State projected to top $2 billion in marijuana sales

The Arizona marijuana industry is flush with green — literally.

In 2021, Arizona is projected to see an estimated $2.14 billion in sales between the medical and newly legal adult-use recreational market, according to an updated forecast report from a leading industry data tracker.

According to Liz Connors, vice president of data and analytics for Headset, a cannabis industry data analytics company responsible for the estimate, the company arrived at the $2.14 billion figure by looking at Arizona Department of Health Services reports that are published monthly for the state’s medical marijuana program.

It’s the recreational sales that are a little harder to decipher.

According to Hally Gordon, a press liaison for Headset, the company “creates sales forecasts based on same-store sales trends within the sample of cannabis retailers connected to our software platform, by forecasting the ratio of adult use to medical sales, and by adjusting for new store openings.”

Ready for the (green) rush

Those big sales numbers are linked to a few variables, according to industry insiders. The first was Arizona’s mature, and well used, medical marijuana program. According to AZDHS data, the state had 315,584 registered medical patients as of November 2021, or nearly 4% of the state’s population.

“Arizona had a pretty robust medical market to begin with,” Connors said.

Connors noted the established dispensary and product line infrastructure that comes along with such a large medical market helped with rolling out the recreational program alongside a well-established medical program, a problem other newly legal states, like Michigan, struggled with.

“I think that Arizona had a lot more product available right away,” Connors said. “The way that they legalized adult use in Michigan was really different. You couldn’t sell anything to the adult use market, unless it had been taken into inventory and not purchased by a medical consumer for 30 days.”

That does not surprise Samuel Richard, executive director for the Arizona Dispensary Association, who like Connors, gave credit first to the state’s decade-old medical program for laying the groundwork and infrastructure that was essential to deploying the recreational program this year.

“I think that we had a lot of additional production and cultivation capability come online as we entered into the adult use market, which was essentially perfect timing,” Richard said.

Having the production capability and capacity to serve both recreational and medical markets without any real shortages reported, and without prices fluctuating too much helped establish trust in the industry according to Richard.

He also said it helped that Arizona was not a trailblazer in rolling out recreational pot. There were templates other states had already laid out.

“I think just generally one of the things that benefits Arizona compared to some of those other adult-use states is that we weren’t first,” he said. “We had the benefit of seeing what worked and, frankly, what didn’t work well in some of those other markets.”

An economy unto itself

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While much of the economy has seen inflation, labor shortages and supply chain issues affect the price of daily products, that is not the case in cannabis. In fact, according to industry experts, Arizona’s marijuana industry is doing well on all three fronts.

Connors pointed to the price of marijuana flower, or what most people think of when they think of “smoking pot,” being down almost 20% per unit from January through October, according to Headset’s findings.

“A lot more product comes into the market, so there is a lot more competition. Also, a lot of adult use consumers are looking for a very value-oriented product, so that can bring prices down,” she said.

For the consumer, it means if you visited a dispensary in January and bought a $40 eighth (or 3.5 grams) of marijuana flower, pre-tax, theoretically that same eighth would cost about $32 now.

An eighth of marijuana is the most common amount marijuana flower is broken down and sold in.

Connors also talked about how recreational customers, who buy in relatively smaller quantities, help to drive prices lower as well.

“For the adult-use consumer, it’s not a medical, day-to-day thing for them,” she said. “It’s just something they do for fun. Those tend to drive prices down just because they buy smaller amounts at a time.”

When it comes to the supply chain, Richard notes that one of the drawbacks of federal marijuana policy on the national level — it’s prohibition against any marijuana product crossing state lines — has forced states to establish self-sustained, self-contained and (in Arizona) vertically integrated supply chains.

“Arizona is a fairly large state in terms of like just the geography,” Richard said. “But, you know, we’re all in the state. So, we have a pretty good handle on where the flower is and how much of that flower has been converted into oil and other products.”

Labor has been another strength for the industry, according to David Belsky, CEO of FlowerHire, a staffing and talent agency focused primarily on the legal cannabis industry. Part of that has to do with Arizona’s relatively quick embrace of recreational marijuana.

From vote to smoke, it was the quickest rollout for any recreational program in the nation, so far.

“Arizona had the benefit of watching what other states have done and is doing it differently and doing it better,” Belsky said. “And I think that cannabis is a more attractive industry for folks to work in than other more legacy industries.”

Part of that is the allure of a somewhat new and taboo product, he acknowledged. However, the possibility of realizing what Belsky called the American dream is palpable.

“You have the opportunity to move up, based on hard work, by getting your foot in the door of this industry. Folks recognize that as well, and it’s attractive in that way,” he said.

Richard agreed. Alongside well-paying jobs that offer most of the standard benefits that come with full-time employment like health insurance, there are the extra side benefits as well.

“There’s the old joke, ‘Hey, do you get some free weed?’ But yeah, you do,” he said. “Most employers do give significant discounts for employees as part of the benefits package, and it’s because of this competitive employment landscape.”