Though the cannabis industry is one of America’s most lucrative new industries — with estimates that it will reach approximately $58 billion in sales by 2028 — the markets in several recreational states are suffering severe financial harm. In states like Oregon, the problems have gotten so out of hand that businesses are even pulling out of the state. And these problems are far from over.
California is probably the best example of such a problematic state, as I wrote last week. Last year, reports from the California Department of Tax and Fee Administration showed that the California cannabis industry’s total sales went down by a total of over eight percent from 2021 to 2022, which means approximately $400 million less of annual sales in a market as gargantuan as California’s — at least that was the case with the legal market, which California is doing little to protect. And according to recent sales figures for 2023, it looks like the total financial loss was even more substantial. Whereas nearly $5.4 billion in total sales occurred in 2022, a full $250 million less in overall sales when compared to the already troubled year of 2022. Unfortunately though, California’s problems are only a microcosm of the greater issues that the other states face or will soon face.
Oregon is not much better off. Its cannabis industry has been experiencing its own significant financial issues. Along with freefalling retail prices, Oregon’s cannabis industry has experienced a very similar pattern of two consecutive years of declining sales — just like California. And although Oregon’s market isn’t as vast as California’s, the proportionate financial losses are still just as observable.
Outright, the Oregon cannabis industry only broke $1 billion in total annual sales once, that being during the aftermath year of the pandemic that was 2021. In that year, the Oregon cannabis industry’s total sales peaked at a staggering $1.2 billion. Since then, total sales have continuously and noticeably dropped throughout the state. In total, licensed cannabis retailers in Oregon sold approximately $944 million worth of cannabis products in 2023, down a considerable $39 million from 2022, which itself was already a year of declined overall sales.
While the usual suspects are at play when it comes to the continuing decline of the Oregon cannabis industry, such as their own illicit market issues to big cannabis companies exiting the state, a then-progressive decision made during the state industry’s infancy may be a major culprit in the current widespread problems and struggles plaguing that very industry. While other states such as Nevada and Washington put a limit on how many recreational cannabis licenses could be allocated, Oregon didn’t implement any such restriction.
Although this was a unique regulation at first, the aftermath was a gross market oversaturation seen in almost no other state of its size. In total, Oregon has approved an astonishing 3,000 licenses for cultivation, production, or retail sales of cannabis. For a state with a population of 4.2 million and a tourism industry that doesn’t reach the magnitude of other west coast states, it shouldn’t require an economics degree from an Ivy League school to see why this would cause significant issues. This fierce imbalance of supply and demand made overall retail prices decrease to historic lows also not seen in any other state’s legal industry, with the average item price dropping $15.01 in February 2023 to $13.93 in February 2024 according to data aggregate site Headset.io.
From both a total sales and simultaneously a job creation standpoint, Oregon has suffered tremendously over the past year due to many high-profile exits from the state’s slumping industry. We expect to see even more exits, downsizing, and restructuring in the coming months as businesses struggle to stay afloat and make ends meet.
The oversaturation of Oregon’s cannabis industry is on the front end of problems the state and interested parties are trying to address. Moratoriums have been set up over the years starting in 2018 to cease from assigning further licenses, and the Cannabis Industry Alliance of Oregon (CIAO) is requesting that lawmakers and officials with the Oregon Liquor and Cannabis Commission continue this most recent moratorium set to expire in April. The bill has already passed through both houses and CIAO believes it will be signed by the Governor.
While there’s no way to directly address and possibly remedy the millions in total lost annual revenue, the moratorium on licenses may provide a small but assured remedy to the substantial problems that the Oregon cannabis industry has continuously been facing. Or at least it might be a first step. Oversaturation is certainly not the only problem facing Oregon’s cannabis industry, but if it is not addressed it could be devastating.
