U.S. Cannabis Collective

Herein we provide a state-by-state desk reference for U.S. cannabis industry using data-driven insights. We slightly revised our 2023 U.S. legal cannabis TAM to $28.9 bn and lowered our 2026 TAM estimate to $36.3 bn (previously $38.1 bn) amid a deflationary backdrop and regulatory delays. Price deflation remains a headwind in many markets, as sales will be driven by incremental growth from nascent adult-use markets.
We continue to believe federal legalization will not occur in 2023 and that a path for the SAFE Act to pass is not likely. Price deflation, tough COVID stimulus comps, and excess supply have been overhangs. With the industry having grown less than we expected in 2022 (+3.3%), we temper our estimates for most markets in 2023. This rings particularly true for delays in New York and, to a lesser extent Maryland, though positive adult use trends in Missouri drive upside to estimates. Delays in Virginia contribute incremental risk to our out-year estimates as well, such that we now look for $36.3 bn in retail sales in 2026.
We derive our U.S. legal TAM using a bottom-up approach based primarily on retail sales data from state governments and Headset. Our TAM includes 1Q23 reported retail sales data for 15 states that collectively account for ~72% ($20.9 bn) of our 2023 TAM, of which ten were based on state-reported sales, with the remaining five informed by Headset data.
As we have seen from pricing data at both the retail level and the wholesale level, price deflation intensified in the second half of the year, albeit to varying degrees.
In Michigan, December wholesale prices had declined ~50% YoY (though March was down ~19%). This, in turn, resulted in cross-category price deflation at the retail level.
In Massachusetts, wholesale prices are now down over 50% as price deflation accelerates. That said, we see some relief in more developed West Coast markets like California, where we believe price deflation prompted a shakeout in supply. As such, while wholesale prices in California were down as much as ~44% in July 2022, YoY declines have moderated to down ~12% more recently.
We are watching a few things in 2023:
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