Data Talk: Three Trends LeafLink is Tracking for Croptober 2023

Insights • October 31, 2023

Fall is not just about the changing colors of leaves and the chill air; it marks one of the most exciting times of the year for cannabis – the annual “Croptober” harvest season. Exiting the summer, cultivators begin harvesting outdoor grown flower across the US and Canada, then cure and process millions of plants to supply billions of dollars of branded products to the market.

Fall is not just about the changing colors of leaves and the chill air; it marks one of the most exciting times of the year for cannabis – the annual “Croptober” harvest season. Exiting the summer, cultivators begin harvesting outdoor grown flower across the US and Canada, then cure and process millions of plants to supply billions of dollars of branded products to the market.

At LeafLink, we spend a lot of time listening to our customers and following data flows across the industry. These are the three industry trends consistently across our markets and customers: national sales have returned to all-time highs, cultivation capacity is starting to rightsize with reported harvests coming in smaller than last year, and operators are ramping up preparations for the holiday season.

1. National retail sales hit all-time highs in September at ~$32bn annual run rate.
US retail cannabis sales reached a record $2.66bn in September ($31.9bn annualized retail run rate), the highest monthly total ever. Improvements in the month were driven by strong sustained sales growth from a handful of markets across the country.

• Newly launched adult-use sales states.The launch of legal sales this year in Missouri and Maryland have contributed more than $1.5 billion in total US retail sales growth, about half of all industry growth in 2023. Missouri’s market ramped up from under $40 million/month as a medical market to >$120 million/month as a legal state starting in February. Maryland’s market ramped from $40 million/month as a medical market to >$90 million/month as a legal state starting in July.

• New legal market roll outs. New Jersey and New York, both states with significant population centers, are beginning to accelerate legal sales with the opening of new stores, enabling greater accessibility to all. In the past two months New Jersey has opened ~30 stores, with 500+ locations expected to open in the next year. New York’s licensing roll out is continuing to progress with >1,000 licenses to be issued across the supply chain before year-end.
  
• Growth from new stores in large markets. Michigan and Florida, the second and third largest markets in the country, continue to grow sales this fall with strong expansions in new store approvals, the primary driver of higher state retail sales totals.
  

We expect 2023 retail sales to total ~$31bn, 10-15% growth from last year.

2. The industry supply & demand balance is starting to rightsize with smaller harvests in 2023.
The main driver of margin compression in the industry the last twelve months is oversupplied conditions making it difficult for upstream cultivators to be profitable. Based on surveys conducted with our customers, 70-80% of cultivators are unprofitable this year. Cultivation capacity reached all time highs last harvest season. Interestingly, this year’s harvest will be smaller than expected given market struggles, profitability challenges for operators, and limited capital availability – the S&D balance is starting to rightsize. Some examples include:

Oregon. Reported harvested wet weight in August/September implies ~4.1 million lbs for the season, down ~30% from last year’s total of 5.9 million lbs and down ~45% from 2021’s total of 7.5 million lbs.

• California.Total licensed cultivation capacity was ~62 million sq ft in August, down ~20% from the last harvest’s total of ~78 million licensed sq ft. There are thousands of upstream licenses not being renewed in the state.
  
• Michigan. Total active plants in the ground in September was 2.6 million, down from 2.8 million plants in September 2022 on ~200 more stores (~750 total in market today).
  
• New Mexico. Total active plants per store in September was ~600 per retail license, down from ~1k per retail license last year; so despite uncapped license growth the supply and demand balance is actually improving.

Most mature markets will still be oversupplied but with a much more rightsized balance compared to last year.

3. Successful operators have already started preparing for the holiday season.
Leading retailers and brands across the country and gearing up for the busy end of year period. During the end of year holidays, we at LeafLink see average sales volume spikes of about 10-15%. For Green Wednesday, which is the day before Thanksgiving, the surge is even higher at >25%. To make the most of the holiday season opportunity, brands and retailers need to prepare ahead of time. Running out of popular products can put a damper on customers’ holiday spirits, impact vendor/client relationships, and affect your bottom line. It’s also vital to focus on inventory you’re confident you can move. Smart inventory and marketing strategies put you ahead of the curve in the lead up to the holiday season. In preparation for the holiday rush, LeafLink created the free 2023 LeafLink Holiday Sales Guide which can be downloaded here.

Curating products, selecting inventory, and creating experiences local customers want is a major prerequisite to success during one of the busiest shopping seasons. Knowing what’s popular today and what’s catching on as the next big thing can help you plan and revise your product lineup to suit local market demand.

About Ben Burstein
Ben Burstein is LeafLink’s Strategist, helping manage industry research, mergers & acquisitions, and strategic partnerships for the company. He’s been featured as an industry expert both on-air (ABC, FOX, NPR) and through digital channels (Forbes, Cannabis Business Times, MJBizDaily). Prior to LeafLink, he worked at Citi Equity Research and Tuatara Capital. Ben is a graduate of the Wharton School of the University of Pennsylvania.