The coronavirus was good for some industries and ruinous for others. For cannabis, 2020 was a breakout year. Legal sales across the U.S. – 15 states allow adult use, 35 allow for medical sales – hit a record of $17.5 billion, a 46% increase from 2019, according to a new report.
Most of the sales growth came from adult-use markets, especially mature markets like Colorado, which grew sales by 26% to reach $2.2 billion, and Oregon, which saw sales hit $1.1 billion, a 29% increase over 2019, according to the report published by BDSA, a cannabis sales data platform.
Emerging markets like Illinois, which expanded its medical cannabis market to include adult-use sales last year, saw the largest dollar gain in 2020, rising by $784 million. (Illinois’ cannabis market is now doing over $1 billion in sales.) California, the country’s largest cannabis economy at $3.5 billion, increased sales by $586 million, while Florida saw a $473 million increase.
“We expected more potential impact from an economic downturn, but the industry has proven to be resilient,” says Kelly Nielsen, who runs BDSA’s insights and analytics department. “It’s potentially recession-proof.”
Nielsen says three things contributed to the industry’s growth last year: the Covid-19 pandemic (many states deemed dispensaries “essential businesses” during lockdown); more customers entered mature markets like California, Colorado and Oregon; and states like Illinois and Arizona have created new adult-use markets.
Another factor driving the industry’s growth is a simple one: More people are consuming more cannabis than before. About 30% of consumers surveyed by BDSA said they shop for cannabis products more often, while 25% of consumers say their cannabis usage has increased since before the pandemic.
Across all U.S. adult-use markets, the number of people who consumed cannabis at the end of 2020 was greater than six months prior. Of people living in states that have legalized recreational sales, 43% use cannabis, up from 38%. In Colorado, where market penetration is greatest in the country, 48% of Coloradans imbibe.
“Close to 50% market penetration is really compelling, as alcohol penetration is around 60%,” says Nielsen.
In California, market penetration increased from 37% to 39%. Josh Bubeck, the cofounder of Urbn Leaf, a seven-store cannabis retailer based in southern California, says 2020 has been a difficult year, but his company hit record sales.
“I had my best week I’ve ever had last week,” says Bubeck.
Much of Urbn Leaf’s growth was driven by the fact that it doubled its footprint. And while Covid-19 helped to drive more local business, some of Urbn Leaf’s locations, especially those that cater to tourists, fared worse in 2020.
“My flagship location, which is near Sea World, suffered tremendously from a drop in tourism,” says Bubeck.
Another aspect that buoyed his business is the enforcement of cannabis regulations, a sign that the market is maturing. His shop in San Ysidro, which sits just north of the border with Mexico, was surrounded by dozens of illegal dispensaries until last year, when the city of San Diego shut them down. All that foot traffic made its way to legal stores like Urbn Leaf.
“My shop on the border is now my busiest shop,” says Bubeck. “Two years ago, it was my slowest.”
Cannabis delivery companies also made a killing last year as they were perfectly positioned to capitalize on the pandemic. The number of Americans using cannabis delivery increased 25%, BDSA found.
Sava, a high-end cannabis delivery platform that serves 70 cities around San Francisco, enjoyed a surge at the start of the pandemic. Yet, as the year wore on, the surge never really ended.
“We saw 60% growth in sales in 2020,” says Sava founder and CEO Andrea Brooks. “It’s an exceptional number and it was a particular year. Now it’s about holding on to the consumers and continuing to grow.”
Brooks says her company’s sales growth was initially fueled by shelter-in-place orders, but she also credits the fact that more consumers are crossing over from the illicit market.
“Legalization isn’t like turning on a switch,” says Brooks. “It’s ongoing and people become more comfortable with it as the market matures.”
The bulk of the cannabis industry is still in the black market. Illicit cannabis sales are estimated to be more than $100 billion each year. The legal industry is catching up, albeit slowly. By 2026, BDSA predicts the legal U.S. cannabis market will reach $41 billion in annual sales, roughly the size of the craft beer industry.
Even though his company generated more business than ever before, Bubeck doesn’t want to relive 2020.
The hardest part of navigating the pandemic as a business owner was managing the staff and the logistical problems posed by Covid-19, he says. If one person in the company’s supply chain tested positive, anyone who was within 6 feet of them for more than 15 minutes had to quarantine. Bubeck says if a department wasn’t strict with social-distancing protocols, an entire group of employees would be gone for ten days.
“I’d have to argue, despite this being our best year in terms of sales, that it hasn’t been a win for everyone,” says Bubeck.