unit by the end of the year. The AIP for Concentrates stayed relatively the same throughout the year, only seeing a decrease from $25.42 per unit to $24.07. Flower products dropped average item prices quite substantially from March ($38.35) to September ($30.51), but prices regained a bit by December ($34.50). And finally, Vapor Pens saw an initial increase in AIP, rising nearly $7 per unit from January ($29.70) to March ($36.55). This decreased for the remainder of the year, ending at just above $31 per unit in December.
In this graph, we take a closer look in the change in cannabis prices by looking at the total change in AIP by category for 2021. The largest drop in AIP was within the Capsules category by a clear margin, decreasing by 41.3% within the year. Other categories that experienced decreases were Edibles (18.9%), Beverages (8.2%), and Topicals (8.1%).
The only categories to show an increase in AIP were Vapor Pens and Tinctures & Sublinguals. The AIP within Vapor Pens defied the greater market trend, growing over 5% from January to December 2021.
So why are sales performing so well? Sam Richard, Executive Director of the Arizona Dispensaries Association (ADA) says, “the wild success of the Arizona market is no surprise to folks that call the Grand Canyon State home - and we’re happy to have the chance to reintroduce ourselves to folks across the country. We’re more than just a great place to golf in the winter, though our weather does provide an opportunity to share regulated cannabis with the roughly 45 million non-residents that come through the state annually - in addition to the seven and half million folks that make their home in the 48th State.”
The changes and growth we have seen in Arizona in just the first year have been exciting to watch, and we can’t wait to see how the above charts and graphs change as the trends shift while the adult-use market continues to mature. As always, we will be keeping an eye on the growth in the market. If you’d like to follow along and keep track of Arizona and other legal cannabis markets, sign up for a demo.