The U.S. cannabis industry has enormous growth potential, according to a report from Whitney Economics, but it struggles to realize it because of many self-inflicted wounds.
Portland-based Beau Whitney forecasted that legal cannabis retail revenue in the U.S. in 2024 will be $31.4 billion, a 9.14% increase from the $28.8 billion recorded in 2023. However, the pace of growth is slowing as the increase between 2022 and 2023 was 11.6%.
While many industries would be thrilled with 9% growth, Whitney pointed out that this isn’t the level of growth an emerging market should be experiencing.
Overall revenue in the U.S. will get a nice assist as more states legalize adult-use cannabis and the programs get launched. Whitney is forecasting legal cannabis sales of $67.2 billion by 2030, with that number topping out at $87 billion by 3025.
And Whitney’s models don’t include cannabis rescheduling or de-scheduling, meaning the market could be poised for even higher growth.
Michigan and Missouri are also shining some light on the industry as both states saw major surges in demand and increasing sales by $809 million and $948 million respectively. Even a smaller market state like Maine, has made major improvements, showing market growth and an increase in the rate of legal market participation.
Buzzkill
When pro-cannabis advocates fought for legalization, one of the arguments repeated was that doing so would crush illegal operations. Instead, illicit operators have flourished.
Whitney anticipates that more than 69% of all cannabis demand in 2024 will be met through unlicensed operators.
Last year, 11 states reported decreases in legal consumer participation. While the report didn’t come right out and say that people in the industry are helping to foster unlicensed operators, he did suggest that when one has to choose between personal financial ruin and operating in the gray market, they will choose quasi-illicit activities.
Green Market Report has written stories that have suggested some operators in the licensed market are also dipping into the illicit side in order to keep the legit business afloat.
Then there are the people in the industry who just don’t pay their bills. No surprise that an industry known for breaking the law doesn’t seem to think it has to pay its vendors for product.
The Whitney Wire wrote:
“In a recent survey, 82% of respondents stated that they have issues associated with delinquent receivables. This is leading to further economic stress to operators and is driving many out of business. With few regulations to address delinquent payments, regulators are INCENTIVIZING delinquent payments and decreasing the health of the industry, driving more people back into the illicit market.”
The economist noted that if cannabis industry insiders took care of their own and paid their bills, it would make the industry stronger and healthier.
But Whitney also points out that the cannabis regulators could have done a better job at controlling supply. He noted that the oversupply of products in several states has driven down prices, but regulators haven’t been cracking down on those suppliers.
Remedies?
The Whitney Wire thinks 2024 will be a transitional year. However, there are a lot of “ifs” in that statement.
If Congress enacts the SAFER Banking Act, if de-scheduling happens, if New York and California fix their in-house problems, if the industry begins looking out for one another and if they can break the hold of the unlicensed operators – then maybe the year will be historic.
If not, it seems cannabis will only have itself to blame.