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January 11, 2018

Initial Findings on California Adult-Use Sales…and “The Seven Effects”

11 JAN Initial Findings on California Adult-Use Sales…and “The Seven Effects” | BDS Analytics

California was already the world’s largest cannabis market when it launched legal adult-use sales on January 1, 2018; and, the early indications are that expansion of sales in the state beyond medical-only will serve to lengthen that lead.

BDS Analytics visited a variety of stores during the first week of adult-use sales, gaining both a preliminary view of how much legalization will boost retail volumes, and introducing us to seven ideas as to how and why.

Here’s a snapshot of preliminary findings:

  • Monday, January 1, Day One, was off the charts. Since Mondays are not typically peak volume days, sales were double those of Mondays in the prior month at many stores. Crowds were huge and in a festive mood, as adults—with and without medical cards—lined up in the early morning hours at new adult-use sales locations in markets from San Diego to Santa Cruz to Oakland.
  • As the week went on, sales growth rates were still very strong although slower at stores that had been open to all adults since New Year’s Day. New permits were being issued by the state throughout the week, notably so that some San Francisco dispensaries could be open for adult-sales by Saturday. Lines quickly formed there too.
  • By week’s end, we were confident our forecast that overall legal sales in California would grow 22% to $3.7 billion in 2018 would turn out to be, if anything, too conservative. (See the Mid-Year Update to The State of Legal Marijuana Markets, here)

That’s exciting enough for industry executives and investors. The picture is even brighter when colored with specific observations by our analysts in the field, who have distilled their findings down into Seven Effects that will drive growth as more stores get their adult-use sales permits.

For example. the first people in the line of about 100 at KindPeoples in Santa Cruz at 6:55 am on Monday morning – Toby and Shara E. (and the budtender who served them) – demonstrated directly five of the effects that explain why the business is going to boom with the advent of adult-use legislation.

The couple was in town for the holidays from Pensacola, FL. (The “tourism effect”)

Toby is originally from Santa Cruz, and as a long-time cannabis consumer, was “incredibly excited to be here this morning.” (The “illicit-market conversion effect”)

Shara herself has “maybe smoked it one time” and is a self-described “extremely conservative, police-academy alumna” originally from the Lancaster, PA area. But she had read that CBD-heavy edibles “are good for anxiety, so I’m eager to try them.” (The “health-and-wellness new consumer effect”)

Inside KindPeoples’, Christine C. spent most of 30 minutes working with them, answering questions and offering advice. For example, she suggested that Shara try locally produced DaddyBones Balm for her chronically sore hip. (The “well-educated bud-tender effect”)

Shara bought some, though she noted that she wouldn’t dare take it back to Florida when they flew home in six days; instead, she would be leaving it behind with her 80-year-old in-laws “who have plenty of aches and pains of their own.” (The “gift-giving effect”)

Saturday in the early morning line at San Francisco’s Harvest on Geary, we spoke to a doctor who had never had a medical card, but whose reasons for consuming weed were fueled by stories from her friends over the years. Those reasons were reinforced in the findings of our study, Public Attitudes and Actions Toward Legal Cannabis (learn more). “As a nightcap; to relieve stress; to be happy,” she proclaimed. (again, the “health-and-wellness-consumer effect”)

Fear of action by her professional licensing organization had kept her from getting a medical card, but now she didn’t need one to walk openly into a store and make her own choices about cannabis products. (The “de-stigmatization effect”)

She expressed some chagrin at not knowing how to talk to patients about the endocannabinoid system, but also an eagerness to learn; resulting – ironically – from the end of the medical-only era. (The “liberation-of-doctors effect”) 

These seven “effects” observed in just the first week of adult-use legality are all good reasons to expect that even in California, where cannabis has been “nearly legal” for several decades, adult-use legalization will prompt the same kind of legal-industry revenue surge that BDS Analytics’ GreenEdge tracking saw in Colorado, Washington, and Oregon during their adult-use launches.

California adult-use sales are off-and-running, and we’ll be right there as stores open and the market continues to grow.

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