A new study predicts Illinois and other states to the east of the Mississippi River are set to dominate the emerging legalized cannabis market within the next five years.
The study by Chicago-based Brightfield Group noted that while western states like Colorado, Oregon and Washington currently comprise more than 40 percent of total cannabis sales in the U.S.
By 2023, Brightfield Group estimates the balance will shift to the east, with states like Illinois, Massachusetts, Michigan, New Jersey and New York making up more than 34 percent of the total market share. The west is expected to backslide to about 20 percent.
“While California has been fumbling with a regulatory nightmare and growth rates slow to low single digits in existing recreational markets, many of the more populous markets along the East Coast and in the Midwest are scaling dramatically in size and offer much greater long-term potential as legal and entry barriers begin to soften,” Brightfield Group wrote in its May 2019 study, “Crossing the Mississippi: U.S. Cannabis Market.”
Brightfield Group attributed the higher potential for growth in the East due to the region’s “wait and see” approach to legalization. Heavier restrictions on dispensaries and growing have led to more consolidation east of the Mississippi, Brightfield found.
“Legitimate businesses have grown at a faster rate in these regions because of this consolidation. It has also become much harder for smaller firms to keep their doors open when competing with multi-state operators (MSOs) bolstered by extensive capital and, in some cases, strong existing brand reputations,” the report noted.
The Brightfield Group analysis of the current state of the industry echoes concerns by some lawmakers worried about a lack of racial and gender diversity in the cannabis industry. The bill proposed by Illinois Gov. J.B. Pritzker earlier this month seeks to diversify ownership.
Lawmakers are fiercely debating Senate Bill 7, mainly over a controversial provision that seeks to expunge some previous marijuana convictions from criminal records. The bill must pass both houses of the General Assembly by the end of May to avoid needing supermajorities to move the legislation.
Law enforcement groups, the Illinois NAACP and Illinois’ Catholic bishops remain opposed to legalization.
The total U.S. cannabis market is expected to reach $22.7 billion by 2023, at a compound growth rate of 20 percent a year. The majority of the growth will be driven by the Midwest and East Coast, Brightfield found.