Summary: California’s adult-use cannabis dispensaries reported a decrease in sales for the third quarter of 2023, marking the lowest sales total since the second quarter of 2020. California licensed operators reported $1.25 billion in taxable adult-use cannabis sales, a 6.2% decrease from the previous quarter. This downturn reflects a broader trend in the state’s cannabis market, with a projected annual run rate indicating a 4.4% market decrease compared to 2022.
California See Cannabis Sales Dip in Q3 of 2023 Amid Market Challenges
During the third quarter of 2023, California’s adult-use cannabis market experienced a notable decline in sales. Despite being the nation’s largest cannabis market, the state’s dispensaries reported $1.25 billion in taxable sales for the period ending September 30, which is the lowest since the second quarter of 2020. This represents a 6.2% decrease from the previous quarter, according to data from the California Department of Tax and Fee Administration (CDTFA).
The first three quarters of 2023 saw nearly $3.9 billion in taxable sales from adult-use retailers, projecting an annual run rate of $5.2 billion. This rate suggests a 4.4% decrease from the $5.4 billion reported in 2022 and a 10% decrease from the peak of $5.8 billion in 2021. Approximately 85% of the 2023 sales are attributed to cannabis products subject to the state’s excise tax, with the remaining 15% coming from other merchandise sold at dispensaries.
Since the launch of adult-use sales in 2018, California’s dispensaries have reported over $24.5 billion in taxable sales, contributing nearly $5.5 billion in tax revenue to the state. These figures do not include locally imposed taxes collected by cities and counties.
The third quarter of 2023 also saw a stagnation in the growth of active dispensary licenses in the state. As of late September, there were 1,222 active licenses, a slight increase from 1,215 at the beginning of July. Compared to other states with adult-use sales, California has one of the lowest dispensary rates per 100,000 people.
Despite the decline in dispensary sales, wholesale prices have seen a slight rebound. The average cannabis spot price per pound at wholesale increased by 5.3% from November 2022 to November 2023. On the cultivation side, active licenses decreased by 26.7% since the beginning of the year.
The Cannabis Licensing Reform Act (Senate Bill 833), signed into law in October 2023, aims to provide relief for cannabis farmers. Effective January 1, 2024, this law will allow farmers to pay less for their state licenses when they grow less, offering flexibility in response to market fluctuations and challenges such as drought or wildfires.
Source: Cannabis Business Times
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