The West Coast has blazed trails for the American cannabis industry over the past decades, but all eyes now are focused on the emergence of East Coast markets, particularly New York and New Jersey. Currently, adult-use products are legal in eighteen states and the District of Columbia, and eight more states (primarily in the east) are expected to pass adult-use legislation and begin sales by 2027.
Brightfield Group forecasts the total United States market will reach more than $30 billion in annual sales by the end of 2022, growing to $51.7 billion by 2027. These numbers come from a new report entitled “Standing Out in U.S. Cannabis: State & Consumer Opportunities,” based on a survey of more than 4,000 consumers.
“There are lots of reasons to be optimistic as cannabis continues to expand, and we really see these new states opening and liberalizing and ramping up very quickly,” said Brightfield Managing Director Bethany Gomez. “By 2027, we’re expecting the market to hit $51 billion, and about 40 percent of that will come from markets that aren’t even open yet.”
In 2021, annual adult-use sales on the East Coast totaled just $2 billion, but sales are expected to reach $10.9 billion annually by 2027. To put this in perspective, California’s adult-use retail market netted $5.2 billion in taxable sales in 2021, according to year-end data released by the state’s Department of Tax and Fee Administration.
However, while East Coast markets are just beginning to heat up, the West Coast still is experiencing a variety of challenges for companies trying to survive, much less turn a profit: a thriving illicit market, a glut in flower production, steep taxes, and more.
“On the West Coast in the early-adopter markets, we are starting to hit a saturation point, and many of these companies are dealing with a lot of challenges,” said Gomez. “We see many of these markets, like Colorado, expecting to see declines in sales for the first time, which is a combination of inflation and market saturation, but also the impact of reduced government subsidies people were using for cannabis during lockdown. So we see more gridlock on the West Coast while we see rapid growth in newer, more populous markets east of the Mississippi.”
One of the more surprising results of the recent Brightfield survey is how many respondents reported being daily users. About 45 percent of consumers use multiple times per day, and another 16 percent use at least once per day. “What we’re seeing is this increasing trend of cannabis consumers using more often and using multiple times throughout their day,” Gomez said. “So if you combine the two groups, you see more than 60 percent of consumers are using daily, and that represents a huge segment of the population.”
The report also digs down into two discrete groups of cannabis consumers: users in the lesbian, gay, bisexual, transgender, and queer (LGBTQ+) community, and “wake-and-bakers,” or those who use first thing in the morning. A few of the insights into these groups include:
- While Gallup discovered 7 percent of U.S. adults identify as LGBTQ+, about 20 percent of U.S. cannabis consumers identify as bisexual, gay or lesbian, or “other.” These consumers are lower- to middle-income, skew younger, and are more often women.
- LGBTQ+ consumers are more likely to consume multiple times per day: 52 percent of LGBTQ+ consumers report multiple-times-daily use, while only 44 percent of those outside the LGBTQ+ community reported using multiple times per day.
- Among wake-and-bakers, 52 percent are women and nearly two-thirds are under the age of forty.
- Nineteen percent of American adults over the age of twenty-one reported using cannabis, which means about 11 percent of Americans are using cannabis daily, according to Gomez.
“As companies look at this kind of data, a lot of them will have in their mind who they think the consumer is and what they think the size of the opportunity is in each different area: ‘We’ll use our data to really level expectations and kind of rationalize and build a winning brand strategy,’” said Gomez. “A company that has a portfolio of brands will want to build up different brands that target different consumer segments.”
Given the emergence of LBGTQ+ and female users as key consumers, brands that want to establish themselves in new markets would be wise to develop products and marketing campaigns that appeal to those groups. In California, brands such as Sundazed and Miss Grass have incorporated more pink into their branding and packaging designs to appeal to female users. (It should be noted the use of pink can be controversial in female-oriented marketing.)
Beyond reaching out to new customers, Gomez explained how targeting existing consumer groups might be a more effective strategy for many companies.
“Companies don’t need to focus the bulk of their attention on trying to win over people who aren’t yet cannabis consumers,” she said. “There’s a huge built-in opportunity with those who are using and using frequently, and if [brands] can build a strategy to win over more of their dollars, that may be a better use of resources than trying to convince people who are not yet consumers to try products.”