Business
California’s annual cannabis sales fell in 2022 for the first time since adult-use launch
Annual cannabis sales in California declined in 2022 for the first time since the state launched its adult-use market five years ago, according to state data analyzed by MJBizDaily.
Retailers generated just over $5.3 billion in taxable sales of recreational and medical marijuana last year, down 8.6% from roughly $5.8 billion in 2021, according to the latest statistics released by the California Department of Tax and Fee Administration.
Taxable sales in the fourth quarter dipped to about $1.3 billion – the third straight quarterly decline – down nearly 12% from the same period a year ago.
Depressed wholesale prices, which have made products cheaper for consumers, and the continued lack of retail outlets across wide swaths of the state have been two big drivers of this trend, according to California cannabis industry consultant Hirsh Jain.
“California’s ‘dual-licensing’ system has made it very difficult for new dispensaries to open in the years since adult-use sales began,” said Jain, the principal of Los Angeles-based Ananda Strategy.
Under California rules, cannabis businesses must obtain local authorization from the city and/or the county in which they operate before they can apply for a state license.
This system has caused major delays in issuing annual licenses since the launch of adult-use sales in 2018.
Those delays continue to plague operators throughout California, including Mendocino County.
Marijuana growers there are asking state regulators to intervene because the local government has failed to “establish a process capable of moving good-faith cannabis operators towards state annual licensure,” the Mendocino Cannabis Alliance claimed in a Feb. 8 letter to California Gov. Gavin Newsom and Department of Cannabis Control Director Nicole Elliott.
“This has artificially limited the size of the state’s legal cannabis market, causing it to prematurely plateau and now regress,” Jain added.
The state’s illicit market, which some industry insiders estimate is double the size of the regulated industry, has also played a role in stumping sales at licensed stores, a trend that materialized during the medical marijuana era, years before California voters legalized possession and adult-use sales in November 2016.
California cannabis businesses generated nearly $1.1 billion in taxes in 2022, down 21% from roughly $1.4 billion in 2021.
The decline partially stemmed from the elimination of the state’s cultivation tax on July 1, the start of the fiscal year, as well as the aforementioned economic and regulatory challenges.