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Whitney Wire – State Focus: Ohio legalization
This month, Ohio became the 24th state to legalize cannabis for adult-use purposes. This month, we thought we would take a look the potential of the Buckeye State cannabis market.
Current Ohio Data Overall, Ohio is already a strong market. As of the end of September there were 369,587 medical patients. Ohio ranks 3rd in the U.S. below only Florida and Pennsylvania in the number of registered medical patients. With a forecast of $520 million for 2023, and $360 million in sales through September, Ohio is in the middle of the pack in terms of legal market size (Rank = 16th).
What is the Impact of the Vote Revenues will take a while to ramp. Despite having an existing medical program, it will take Ohio 16 – 24 months to develop, deploy and implement their legal adult-use regulatory program. There are discussion about having early adult-use sales through existing medical shops. This has been successful in other states. Regardless, it will take a while to ramp. The ramp should result in sales between $1.25b - $1.5b by 2026. Ohio has a total market value of $3.5 billion, so there is room for upside both in the next 3 years and next 10 years
What Should Operators Do Now If you are an existing medial operator with hopes to transition into the adult-use program. BE CAREFUL. It is important to begin planning for ramp now. There are a lot of details, so start early and develop the relationships and supply chain ASAP. However, despite the ambitions about the lager market, it is critical to protect the integrity of the medical patients. Early sales often result in supply shortages will medical patients holding the bag. It is a common mistake that regulatory deployments work their way backwards instead of starting with the longest lead time items. Start with cultivation and testing as those are the gates at the beginning of the ramp. It is important though, not to flood the market too soon with supply. There is a balance. Balance canopy with the demand and give more access at the retail levels so that consumers participate early and often. As operators, it is critical to be disciplined. Control your costs and prepare for falling prices
What will be the Impact of This Vote While this may be good for Ohio, for those operators in Michigan beware. Michigan will see demand decline, especially near the borders with Ohio. They should prepare for lower sales and basket amounts
Summary This is a big development in the cannabis industry. Ohio is a huge market. But while there are upsides in Ohio to the adult-use legalization, there are going to be impacts elsewhere. It is important to anticipate change and prepare accordingly.
Beau Whitney is the founder and Chief Economist at Whitney Economics, a global leader in cannabis and hemp business consulting, data, and economic research. Whitney Economics is based in Portland, Oregon. Beau has provided policy recommendations at the state, national and international levels and is considered an authority on cannabis economics and the supply chain.
