On Monday, the legal sale of recreational marijuana was formally rolled out in America’s most populous state.
Another historic moment for the cannabis reform movement, California’s adult-use sales are predicted to reach some lofty highs before plummeting back to reality by the end of 2018. Also on the menu for California’s newest industry in the new year, a serious bout of consolidation in the world of marijuana brands, according to a new report from the canna-tech company Headset.
With high hopes for California’s recreational market, the recently published report extrapolates critical market data gathered from Washington State and Colorado’s medical and recreational marijuana sales.
Compared with the first two states to legalize recreational marijuana, the report projects California’s 39.5 million residents will spearhead some rather monumental growth over the next six months.
– Growth was explosive, then plateaued.
– In the first six months of sales, total units sold and total revenue increased by 310% and 270%, respectively.
– Units sold continued to explode, rising to a cumulative 860% after a year, but revenue only rose to 370%. Both tapered off to an average of around 100% for the next two years. This disparity is because of another market phenomenon that was playing out: price pressure.
– Prices started high, but dropped.
– Initially, customers in WA paid $35 for a product on average. After just six months, that dropped to $15.
– Product offerings on day one were extremely limited. Brand diversity grew massively—1478% over the first six months. Total product offerings grew by 1150%.
– Clear brand winners emerged.
– After six months, the top 20 brands controlled 55% of the market. That dropped to 34% a year out and is currently around 21%. But considering that the total Washington and Colorado dataset now includes over 800 brands, that’s still a massive market share.
– Top brands grew their product mix at higher than market rate. Washington brands Phat Panda and Northwest Cannabis Solutions grew total offerings at 138% and 128% respectively over the past two years. Shelf space matters.
Despite recreational marijuana sales becoming legal in California Jan. 1, 2018, more than a handful of municipalities across the Golden State are not allowing adult-use sales within their city or county. While cities like Burbank, Pasadena, and Glendale have collectively banned recreational dispensaries, other cities like Los Angeles scrambled to get their own patchwork of regulations and policies passed before the January deadline.
And from San Diego to Crescent City, at least for the foreseeable future, the common denominator throughout the state will be that marijuana is both “limited and expensive,” according to the report.
At least for a little while.
Like in Washington and Colorado years ago, regulators in California are stumbling through a minefield of political and economic unknowns. But unlike Washington and Colorado, with 7.1 million and 5.6 million residents respectively, California’s robust medical marijuana market, first established in 1996, has created an educated and enthusiastic customer base.
