Cannabis data and analytics specialist Headset just released its latest report comparing US medical and recreational cannabis market development, bearing results that reveal sales patterns and unifying trends across the industry.  The report’s findings are grounded in the context of the predominant pattern of a three-step process in cannabis market development, including prohibition, medical access, and adult-use legalization. 

Though there are exceptions to this evolution where markets leapfrog medical use and go straight from cannabis prohibition to adult-use legalization, flagship states like California, which approved medical use in 1996 but took another twenty years to allow adult-use cannabis, follow a more predictable pattern. The report compares California’s slower rollout to Illinois accelerated process, evident in its shorter six-year span between medical and recreational legalization. 

The Medical To Rec Jump

Due to the time-tested predictability of this market pattern, industry analysts are using it to make sense of the past, paint a clearer picture of the present, and forecast future sales patterns in states such as New York, New Jersey, and Montana, which will all be transitioning to recreational use this year. Headset’s report also looks at cannabis markets in Illinois and Michigan, which made the medical-to-recreational transition fairly recently, and Colorado and Oregon, which jumped on that bandwagon much sooner. Overall, analytics show significant growth when markets first transition to adult-use, as illustrated by Illinois’ 226% gain in the period between the January 2020 launch of their recreational market to July 2021. Michigan’s recreational use program may have had a more sluggish start, but its total adult-use sales still saw a whopping increase of 1077% over the same period.

The impact of adult-use legalization on the medical market is less predictable and more state-specific. While Illinois medical use sales initially held steady once adult-use legalization passed, Michigan saw 75% growth in medical sales between January 2020 and July 2021. Still, the proportion of total cannabis sales to medical patients in Michigan has steadily declined since the introduction of the recreational market, and Illinois saw a steady decline over the first quarter resulting in an all-time low of 20.9% in July 2021. However, Colorado and Oregon, two of the most mature recreational markets in the country, offer some evidence that adult-use legalization is not necessarily a death knell for medical use. Oregon’s medical sales have held steady at 8-12% since the beginning of 2020 with Colorado topping that over the previous twelve months at between 18-20%.

Medical Patients Spend More

Buying behavior differences between recreational and medical use consumers can impact the market as well. Headset data shows that medical consumers tend to purchase more product at one time (a metric they refer to as “basket size”) than recreational consumers, giving Oregon as a prime example, where pre-tax average basket size for medical patients over a 90 day period was a staggering 99% larger than that of recreational use customers. Consumer differences carried over into preferred consumables as well, with medical patients trending higher in concentrate consumption versus the recreational user predilection for edibles and pre-rolls. 

In the end, lower taxes, higher potency THC products and more knowledgeable staff and sales experience give the medical use market enough of an edge that it shows some promise of holding its own, even with the advent of adult-use legalization. Given the astronomical growth spurt of new adult-use markets, however, Headset’s latest findings suggest that medical cannabis will be lucky to maintain its ten to twenty percent of total market share.