Arcview and BDS: Report predicts boom in cannabis retail as operators seek national, multi-state expansion

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The increasing legalization of cannabis retail products is entering a new phase of development, shifting from establishing sustainable single-state business models and market share, to national, multi-state expansion according to From Dispensaries to Superstores: Opportunities in Cannabis Retail, a new report from Arcview Market Research and BDS Analytics. Currently, however, only four states (Oklahoma, California, Colorado and Oregon) make up 80 percent of the total active retail licenses nationally — a clear indication of the legal cannabis industry’s relative immaturity as a consumer retail channel.

With this imminent shift, the report found that single-state operators are in a prime position to leverage early-market share into broader national expansion while still maintaining margins and fending off new competitors. Concurrently, the percentage of respondents identifying as consumers in adult-use states rose from 31 percent in Q1 2018 to 38 percent in Q1 2019, while consumer rates in medical states rose from 18 percent to 25 percent over that same period.

“New competitors with deep pockets, often using the public equity markets to fund business plans, are aiming for scalable, national chain-building from the outset,” said Troy Dayton, CEO of the Arcview Group. “These players can take advantage of distinct state-based licensing frameworks unlike other mainstream consumer retail sectors and leverage their early market share into broader national expansion.”

The report also found that while federal legalization likely will not have an impact on further statewide legalization, such mainstream adoption will be a primary factor to boost interstate operations and shift consumer attitudes even further.

“The legal cannabis market is poised to grow into a $30 billion industry in five years, with three-quarters of that revenue generated within just 12 markets, which is a huge opportunity for cannabis retailers,” said Tom Adams, Arcview Market Research editor in chief and BDS Analytics managing director. “For now, that upside is theirs to lose as federal prohibition keeps mass merchants and e-commerce giants at bay.”

Other key findings in From Dispensaries to Superstores: Opportunities in Cannabis Retail include:

  • Currently, licensed retail operations have ample prospects for sustained growth beyond 2024, driven by populous soon-to-be legal medical-use states like Texas, and coming adult-use states like Florida.
  • Consumers in adult-use markets are still much more likely to buy cannabis from storefront dispensaries or delivery services. 54 percent of consumers in adult-use states reported buying cannabis from a recreational dispensary in the past six months, while 26 percent reported purchasing from a medical dispensary and 10 percent reported buying from a delivery service.
  • 71 percent of consumers in adult-use states and 37 percent in medical states describe cannabis consumption as recreational or social, while 56 percent in adult-use states and 53 percent in medical states cite health or medical reasons.
  • Enormous product opportunities lie outside traditional inhalables. The “topicals and other cannabis products” category makes up very little of current spending, however, the price points commanded by those products is significantly higher with the topical average selling price at $28.80 in the second half of 2019.

The 35-page report is available for $297 or as part of the Cannabis Intelligence Briefing Series subscription service from Arcview Market Research and BDS Analytics for $1,975.