“Fundamentals are Strong:” Cannabiz poised for strong long-term growth, analyst says

A prominent cannabis market analysis firm predicted strong industry growth in coming years.

At a Thursday webinar, one of a series held by BDSA since the COVID-19 lockdowns began, president and co-founder Liz Stahura reviewed recent trends and data on cannabis sales.

All states have started some form of reopening. But states, counties and even cities have taken different approaches. While sales have remained strong through the pandemic, for cannabis, the big question is how fast brick and mortar stores can resume something like normal operations. 

This is not necessarily a “Field of Dreams” moment, Stahura said, where people will come if shops open. The industry is not immune to impacts from regulations, social distancing and customers’ changes in behavior.

May has started to show a “return of a more typical sales cycle,” Stahura said. That includes shopping patterns and store traffic. “The extreme stock-up behavior is definitely subsiding.”

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Significant Hills

The year’s first quarter ended on a positive note, she said. Sales were about the same or higher, year over year, for several states, including in Maryland, Arizona, California, Colorado and Oregon. 

She attributed some of Maryland’s growth to the growing number of stores.

Nevada suffered from the pandemic’s impact on tourism. Even with reopening, its outlook is bleak. 

Stahura will be watching the long-term impact of lost tourist money in Colorado, as well. But that state still showed strong growth. Sales there have climbed from about $700M in 2014 to $1.7 billion in 2019.

California’s licensed businesses, meanwhile, face a “significant hill” in the state’s illegal market, which still accounts for roughly two-thirds of sales.

Asked about the pandemic’s impact on the illegal market, Stahura said she expects legal outlets–comfortable stores with social distancing measures–will have an advantage in the near-term. But lower prices in the illegal market may draw customers over time. 

BDSA continues to watch other metrics. For instance, COVID accelerated demand for delivery. In California, delivery for retailers already offering it accounted for 16% of sales in the first two weeks of May, compared to 6% in the first two weeks of March.

Massachusetts stores will reopen soon. “We expect to see strong sales in Massachusetts starting in June” and picking up through summer months, she said.

And the firm will look at how the Boomer generation’s shopping, consumption and other patterns have shifted.

BDSA expects the worldwide legal cannabis market to total $46.8 billion by 2025 and $34 billion in the U.S. Stahura pointed to short-term challenges—capital constraints, social distancing, tourist markets—but said she expects a leaner, more efficient industry after 2020.

“The fundamentals are strong,” she said, adding that support for legalization also remains strong among the U.S. public. All of which “point to long-term growth for the industry as a whole,” she said.