Licensed California Cannabis Sales Down 11% in Q1

Legal cannabis sales in California experienced an 11% sales drop during the
first quarter of this year, compared to last year, the largest such decline
in the history of legal cannabis sales in the state, SFGate reports. Sales
during the first quarter totaled $1.088 billion.

Tamma Adamek, a spokesperson for the California Department of Tax and Fee
Administration, told SFGate that comparing quarter-by-quarter totals is
like comparing “apples to oranges” because tax figures are always being
updated as more shops file their tax reports and that officials “know that
gap will shrink.”

According to a state Department of Cannabis Control analysis published this
year, legal cannabis sales comprise just 38% of the overall cannabis market
in California in 2024. The report noted challenges faced by cannabis
companies, including a 57% decline, adjusted for inflation, in wholesale
cannabis prices as of Q4 2024 compared to average prices in Q4 2020; a 46%
decline in indoor-cultivated cannabis prices; a 74% drop in
outdoor-cultivated cannabis prices down; and a 60% reduction in
mixed-light-cultivated cannabis prices during the same period. The report
notes a “continued” decrease in retail prices through the first half of
2024.

Despite the price decreases industry-wide and the fact that the majority of
cannabis sales in the state are still occurring outside of the regulated
market, the state excise tax will increase from 15% to 19% on July 1, which
could further contract the market and push more consumers into the
unlicensed market. In a March update, the California Legislative Analyst’s
Office suggested the “tax hike will reduce the size of the licensed
cannabis market” and “will offset only a small share of the revenue raised
by the tax hike.”

A bill to block the tax increase has passed the state House but still needs
approval from the state Senate and would need to be signed into law by Gov.
Gavin Newsom (D).