In March 2020, when governments worldwide – even in so-called “liberal democracies” – put their citizens under house arrest, people started consuming many more substances, including cannabis.
This boom was artificial, though. Fuelled by stimulus checks, unemployment insurance, and general fear and hopelessness about the future – the great cannabis boom of 2020 is now over.
Sales are softening, retail businesses are closing their doors, financing is drying up, and consumer demand has returned to pre-covid levels.
In other words, the COVID cannabis bubble has popped.
What the Data Says
The data comes from Headset, which uses real-time sales reporting by cannabis retailers using their point of sale systems.
What they found was staggering. U.S. cannabis markets in Colorado, Nevada, Oregon, and Washington are declining in year-over-year sales growth.
From March 2020 to 2021, Colorado’s sales grew by 25.8%. In the first few months of 2020, Colorado saw a 63% increase.
But now, average monthly year-over-year sales in Colorado have declined by 11.3%.
The same is true in Oregon. Despite a 36.6% year-over-year growth between March 2020 and March 2021, Oregon has been experiencing recent declines of up to 20%.
Yet, despite these declines, the long-term trends are showing positive growth. The data shows that there was indeed a COVID cannabis bubble. One that has now popped.
The COVID Cannabis Boom Bubble
The above graph looks at monthly sales in Colorado, Nevada, Oregon and Washington before and after the first year and a half of COVID.
As we can see, cannabis sales exploded in the first six months of the pandemic. Colorado’s sales grew by 63% compared to 43% in 2019 over the same period.
Sales remained high through the rest of 2020. There was a surge of growth in Q2 2020, followed by continuous 20% to 40% year-over-year increases into early 2021.
But then sales started to decline.
COVID Cannabis Bubble Begins to Deflate
In the second half of 2021, especially in the United States, COVID was retreating into the background. Governments lifted restrictions, stimulus cheques dried up, and the sense that it was the end of the world faded from memory. Life began to return to some semblance of “normal.”
And cannabis sales began to drop. This trend continued into early 2022. During Q2 2021, year-over-year growth began to plummet as sales stabilized.
By July 2021, Colorado, Oregon and Washington experienced negative year-over-year growth, with Nevada and California joining soon after.
You can see from the graphs how dramatic this increase was during 2020 and what it means now that sales are returning to pre-pandemic levels.
It may look as if sales growth since June 2021 sits at -10%. But the long-term trends are hopeful.
What if the COVID Cannabis Bubble Had Never Happened
Somewhere in an alternate universe, there’s no First World War and no Federal Reserve. So the remaining 20th century is one of prosperity, innovation, and liberty instead of constant wars, genocide, and centralizing states.
In this alternate universe, no sane citizen of a republic or constitutional monarchy would permit a government-ordered shut down of the private sector. Especially over a flu virus with a 99% survival rate.
In this alternate reality, what does the cannabis industry look like?
Headset’s data can remove the COVID cannabis bubble from the equation. The graph below shows monthly sales totals across U.S. cannabis markets, except for the sales data pulled between February 2020 and February 2022.
With no COVID cannabis bubble interrupting the market, you can see a clear upward trend from early 2020 to 2022.
So while cannabis sales may appear to be collapsing, what’s happening is a market correction. The COVID cannabis bubble has popped, and now we can experience real market growth. (Or as real as it can be in a fiat debt-based economy).
Long-term Cannabis Trends
Comparing June 2019 to June 2022, we can see sales have grown in every market. Colorado had the slowest growth at 4%, but this makes sense given their arbitrage advantage with cannabis is now over. With more states legalizing, fewer people travel to Colorado for legal weed.
Despite a 20% decline in monthly sales, Oregon has been up 25% over the last three years.
The sales decline in recent months isn’t indicative of a long-term trend. In fact, the opposite is true. The COVID cannabis bubble was unique, and sales should stabilize now that the market is correcting to a pre-pandemic normal.
However, the market is still in correction mode. The bad news is that we haven’t seen the end of layoffs and closing retail chains.
The good news is that long-term trends are still demonstrating growth across all cannabis markets.