In the US, the legal cannabis industry has shown rapid growth, with sales increasing significantly in its early stages due to high demand. According to Forbes, the global legal cannabis market is anticipated to reach $55 billion by 2027. According to the forecast, Michigan is expected to grow significantly, reaching a $3.8 billion market by 2027. Moreover, New York and New Jersey are forecasted to reach $2.5 billion each within four years, starting from 2024. Also, California and Colorado are predicted to experience modest recoveries post-pandemic, with California expected to reach $5.24 billion and Colorado to reach $1.7 billion in sales by 2027.
As of January 2024, recreational cannabis use for individuals aged 21 and older has been legalized in 24 states, plus the District of Columbia, and Guam. These states include Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia, and Washington.
Additionally, marijuana is now legal in 40 states plus Washington D.C. for medical purposes. These states comprise Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, Vermont, Virginia, Washington, and West Virginia.
With this let’s look at some of the major players in the cannabis market before we jump on to our list of 15 Best States to Start a Cannabis Business, where we look at what these entities do, and how their latest available performance has been.
Curaleaf Holdings, Inc. is a holding company that operates subsidiary companies involved in the production and distribution of cannabis products. Its operations span dispensary and cultivation sites across North America.
In the latest financial report, Curaleaf Holdings recorded a revenue of US$333.2 million for the quarter ending 31 October 2023, showcasing a 2.3% increase from the same quarter a year ago. However, the company experienced a net loss of US$69.5 million, representing an 80% widening of losses compared to the 3rd quarter of 2022. Moreover, Earnings per share also declined to US$0.096, deteriorating from US$0.054 in the same period, a year ago.
Tilray Brands Inc. is an American pharmaceutical company specializing in cannabis research, processing, cultivation, and distribution. The company is recognized for its Good Manufacturing Practice (GMP) certification in the production and supply of adult-use cannabis products, medicinal cannabis products, and hemp products, among others.
In the quarter ending on November 30, 2023, Tilray Brands Inc. reported record net revenue of $194 million, marking a notable 34% increase from $144 million in the previous year's quarter. The company's gross profit saw an 11% rise to $47 million, with adjusted gross profit increasing by 18% to $52 million during the same period. The gross margin stood at 24%, while the adjusted gross margin improved to 27%. Specifically, within the cannabis segment, net revenue experienced a 35% growth to $67 million in the second quarter compared to $50 million previously. The cannabis gross margin was reported at 31%, down from 43% in the prior year, and the adjusted cannabis gross margin was at 35%, a decrease from 43% in the prior year quarter.
Green Thumb Industries Inc. is a cannabis consumer packaged goods company with two segments: Consumer Packaged Goods and Retail. The company cultivates, produces, and sells cannabis products to retail stores and directly to patients and consumers.
In Q3 2023 ending 30 September, the company reported $275 million in revenue, a 9% sequential increase. GAAP net income was $11 million ($0.05 per share), and Adjusted EBITDA was $83 million (30% of revenue). Cash flow from operations for the quarter was $61 million, totaling $154 million year-to-date. Cash at quarter end was $137 million, and share repurchases amounted to $25 million.
The company also announced the launch of adult-use cannabis sales at four RISE Dispensaries in Maryland since July 1, 2023, and the opening of new RISE Dispensaries in Las Vegas, Nevada, and Fruitland Park, Florida at the end of 2023.
To prepare our list of 15 Best States to Start a Cannabis Business, extensive research was done. First, Thompson Coburn LLP was referred to, which has created a state-by-state ranking of cannabis regulations, based on how much the regulatory system is feasible for the cannabis industry in each state. Their ranking considered variables such as medical and recreational cannabis legality and licensing, commercial licenses, regulatory agencies, developments and trends in cannabis legalization support, and business opportunities based on operators, consumers, and industry potential in the state.
Next, the 15 states extracted based on Thompson Coburn LLP's rankings were individually assessed for their average monthly revenue generation from recreational cannabis sales, since the time of each state's legalization inception for recreational cannabis. The cut-off date for the average monthly revenue generation was 30 December 2022 for most of the states, keeping the consistency element intact. However, average monthly revenue generation for Missouri, New York, New Jersey, and Maryland pertain to post 2022 period, due to the fact that either adult-use cannabis hadn’t turned legal in these state by year 2022, or licenses hadn’t been issued for retail purposes.
We then formulated an Insider Monkey score by combining the two metrics mentioned earlier. In this composite score, more reliance was put on Thompson Coburn LLP's rankings. This was adopted to ensure cautious consideration of the accuracy of revenue figures.
The resulted Insider Monkey score essentially tells us the relative risk associated with setting up cannabis business in each state. However, please note that the score predicts the risk of each state in relation to one another, i.e., higher the score, lesser the feasibility of each state in context of setting up a cannabis business.
Note that any revenue projections for the future are sourced from Thompson Coburn LLP.
Now, with this, let’s present our list of 15 Best States to Start a Cannabis Business.
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Insider Monkey Score: 14.6
Average Monthly Revenue: 15.2m
Maine, securing the 14th spot on our list of Best States to Start a Cannabis Business, saw adult-use cannabis sales begin in March 2020 following a bill signed in June 2019. Sales surged to a record $21 million in July 2023, and the state is estimated to reach $300 million in sales by 2024, reflecting substantial growth in its cannabis industry.
Insider Monkey Score: 13.6
Average Monthly Revenue: 21.2m
At 13th, New Mexico initiated recreational cannabis sales on April 1, 2022, reporting over $5.2 million in the first weekend and reaching almost $39.5 million in the first month. In its initial 12 months, the state's adult-use market generated $300 million in annual sales.
Insider Monkey Score: 12.6
Average Monthly Revenue: 55.2m
Ranked at 15th on our list of Best States to Start a Cannabis Business is Maryland, which is poised for significant market growth, with an anticipated increase in total revenue from $275 million to $2.1 billion between 2023 and 2027. Notable retailers like Trulieve, Green Thumb Industries, Zen Leaf, gLeaf, Ethos Cannabis, and Health for Life are contributing to this growth, with promising initial sales data.
Insider Monkey Score: 10.8
Average Monthly Revenue: 9.1m
New York residents are allowed to possess and use up to 3 ounces of cannabis and 24 grams of concentrated cannabis for recreational purposes. Despite the slow start, with only $16.5 million in sales from 20 adult-use businesses in July 2023, over 200 adult-use licenses were issued. Outside the city, legal avenues for obtaining recreational cannabis have emerged, particularly in western New York, where businesses on Native American tribal reservations enjoy a head start due to tribal sovereignty.
Insider Monkey Score: 10.0
Average Monthly Revenue: 103.3m
Although Washington just missed out on being the first state to legalize recreational cannabis, full legalization has been in place since 2012. With a stable, well-regulated environment and high social acceptance, Washington boasts one of the country's best cannabis markets. While there is still room for growth for small businesses, competition is intense, requiring a solid business and risk management plan for success.
Insider Monkey Score: 9.8
Average Monthly Revenue: 56.2m
New Jersey, holding the 12th position, started retail cannabis sales in April 2022, with over $555 million in licensed retail market sales in 2022, reflecting a thriving market despite having the most expensive cannabis in the country.
Insider Monkey Score: 9.6
Average Monthly Revenue: 74.8m
Oregon, home to one of the oldest cannabis markets, offers lower barriers to entry with lower startup costs and licensing fees. The state's solid social acceptance and lower cannabis costs and taxes make it an attractive option for dispensaries. However, the competitive nature of the market requires fledgling business owners to be prepared for intense competition, with cannabis tourism being a significant draw.
Insider Monkey Score: 8.6
Average Monthly Revenue: 113.9m
As the pioneer state to legalize recreational marijuana, Colorado embraces a remarkably cannabis-friendly environment. The established nature of its market affords a level of predictability and stability not commonly found in younger markets. Cannabis enjoys widespread social acceptance, mitigating the stigma for new business owners. With a diverse array of brands and products, Colorado provides ample choices for dispensaries to curate their offerings. While the market is competitive, as is typical in the cannabis industry, the demand has remained consistently strong for nearly a decade. Despite the apparent saturation, Colorado remains open to innovative brands seeking a foothold.
Insider Monkey Score: 7.0
Average Monthly Revenue: 69.9m
Known as the home of Sin City, Nevada has been embracing legal cannabis since 2017, attracting visitors from around the globe. The decisions permitting consumption lounges have further bolstered the cannabis tourism sector. Furthermore, Nevada stands out for its lenient marketing laws, even allowing billboards. Although startup costs are high, competition is fierce, there is substantial room for growth and success in this dynamic market.
Insider Monkey Score: 6.6
Average Monthly Revenue: 109.0m
6TH on our list of 15 Best States to Start a Cannabis Business is Missouri. In November 2022, Missouri voters approved Amendment 3 to legalize adult-use cannabis, resulting in a booming cannabis market with monthly sales consistently reaching around $120 million from March 2023 to August 2023. Despite the strong demand causing price increases and product shortages, Missouri surpassed $1 billion in sales in early May 2023, presenting challenges for existing retailers.
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Disclosure: None. 15 Best States to Start a Cannabis Business is originally published on Insider Monkey.
