As US Cannabis Sales Decline, This Analyst Predicts More Consolidation – Who Will Benefit?

Cannabis sales across most U.S. states with legal programs declined subsequently in the third quarter, but Cantor Fitzgerald analyst Pablo Zuanic says the upcoming quarter could see a bit of an improvement, given its seasonality.

The buildout of licenses in some states negatively impacted marijuana operators' economic metrics, such as revenue per store and gross margins that caused more verticalization in states like Illinois, Massachusetts and Pennsylvania, said Zuanic in his Monday note.

“Current market conditions are exacerbated by the lack of access to capital, which we believe will lead to further industry consolidation, likely benefiting the larger and better capitalized multi-state operators.”

The analyst pointed out that industry growth trends have stalled overall, excluding several key state-level regulatory changes such as moving from medical to recreational programs. 

Trends Across The States – Highlights 

• Illinois: Third-quarter sales reached $482 million, with adult-use accounting for $396 million, and medical with $86 million; Retail prices have declined and 185 social equity stores could spike demand, but not until the first half of 2023.
• Pennsylvania: No official data for sales, but Zuanic estimates revenue per store to be at $6 million versus $10 million in 2022. 
• Florida: Quarterly sales declined 6% sequentially to $433 million. 
• New Jersey: No official data for third-quarter sales, but second-quarter sales saw $139 million with the momentum that should have led to growth in the following quarter. New Jersey prices are the highest in the U.S. 
• Massachusetts: Sales in the quarter grew 4% sequentially to $455 million, but the growth consistently declined in year-over-year terms. 
• Arizona: Headset data reveals a 6% sequential decline in third-quarter sales. 
• Michigan: Third-quarter sales improved 11% quarter-over-quarter to $630 million, having a growth momentum among the best in the industry, according to Zuanic. 
• Ohio: Per official state data, medical sales declined 3% sequentially to $116 million. 
• Maryland: Medical marijuana sales dropped 7% from the previous quarter to $123 million.
• Missouri: Medical cannabis sales improved 7% quarter-over-quarter to $101 million. The market might be getting crowded with 195 active stores, Zuanic said.
• Estimates for other states in the third quarter: According to Headset, sales trends worsened sequentially in California, Oregon, and Washington, but improved in Colorado and Nevada.

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