Visibility into sales and production in Washington’s legal cannabis market has been obscured since late 2017 due to issues with LEAF, the state’s plant and inventory tracking system produced by Akerna (formerly MJ Freeway). However, a recent analysis by data scientist Jim MacRae, who has been observing Washington’s market for years, shows that the Evergreen State joined its Pacific Northwest neighbor in seeing strong March sales.
According to state data obtained by MacRae, March’s pre-tax retail sales in Washington reached over $112.8 million, a record high for the state and only the second time that monthly revenue has topped the $100 million mark. March’s sales are up by roughly 25% from the month prior.
March is a month that typically sees a boost in demand in legal cannabis markets. However, March 2020’s rate of month-over-month increase is essentially double that documented from February to March in 2019, indicating an outsized jump in demand this year. MacRae characterizes March’s sales as “truly … an outlier worthy of note.”
As in other states, MacRae attributes the spike in sales to consumers stocking up ahead of stay-at-home orders and the possibility that retailers might have been ordered to close. That possibility did not come to fruition; licensed cannabis retailers were permitted to remain open as essential businesses in Washington State.
MacRae also notes that 420 licensed retailers reported making sales in March. Unlike most other states with legal adult-use cannabis, Washington has a state-level cap on the number of retail licenses able to be issued. The cap is currently set at 556, leaving room for significant retail expansion in Washington. However, local restrictions have impeded some retailers from opening. The state Liquor and Cannabis Board (LCB) has been discussing the implementation of a social equity program that would issue at least some of the available retail licenses, though a timeline for when that might occur is not yet clear.
On the production side, the LCB recently published a new “Canopy Report,” detailing utilization of licensed canopy in the state’s legal industry. Unfortunately, the most recent data in the report is from 2018. From 2017 to 2018, the number of licensed producer locations decreased from 1,179 to 1,104, while canopy utilization decreased as well. These findings correspond to anecdotal reports that producers – particularly of the smaller license tiers – have been exiting Washington’s market due to overproduction and stiff competition.
LCB officials surveyed 792 licensees in 2017 and 773 in 2018. The report notes, “In year two , more Tier 3 [the license tier with the largest amount of permitted canopy] and fewer Tier 1 and Tier 2 producers were surveyed.” The LCB found that, overall, licensed producers in Washington used 59% of their allowed canopy in 2017, a percentage that decreased to 52% in 2018.” Contracting utilization may have been due to oversupply and falling wholesale flower prices that we documented throughout most of those two years, leading to producers pulling back.