Where the U.S. Cannabis Industry Will Add $5 Billion in 2022

At this point in the cannabis timeline, it’s simpler to count the number of U.S. states that haven’t legalized the plant—it’s 14, for the record—than to tally those that allow medical sales, recreational use or both. And with that broad reach came a record-shattering green rush over the past two years, spurred by the Covid-19 pandemic as dispensaries were declared essential businesses. These brands quickly invested in ecommerce and delivery tools and were flooded by stressed out, homebound consumers looking to stock up on THC-laced products. In 2020, that meant sales to the tune of $19.5 billion, per New Frontier Data. Tallies for 2021 are hovering around $25 billion, another milestone. Going into 2022, the growth shows no sign of stopping, even without federal legalization. Research firm BDSA estimates the U.S. will see $30 billion in legal sales for 2022, with Brightfield Group expecting the market to hit $50 billion by 2026. It's nearly impossible to overstate the size and stakes of the growth happening now, especially in populous states just opening their legal markets. For example, after legalizing recreational cannabis in 2020, Illinois doubled its total sales in 2021. The state logged nine consecutive months of $100 million-plus sales, for an anticipated $1.87 billion bottom line, according to New Frontier. “Normalization came before legalization,” Gary Allen, New Frontier’s CEO, told Adweek, noting that weed is now part of the nation’s public and political conversations, no matter how restrictive the U.S. Drug Enforcement Administration remains on the issue. Competing with a ‘formidable opponent’ The industry’s sales so far—as jaw-dropping as they are—have come from about 45 million consumers, New Frontier studies indicate. And there are some 160 million U.S. buyers who could still join the market. These could be people new to cannabis or already shopping in the entrenched illicit market, thought to be at least four times larger than the legal American system. “We don’t need to convince people to believe in cannabis—we need to convince them to buy legally,” said Cory Rothschild, senior vp of marketing at multistate operator Cresco Labs. “We have to be a viable competitor to a formidable opponent.” Retailers are upping their game, as they should be, and everyone needs to put more emphasis on data, analytics and understanding the consumer journey.Gary Allen, CEO, New Frontier There should be a full-scale effort to “on-ramp” those unreached cannafans, Allen added. To do so, companies are expected to boost their marketing spend and buff their brand-building skills, with Allen seeing “an explosion” of programmatic and digital advertising on the horizon. “Retailers are upping their game, as they should be,” he continued, “and everyone needs to put more emphasis on data, analytics and understanding the consumer journey.” Brands—while continuing to court legacy users and millennials—will devote more energy to targeting coveted groups growing quickly as cannabis customers, such as the overlapping demographics of baby boomers, seniors and women. Each group has been shifting away from alcohol and pharmaceuticals in favor of weed, often gravitating to infused drinks, edibles and other non-flower options. Will support be bipartisan? There’s no Coca-Cola of cannabis. That's because ubiquity in a traditional CPG way is impossible, given the current federal law. But even with the hurdles, industry experts see several specific areas of growth. States with thriving medical markets, like Florida and Oklahoma, might adopt recreational sales. New York, New Jersey and surrounding states will boost U.S. totals significantly when they open their adult-use programs. And states where cannabis is already legal will continue to see bigger numbers as consumer demand keeps rising. “The push for cannabis reform and destigmatization, culturally and as an economic driver, will continue to build momentum,” said Joe Bayern, CEO at multistate operator Curaleaf. Arkansas, New Hampshire, North Carolina, Rhode Island and Missouri are all taking steps to put cannabis legalization on their 2022 ballots. Few cannapreneurs believe that federal prohibition will end anytime soon, but many are solidly in the same camp with Jessica Billingsley, CEO at cannatech firm Akerna, who sees “meaningful pieces of legislation passing, not wholesale, but in a rolling thunder kind of way.” A significant win for the industry, and a relatively decent bet, would be access to banking services in the near future. Billingsley thinks congressional candidates from both parties will be running on pro-cannabis platforms in the 2022 midterm elections. She and others are also keeping a close watch on dual-legalization bills, one from longtime advocate Senate Majority Leader Chuck Schumer and the other introduced by Rep. Nancy Mace, a Republican from South Carolina. “It’s important to note that we’ve now seen two competing legalization bills filed for the first time in history,” Billingsley said. “That was a landmark moment. It’s becoming truly bipartisan, and I expect to see the adoption of new ideas carry into next year.”

Cannabis

Legal Cannabis Could Become a $30 Billion US Industry in 2022. Here's Where It Will Grow

Still federally illegal, the category has boomed amid the pandemic and shows no sign of slowing

T.L. Stanley

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T.L. Stanley