California’s legal cannabis market is on track to grow 23% in 2019 to $3.1 billion, according to a new report from Arcview Market Research and BDS Analytics.
Consumer spending is forecast to hit $7.2 billion in 2024, a 19% compound annual growth rate over the next five years, according to the report titled California: Lessons From the World’s Largest Cannabis Market.
California became the first state to have legal spending on cannabis fall year-over-year when switching from medical-only access to an adult-use regulatory regime – from $3 billion in 2017 to $2.5 billion in 2018.
States making the move before – including Colorado, Washington and Oregon – have typically seen consumer spending double over 12 months. But in California, local bans on commercial cannabis activity caused the number of retailers to shrink sharply during the launch of the state’s adult-use program in January 2018. Stringent testing regulations that took effect in July 2018 prompted many suppliers to fold as product shortages cut consumer spending dramatically, according to the report.
“California companies that survived the dual ‘extinction events’ of 2018 have emerged stronger and well-positioned to grow their market share going forward,” Arcview Group CEO Troy Dayton stated. “More than that, they are battle hardened, and kicked off a merger and acquisition flurry in the first half of 2019 that will allow them to leverage their positions in California to compete across the country.”
California currently has a relatively low number of retailers for its population, with only one licensed retailer for every 35,147 adults over the age of 21. Whereas, Oregon has one dispensary for every 5,567 adults over 21 and Colorado––the first state to launch an adult-use market–– has 4,240 adults age 21 and over for each retailer.
“Despite the burdens imposed on the legal market by regulators, with a $2.7 billion gross domestic product, California has the world’s largest legal cannabis market and will continue to until federal legalization makes it merely a part of the larger U.S. market,” stated Tom Adams, managing director and principal analyst for BDS Analytics’ Industry Intelligence group and Editor-in-Chief for Arcview Market Research.
“At that point, California will assume its usual place in the world economy as a major exporter of agricultural commodities and their derivative products, a technology mecca, and consumer product trendsetter,” Adams added.