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Report: California Legal Cannabis Sales To Exceed $3 Bln In 2019

The legal cannabis market in California is poised for huge growth after seeing a $500 million fall in legal sales in 2018 following an initially rocky launch of the state's adult-cannabis market, according to a new report.

The report, titled "California: Lessons From the World's Largest Cannabis Market", released by Arcview Market Research and BDS Analytics, projects California's legal cannabis market to grow 23 percent in 2019 to $3.1 billion.

Legal cannabis sales in the state are projected to further reach $7.2 billion in 2024, representing a 19 percent compound annual growth rate or CAGR over the next five years.

Nevertheless, California was the first state to record a year-over-year decline in legal cannabis sales amid the transition from a medical-only access to an adult-use regulatory regime, according to the report. Sales fell from $3 billion in 2017 to $2.5 billion in 2018.

The decline in sales came after local bans on commercial cannabis activity caused the number of retailers to shrink sharply during the launch of the state's adult-use program in January 2018.

In addition, stringent testing regulations in July 2018 prompted many suppliers to wind up as product shortages cut consumer spending dramatically.

"Despite the burdens imposed on the legal market by regulators, with a $2.7 billion gross domestic product, California has the world's largest legal cannabis market and will continue to until federal legalization makes it merely a part of the larger U.S. market," said Tom Adams, Managing Director and Principal Analyst for BDS Analytics' Industry Intelligence group and Editor-in-Chief for Arcview Market Research.

The report noted that California Governor Jerry Brown projected the state would generate $643 million from cannabis taxes in 2018. However, actual cannabis-related tax revenue fell far short of projections and totaled just over $345 million.

The report also said that California's illicit market will account for 53 percent of all sales in 2024, thanks to the tax and regulatory load on the legal market. During the same time frame, the illicit markets in other states with more supportive tax regimes are expected to fall to 30 percent or less of total sales.

The report also found that the average age of a cannabis consumer in California is 44 years.

However, the rate of consumption is higher among younger generations. 39 percent of Gen Z and millennials, and 41 percent of Gen X reported consumption in the past six months, compared to just 20 percent of Baby Boomers and older generations, according to the report.

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