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California’s Cannabis Sales Declined In 2022, The First Time Since Legalization

The state generated $5.3 billion in legal sales last year, an 8.2% drop from 2021 and the first since the adult-use market launched in 2018. Here’s what that means for New York and other states.

Will Yakowicz

Forbes Staff

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Annual legal cannabis sales in California decreased for the first time since the nation’s biggest pot market launched recreational sales nearly five years ago. In 2022, legal sales reached $5.3 billion, according to figures released by the California Department of Tax and Fee Administration, down 8.2% from $5.77 billion in 2021.

Despite the drop, California still represents roughly 20% of the $26 billion industry. Many in the cannabis sector see the state’s high taxes and a limited number of dispensaries as the main culprits for the decrease, viewing the legal market as broken and dysfunctional. At a small farm near Garberville in Humboldt County, the heart of California’s Emerald Triangle, Johnny Casali is preparing a greenhouse full of mother plants for the upcoming season. Casali, the founder of craft cannabis brand Huckleberry Hill Farms, has long believed the legal framework is driving many longtime growers out of business.

“Most of us farmers have been trying to tell the state [regulators] that the marketplace is imploding,” says Casali. “The drop in retail sales means the customer is tired of paying the exorbitant taxes and are now buying it from a friend of a friend or the guy on the corner.”

Despite selling all of Huckleberry Hill’s product in 2022, Casali posted a $50,000 loss for the year. The main factor behind his rolling paper-thin margins is that the price per pound of weed has plummeted. The wholesale price in California is currently around $665 a pound, which is down 26% year over year, according to Cantor Fitzgerald. Since 2017, the year before legal recreational sales began in the state, and through last summer, the wholesale price of cannabis in California is down over 50%, according to New Leaf Data Services, an institutional-grade wholesale price tracker.

All of this means that California—which only has about 1,000 legal dispensaries for its 40 million residents—grows far more cannabis than can be legally consumed within its borders. The cannabis surplus has led to a price war in the legal industry and intense competition from the illicit market.