From Medical To Recreational: What Does Report Show About Cannabis Sales During This Transition?

What does the transition from medical to recreational sales look like for an emerging market?

In a recent report, Headset analyzed data from real-time sales to identify patterns in US markets that have made this transition, looking into unifying trends between them.

According to the report, “These universal trends may be used to better forecast sales patterns in upcoming legal markets such as New York, New Jersey, and Montana as they make the transition from medical to recreational in the next year”.

Key Takeaways

• In any newly opened adult-use market, recreational sales can be expected to realize incredible growth over the first several years after legalization. For example, sales in Illinois have grown by 226% from $39.2 million when they first began in January 2020 to $127.8 million in July 2021.

• Medical sales may continue to grow or stagnate, but their proportional relevance within the total market will certainly decrease as recreational sales grow.

• After the initial tumult of rapid recreational growth, the proportion of total sales to medical cannabis can be expected to settle somewhere between ten and twenty percent in medical and recreational markets.

• Recreational customers and medical patients tend to choose individual products that are similarly priced (before taxes), but medical patients tend to purchase more at once, resulting in significantly lower average basket sizes for recreational customers.

• Some product categories (like concentrates and pre-rolls) attract medical and recreational customers at different rates, while there isn't much difference in others.

The Impact on Medical Sales Depends On The Market: Michigan Vs. Illinois

Both Michigan and Illinois have seen tremendous sales growth since launching their adult-use cannabis programs.

Adult-use sales in Illinois have grown by 226% from $39.2 million in January 2020, to $127.8 million in July 2021. Adult-use access launched with 62.7% of cannabis sales in Illinois, in January 2020, and steadily declined, reaching an all-time low of 20.9% in July 2021.

Meanwhile, Michigan's recreational program got off to a slower start, resulting in even greater proportional growth over the same time period.

Michigan's total adult-use sales had an increase of 1077%, growing from only $9.8 million in January 2020 to $115.3 million in July 2021, reported Headset.

In Illinois, medical sales have held fairly steady over the last two years, with a total increase of only 35% from $23.4M in January 2020, to $31.5M in July 2021, while Michigan's medical sales have been slightly more volatile.

Medical sales in Michigan grew by 75% from January 2020 to July 2021. However, the proportion of total cannabis sales to medical patients has steadily declined since the introduction of adult-use sales to 27.7%.

According to the report, one key difference between medical and adult-use consumers is in their basket sizes.

"Medical patients tend to purchase more at once, resulting in significantly lower average basket sizes for recreational customers, and medical patients are more likely to purchase Concentrates (especially in Illinois), while recreational customers are more likely to purchase Edibles and Pre-Rolls," wrote Headset.

Proportional Sales In More ‘Mature Markets’: Colorado and Oregon

Colorado and Oregon, “are two of the most mature US recreational markets and both have medical programs that seem to have found equilibrium within each state's total cannabis market,” stated the report.

Oregon's medical sales have contributed 8-12% of total sales each month since the beginning of 2020 while Colorado's medical sales have been even more stable, staying between 18% and 20% over the previous twelve months.

According to the report, there are several advantages that medical cannabis patients enjoy in recreational markets, including lower taxes and higher THC potency. 

In Michigan, for example, adult-use purchases are taxed with the state-wide 6% sales tax as well as a 10% marijuana excise tax, whereas medical purchases are only subject to the 6% sales tax, added the report.

‍Total market sales data is sourced from corresponding state regulatory agencies for the most recent 90 days at the time of the analysis: August 30, 2021.

Photo By Kindle Media via Pexels