A deep dive into the Illinois cannabis market

Introduction

This industry report examines the Illinois cannabis market, which was approved for medical use in 2013 and legalized for adult use in 2019. With a population of 12.7 million, Illinois is the 11th state to legalize recreational cannabis and one of the largest markets in the country. This report analyzes detailed data on thousands of products in the Illinois market to determine how it compares to other states. Key areas of focus include sales growth, product category popularity, pricing, basket analysis, and demographics.

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Key Takeaways

• With only 118, Illinois has very few brands and high market consolidation with 68% of sales coming from the market's top 10 brands.
• Illinois is issuing 55 new retailer licenses to expand access to its domestic market. This spring the state only had approximately 120 licensed retailers which is very low compared to other US states.
• Pre-Rolls which has been one of the fastest-growing categories in cannabis is the most underrepresented category in this market, over four percentage points off the national average. The category represents an area of opportunity in Illinois as Pre-Rolls in the state have seen sales increase 5.6% in the last year.
• In Illinois, 27% of total sales come from vertically integrated products. This is the third highest of any currently tracked state behind only Colorado (28%) and Massachusetts (44%).
• Prices in Illinois are among the highest in the country. The average item price in Illinois is currently 89% higher than the rest of the US market.
• Consumers over the age of 41 typically account for 36.4% of sales, however, in Illinois they capture 42.1% of total sales.

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Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business intelligence software. Headset’s data is very reliable, as it comes digitally direct from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. Thus, there is a slight margin of error to consider. In this report, we examine sales from US Headset Insights markets. This includes AZ, CA, CO, IL, MA, MD, MI, NV, OR, and WA.

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Sales Growth

Through the first six months of 2023, Illinois has captured over 950M in total cannabis sales. This makes the Land of Lincoln the third largest cannabis market in the US trailing only California and Michigan. The state is the 6th largest in the country, and with lots of consumers come lots of opportunities.

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In the last year, Illinois has grown 2.1% which may seem small, but in a time when a lot of markets see flat or shrinking sales growth, growth is something to celebrate. Their 2.1% growth rate makes them one of only five of Headset’s eleven US-tracked markets to see year-over-year positive sales growth behind MI, MA, and FL.

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While some growth is better than no growth, Illinois seems to be flattening out after enjoying a few years of rapid growth. Typically we see double or even triple-digit year-over-year growth when a market opens up. This sales growth is mostly a result of the market catching up with preexisting demand. However, after a few years, the market converges with demand and flattens out.

Illinois has followed this playbook with sales increasing 101% in the first year of legalization before falling to 13% the following year and most recently 2% between the first half of this year compared to the last. Sales in Illinois will also likely be negatively influenced by the recent legalization in Missouri, a border state. Headset has done analysis in the past showing that border towns see a lot of cannabis sales to out-of-state customers. That being said, state regulators are adding 55 new retail licenses to expand access to cannabis to their domestic market.

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Category Market Share

The category performance that we see throughout the country is largely reflected in Illinois. However, there are a few interesting data points to call out. Pre-Rolls which has been one of the fastest-growing categories in cannabis is the most underrepresented category in this market, over four percentage points off the national average. The category represents an area of opportunity in Illinois as Pre-Rolls in the state have seen sales increase 5.6% in the last year. Flower, the most popular category, has grown 0.7% in the last year. Flower is slightly overrepresented in IL as the industry generally is shifting some of its popularity from Flower to newer categories such as Beverages, Edibles, Pre-Rolls, and Vapor Pens. Additionally, Concentrates saw the biggest loss among significant categories, down over 15% in the last year to 7% of total sales in IL.

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Brand Growth

In the last four years, Illinois has had steady brand growth. The state has averaged a year-over-year increase in brand count of 28.1% since 2020. However, the rate at which new logos are popping up on shelves is slowing. Between 2020 and 2021, brand count grew by 32.4% while 2023 compared to the previous year saw an increase of 11.3%.

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While the number of brands in the market is steadily climbing, Illinois has among the fewest brands in any US market. With only 118, Illinois is dead last, 52.6% less than second-to-last Arizona, which is also a heavily vertically integrated market. Michigan has a similar population size and is the second largest cannabis market ahead of third place Illinois. For comparison, Michigan has approximately 800 unique brands present in its market, nearly seven times higher than Illinois.

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With so few brands it’s no surprise that sales are highly concentrated within a few logos in Illinois. Illinois has a whopping 68% of sales coming from the market’s top 10 brands.

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There is a very strong correlation between vertical integration and a market’s level of brand consolidation. Vertical integration, which is when a retailer is selling their own in-house brand is very prominent in the state of Illinois. In Illinois, 27% of total sales come from vertically integrated products. This is the third highest of any currently tracked state behind only Massachusetts and Colorado.

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Top Products

Here, we look at the top Illinois products by category as of July 2023. For the latest information about the top brands by category, check out Illinois’ Best Sellers, updated frequently.

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Pricing

As of June 2023, Illinois has some of the highest cannabis prices in the country. Illinois’ average item price is 46% higher at $33.82 than the second highest Massachusetts and has a 36% higher price per gram ahead of Nevada. The high vertical integration coupled with the small brand selection likely contributes to a situation where prices are allowed to stay relatively high. Compare that to Washington State which has well over a thousand distinct brands versus 118 in Illinois. Additionally, Washington has some of the lowest prices in the country with an average item price that is 61% less than in Illinois. A strong contrast between mature and emerging markets.  Poor access is another factor likely contributing to expensive cannabis. This spring Illinois only had 118 operating retailers compared to several hundred in states with equal or smaller consumer bases. This number is comparable to the number of retailers in Maryland’s medical cannabis program prior to their July 1st adult-use launch.

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Examining the average item price (AIP) and equivalized quantity (EQ) price in Illinois versus the rest of the US we can see that prices are falling across the board. The AIP in Illinois is currently 89% higher than the rest of the US market and EQ Price is 97% higher. In the last year, EQ price has dropped 26.8% compared to 17.3% nationally. AIP is much more stubborn, with the rate of compression being slower than the rest of the US market. Moving to value-driven formats (more THC per dollar) maybe be the cause of the rapidly falling EQ prices.

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Demographics

This graph compares the proportion of total market sales in Illinois by demographic group to the proportion of sales attributed to the demographic group nationally — the index below the graph compares these values. If the index for a demographic group is greater than 100, then that group spends relatively more in Illinois than they do in the rest of the US. If the index is lower than 100, then that group spends relatively less in Illinois than they do in the rest of the country.

While Millennials make up 45% of total sales, there is a higher Baby Boomer and Gen X representation in the Illinois market. Consumers over the age of 41 typically account for 36.4% of sales, however, in Illinois they capture 42.1% of total sales. There is also a slight skew towards women compared to the national market.

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Conclusion

This report provides a detailed analysis of the Illinois cannabis market, examining sales growth, product categories, pricing, demographics, and more. While the market has experienced some growth, it seems to be flattening out after a few years of rapid expansion. Additionally, the market is highly consolidated, with a small number of brands capturing the majority of sales. Prices in Illinois are among the highest in the country, likely due to a combination of factors including vertical integration and limited access. Despite these challenges, the Illinois market remains one of the largest in the US and presents numerous opportunities for businesses.

For additional analysis of the Illinois market, Headset Insights provides real-time SKU-level data, including sales by strain, package size, and consumer demographic. To explore the latest trends in Illinois and other legal cannabis markets, reach out to the Headset team here.