A high-level overview of the Arizona cannabis market

Introduction

Although Arizona started adult-use cannabis sales in January 2021, medical sales have been legal in this market since 2012. This report provides an overview of the Arizona cannabis market, exploring various sales trends including month over month growth, cannabis category trends, and some pricing insights. All of the data in this report and more can be accessed in our market intelligence tool, Headset Insights. To explore market reads for Arizona and other legal cannabis markets further, sign up for a demo of Headset Insights.

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Executive summary

Between January and September 2021, Arizona saw $1.6B in total cannabis sales (including both medical and adult-use sales). When we compare Arizona to other medical cannabis markets that have recently legalized adult-use sales, such as Michigan and Illinois, we find that Arizona shows strong year over year growth, growing 110% YoY in September 2021. Concentrates hold a significant market share in Arizona compared to other US markets at 10%. While Flower is still the dominant category, market share to this category has been decreasing, and market share to Vapor Pens and Pre-Rolls have increased. When we look at pricing trends, we notice a sharp decrease in average item pricing (AIP) of Flower from January to September (-21%), indicating an over supply of inventory in the category or potentially an adjustment to pricing to match consumer expectation. This runs in contrast to a 7% increase in AIP for Vapor Pen items over the last nine months.

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Methodology

All data for this report was sourced directly from Headset Insights from January to September 2021. Data for Arizona, Michigan, Illinois, and Oregon include both medical and recreational sales. Data for the Pennsylvania and Maryland markets includes medical sales only.

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Total cannabis sales in US markets

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First, let's look at total cannabis sales by state from January through September 2021. Out of the US markets Headset tracks (six of which include medical sales), Arizona was ranked second in total sales. Arizona made a total of $1.6B in cannabis sales (medical and adult-use) between January and September 2021 and had $175M more sales than Colorado.

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YoY growth in AZ, IL, & MI cannabis sales

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Next, let's compare three states (Arizona, Illinois, and Michigan), all three of which are recent entrants into adult-use cannabis sales. Each of these three states had strong medical markets prior to starting recreational sales in January 2021 (AZ), January 2020 (IL), and December 2019 (MI). Arizona has shown strong YoY growth, growing 110% YoY in September to $179M in total cannabis sales (medical and recreational). Over the past five months, the YoY sales growth rates in Michigan and Illinois have started to slow down, but Arizona continues to show the largest YoY growth in each period.

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Cannabis category market share MI, IL, & AZ

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Looking at category sales shares in Arizona, Illinois, and Michigan, we see Flower is the largest category, capturing 44.9% of sales in Arizona in September. In terms of the largest three categories (Flower, Vapor Pens, and Pre-Roll), Arizona sits squarely in between the category shares seen in Illinois and Michigan. A category with unique sales share in Arizona is Concentrates, which produced 10% of September sales in the state compared to just 6.8% and 7.1% in Illinois and Michigan (+40-47% variance). Concentrates products are often associated with medical applications due to their potency. Given that Arizona's cannabis market is new to adult-use sales, there is still a significant portion of medical sales in the state. This shift away from medical sales and towards recreational sales makes Arizona a very interesting market to watch as adult-use category sales continue to mature and evolve.

Cannabis category sales share in Arizona

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Looking at monthly category sales shares within Arizona, we can see that Flower has been decreasing in market share between January (52.6%) and September (44.9%). While Flower market share has been decreasing, Vapor Pens and Pre-Rolls have increased. Vapor Pens started 2021 with a market share of 21% which grew to 25% by September and Pre-Rolls started at 5% market share and has since risen to 9%.

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Cannabis pricing trends in Arizona

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In this graph, we look at the average item price (AIP) in Arizona for each inhalable category during September 2021. Vapor Pens and Flower have the highest AIP among inhalable categories, commanding $31.81 and $28.78 per item. There is a sharp decrease in AIP in Flower from January to September (-21%), indicating an over supply of inventory in the category or potentially an adjustment to pricing to match consumer expectation. This runs in contrast to the 7% increase in AIP for Vapor Pen items over the last nine months.

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Price of Vapor Pens in AZ, IL, & MI

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Now, we look at the average item price (AIP) and total units sold across Arizona, Illinois, and Michigan for Vapor Pens during September 2021. Illinois has the highest AIP of Vapor Pens at $48.09, while Michigan and Illinois both have similar pricing just under $32. As expected, higher prices in Illinois have led to a lower amount of Vapor Pens sold, while Arizona sold the most (1.4M) during September 2021.

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Conclusion

Arizona is a unique market for many reasons, and an important one to keep an eye on as the adult-use industry matures. Headset Insights provides a detailed look at the Arizona cannabis market so that you can monitor cannabis sales, category trends, pricing and more in order to stay ahead of the opportunities in the market. To learn how you can keep track of Arizona and other legal states and provinces, sign up for a demo.

Key takeaways

• From January to September 2021, Arizona made a total of $1.6B in cannabis sales (medical and adult-use combined).
• Sales in Arizona continue to show strong YoY growth, growing 110% YoY in September.
• While Flower is the largest category in Arizona, market share has decreased from 52.6% in January to 44.9% in September. Market share to Vapor Pens has increased from 21% to 25% from January to September, and Pre-Rolls has increased from 5% to 9% in the same period.
• Concentrates have more market share in Arizona at 10% than in Illinois (6.8%) and Michigan (7.1%). This could be due to the strong medical market still remaining in Arizona, since Concentrates are known to have medical applications.
• There was a sharp decrease in average item pricing (AIP) of Flower from January to September (-21%), indicating an over supply of inventory in the category or potentially an adjustment to pricing to match consumer expectation. This runs in contrast to the 7% increase in AIP for Vapor Pen items over the last nine months.

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