With the launch of sales on January 22, 2021, Arizona became the 10th state with adult-use cannabis retail. The state is already home to one of the most developed medical cannabis markets in the country, as BDSA’s retail sales tracking shows that Arizona brought in over $1 billion in medical sales for 2020. While Arizona’s market will likely deal with issues that are common in new adult-use markets, such as undersupply and limited retail coverage, BDSA expects Arizona to see strong adult-use sales in 2021.

Arizona legalized medical cannabis in 2010 with the Passage of Prop 203, and the first dispensaries opened their doors in late 2012. The states medical cannabis program has been tightly regulated since its inception, mandating vertical integration and capping the number of licenses at 130. Since the start of sales, the qualifying condition list has expanded along with the access to retail stores, allowing for patient counts to grow rapidly. By December 2020, Arizona had a total of 295,295 active medical patients, a 34% increase from the 2019 total.

The foundation set by the well-developed medical market allowed Arizona to launch adult-use sales in record time, just 80 days after the Passage of Prop 207. Applications for adult-use licenses opened to existing medical licensees on January 19, 2021, and 73 dispensaries were approved for adult-use sales by January 21. Regulations lay out a plan to issue licenses to all 130 existing medical licensees, as well as 12 social equity applicants and applicants looking to open a dispensary in a county with limited retail access. The largest licensees in the state have already reported that they are ramping up operations by hiring more retail employees and expanding cultivation capacity.

Here are some trends that BDSA thinks will be influential in the first year of adult-use sales:

• Given that BDSA predicts a three-fold increase in dispensary customers, the increased capacity from existing licensees expanding is unlikely to stave off product shortages in the early months of 2021, especially with the long lines of adult-use customers that dispensaries have seen in the first two weeks of sales.
• The total number of dispensaries is expected to top out at 150-160 under current regulations, foretelling huge profits for those able to gain a sizable share of licenses in this limited market.
• As the 16% excise tax is not applied to medical sales, many Arizona patients are expected to hold on to their medical cards, leading to a gradual decline of medical sales rather than an abrupt drop as we have seen in markets that apply excise taxes to all sales. 

With over four years of continuous retail sales tracking coverage in Arizona, BDSA is well situated to cover this exciting new adult-use market as it develops. For the latest sales forecast for Arizona and other markets, be sure to check out BDSA’s new market forecast update, coming February 22, 2021.

 

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