What is Driving the Surge in Per Capita Cannabis Spending?

When Colorado first launched adult-use (recreational) sales in 2014, the existing medical market opened up to a wave of new consumers, including those from the sizable illicit market as well as new consumers who previously had little or no experience with cannabis.

The launch of adult-use sales in other U.S. states along with expanding medical programs have led to an increase in legal per capita sales across the U.S. at a 31% Compound Annual Growth Rate (CAGR) from 2013 to 2019. While the tremendous growth of the past six years is expected to slow, per capita sales are likely to increase for years to come as cannabis producers continue to adapt to the desires of an increasingly diverse and growing legal-market consumer base.

Not surprisingly, the fastest growth in per capita sales is driven by adult-use markets, with Colorado sales rising from $64 per capita in 2013 to $290 per capita in 2019.

A significant driver of this growth was long-time cannabis buyers embracing legal channels, although new consumers have also contributed to the increase in per capita sales. BDSA Consumer Insights data indicates cannabis consumption in Colorado (the number of adults in Colorado reporting past six-month cannabis use) grew from 24% in Q3 2017 to 42% in Q3 2019. U.S. state markets with more modest growth in per capita sales have also experienced slower growth in consumption. California consumer growth, for example, expanded at a slower rate, from 23% in Q1 2017 to 37% in Q3 2019—and, accordingly, per capita spending only grew by about 15% between 2016 and 2019.

While U.S. per capita growth is expected to slow relative to the high growth rates observed from 2013–2019, cannabis sales are still forecast to grow at a 17% CAGR through 2025. Sales growth in new adult-use markets will, of course, be dramatically higher than that.

In existing adult-use states, there are three main drivers of continued growth:

1. Further proliferation of new cannabis products that appeal to the needs and desires of new consumers;
2. Improved product availability; and
3. Growing acceptance of cannabis use.

This increase in reported consumer rates is largely driven by the proliferation of new products, with producers responding to new consumers’ needs and desires from cannabis, namely:

• Ease of use;
• Discretion; and
• Product form factors they might recognize from other consumer products.

Specifically, BDSA Consumer Insights data from Q1 2020 demonstrates that products such as gummy candy and baked goods, two familiar confections, are among the most consumed edibles. 60% of existing edibles consumers report consuming gummy candies and 46% report consuming baked goods.

Other ingestible products offering familiar form factors to new consumers are becoming increasingly more common and popular, such as chewing gum, which 8% of respondents report consuming in Q1 2020, up from 5% in Q3 2018, and powdered drink mixes, which 5% of respondents reported consuming in Q1 2020, up from 2% in Q3 2018. Sparkling and carbonated waters also experienced an increase in reported consumption, growing from 3% in Q3 2018 to 5% in Q1 2020.

Continued innovation includes producers fine-tuning their products to the needs of the new cannabis consumer with products, including an array of microdose products as well as products containing CBD and other up-and-coming cannabinoids.

As awareness of these products increases and consumer access improves, new consumers will continue to enter the legal market, fueling continued per capita sales growth across the U.S.