What You Need to Know About the Pennsylvania Cannabis Market
At LeafLink, we are watching the Pennsylvania cannabis market closely for many reasons. According to a recent poll from Pew Research Center, 88% of participants think that cannabis should be legal for medical or recreational use. Over half of these participants also recognized that legal cannabis is good for the economy and provides tangible benefits. Pennsylvania’s medical cannabis market is generating ~$120 million in monthly sales, putting the state on pace to do over $1.4 billion in annual retail sales. A legal cannabis program protects the safety and health of consumers, invests in important state programs, and creates thousands of good-paying jobs. Clearly, PA has much to gain from legalization of cannabis.
Market structure
Pennsylvania is one of the most robust medical markets in the country with over 1 million registered patients and 100 million items sold since 2020. Last year alone, the wholesale cannabis market in Pennsylvania reached approximately $300M.
Medical cannabis was legalized in April 2016, with first licensed sales starting in early 2018. In 2021 the market was expanded to the 25 grower / processor licensees, who are still operating today, and retail expanded to 178 dispensaries. Sales grew meaningfully from 2020 – 2022 as new stores and operators entered the market.
As of the last couple years, sales have been roughly flat due to plateauing patient counts and limited new stores. Packaged flower is the most popular form factor in the market, comprising ~45% of total sales, followed by vapes at ~35% of total retail units.
As the fifth most populous state in the country, recreational sales, once approved, are likely to surpass $2 billion annually relatively quickly. This is thanks to a robust medical program that has already built out much of the upstream infrastructure needed for a successful adult-use roll out.
Pricing
Over the past few years PA’s grower / processors have expanded cultivation capacity on a relatively static retail base, causing pricing to decline. At retail, the price per gram to consumers has fallen ~40% since the beginning of 2021 from ~$15 per gram to under $9, driven by oversupplied market conditions and verticalization growth insulating margins. Price declines have been even steeper in the wholesale market, with the average wholesale flower price declining ~70% from ~$5,000/lb in early 2021 to ~$1,600/lb today. Based on LeafLink data in the 2024 Wholesale Cannabis Pricing Guide, this follows the national trend which saw an -8.1% decline from 2022 to 2023, or a drop from $1082.99/lb to $995.46/lb. Despite declining per unit pricing, basket sizes remain among the highest in the country at >$93 per purchase. This is driven by strong market adoption among heavy consumers and robust vertical product promos increasing patient spending.
Top players
Pennsylvania is primarily serviced by brands owned by Cresco Labs, Ayr Wellness, Curaleaf, Verano, PharmaceuticalRX, and TerrAscend, each with attached stores. The vertical operators own the largest canopies in the state, each with over 100k sq ft. The remainder of the market is split across smaller grower / processors with limited capacity and distribution. About half of retailer shelf space in the state is vertical (owned brands) with the remainder comprising brands from 3rd party sellers.
Legalization status
Pennsylvania legislators continue to work towards a legalization measure. The next several weeks will prove critical as negotiations begin for a plan that can pass before the June 30 budget deadline.
Setting the stage for success
There are many lessons to be learned from mature markets on how to roll out a legal cannabis program the right way so it’s successful. The illicit market, like every other state, is the dominant supplier of cannabis in PA and across the U.S., with some reports estimating that it accounts for 75% of all cannabis sales. Unlike regulated markets, the illicit market cares little about testing, labeling, and age-gating, all of which would be overseen by the creation of an adult-use program. PA needs to think about how to approach taxing legal cannabis in a balanced way as to not drive customers to the illicit market.
Additionally, lessons can be taken about how to support an emerging industry like this by removing barriers for businesses. Whether that is programs to help find retail space or access to loans, the state needs to play a part in helping businesses. PA can also help make this easier and beneficial for all with ample licenses to support such a large market.
LeafLink services
LeafLink offers the full suite of products in Pennsylvania, with a strong footprint across the marketplace, payments, insights / analytics, and logistics. Additionally, LeafLink partners with Vet Force to provide distribution services in the state, directly integrated with the LeafLink marketplace experience.