Ask Our Experts: Average Cannabis Consumer Spending
Q: If sheltering-in-place orders led to higher U.S. demand for cannabis in the spring, what are the expectations for demand as states begin to reopen?
By John Kagia, Chief Knowledge Officer, New Frontier Data
A: Following a surge in consumer spending for cannabis throughout April and May, the trend leveled off in June, suggesting that spending peaked during the height of market shutdowns.
In analyzing retail data from 24 legal cannabis markets in the United States, New Frontier Data found that average consumer monthly spending rose to record highs in April and May, at $290 and $296, respectively. While June’s sales across those markets were down slightly (minus 4.7% from May) to $282, they were significantly higher (up 32.4%) from the average of $213 spent during the first three months of the year.
*For access to complete data on spending trends, please visit: https://equio.newfrontierdata.com/
Medical markets in the Northeast saw the highest spending, with Pennsylvania, Rhode Island, Connecticut, Maryland, and Delaware representing five of the six highest-spending states. North Dakota was the one exception, with that state’s early medical market having the fourth-highest spending among the states analyzed.
Conversely, spending was lowest in the mature medical and adult-use markets, with Oregon and Washington having the lowest spending. Consumer spending in Pennsylvania was 3x higher than that among consumers in Oregon, reflecting a dramatic shift in market economics seen as states transition from medical markets to adult use, and as a state’s industry matures. The wide variance in spending is also indicative of the large cannabis cultivation ecosystem in Oregon, which historically contributes to lower cannabis prices than in the Northeast (where most commercial cannabis cultivation cannabis serving the legal markets is newly built in capital-intensive facilities).
There were also changes in the products purchased between the first and second quarters. The share for flower rose by 5% in the second quarter (from 37% to 42%), while the share of vapes fell by 5% (from 32% to 27%) nationally.
The outlook for consumer spending in July and throughout the remaining summer will be influenced by a convergence of factors:
- Consumer response to efforts to reopen the economy: The rate at which the public returns to recreational and leisure activities will be a key determinant of cannabis spending trends. Not only will the resumption of out-of-home activities impact discretionary spending allocations, but the easing of shelter-in-place orders which previously drove higher rates of use will occasion some pullback in demand as consumers get back outside and away.
- States’ success in containing the surging spread of COVID-19, especially in important cannabis markets (e.g., California, Arizona and Florida): Concerns about COVID-19’s rampant spread throughout Southern states may lead to prolonged closures of businesses and cancellation of other summer activities, lead to extended shelter-in-place orders, and generally heighten levels of stress, anxiety, and sleep disorders — all of which typically drive increased cannabis use.
- The impact of congressional action regarding additional federal stimulus spending for individuals, and eviction protections for homeowners and renters who have faced COVID-related job losses: With the U.S. Bureau of Labor Statistics this month reporting8 million unemployed Americans in June, a large cross-section of consumers facing financial uncertainty may shift their spending to lower-cost products in the legal market, or revert to the less expensive illicit market. While those economic challenges are not expected to significantly disrupt overall demand, consumers’ belt-tightening efforts may lead to lower monthly spending on cannabis among those most acutely impacted.
U.S. legal cannabis demand was already on a strong growth trajectory before the pandemic, and coping with COVID-19 has only affirmed the increased acceptance and demand for cannabis in states where it is legal. With the effects of the pandemic likely to cause social and economic disruptions for months if not years to come, New Frontier Data expects that the trend toward increased use of cannabis both for medical reasons and general wellness will fuel strong industry growth throughout the foreseeable future.