The once-booming cannabis industry in Arizona is showing signs of slowing down. After a record-breaking year in 2022, the state saw its cannabis retail market decline for the second year in a row. Sales in 2024 totaled just over $1.25 billion, marking an 11.4% drop compared to the previous year, according to new data from the Arizona Department of Revenue analyzed by MJBizDaily.
This marks the second consecutive year of falling sales in Arizona’s marijuana market, which had previously been one of the fastest-growing in the country. In 2023, cannabis sales had already dipped slightly from their record highs, and 2024 has proven to be another difficult year for retailers.
Factors Behind the Decline
Arizona’s cannabis sales have not been immune to the broader economic trends seen in other states where recreational marijuana is legal. In fact, the drop in sales follows a pattern seen across the country, where states that have introduced recreational cannabis markets have often seen a reduction in medical marijuana use. For Arizona, the steepest decline came from the state’s medical marijuana segment.
Medical marijuana sales in Arizona totaled just $243.9 million in 2024, a staggering 31.8% decrease compared to 2023 and a nearly 53% decline from 2022. This dramatic drop is a key driver of the overall revenue loss.
What exactly is behind this steep fall in medical marijuana sales? It appears that the introduction of adult-use cannabis has shifted consumer behavior. As MJBizDaily reported earlier this year, the total number of medical marijuana patients in states with legal recreational cannabis often drops by roughly one-third within two years of the market’s launch. Arizona, it seems, is no exception to this trend.
Adult-Use Sales Still Make Up the Majority
Despite the dip in medical marijuana sales, adult-use cannabis continues to make up the bulk of Arizona’s market. Adult-use sales in 2024 were reported at $1.01 billion, down just 4.5% from the previous year. While the adult-use segment has experienced a more modest decline, it has still been affected by broader market trends. Consumers may be spending less per visit, or they may be choosing lower-priced products as the novelty of recreational marijuana wears off.
Nonetheless, adult-use sales are still holding strong and remain the primary driver of Arizona’s cannabis market. As more consumers turn to recreational marijuana, dispensaries are adapting with new product offerings, marketing campaigns, and a focus on building relationships with customers. Whether this segment can maintain its strength remains to be seen, as competition grows and consumer preferences evolve.
National Trends Reflect Arizona’s Struggles
Arizona’s drop in cannabis sales is hardly an isolated incident. Similar patterns of decline are unfolding across the U.S. in states that have legalized recreational marijuana. Markets such as California, Colorado, and Oregon have all faced similar slowdowns in recent years. In many cases, the rapid initial growth in cannabis sales eventually levels off as the novelty of legalization fades, and competition increases.
In fact, an MJBizDaily special report released in February, in collaboration with the Marijuana Policy Project, examined the broader trend of decreasing medical marijuana patient numbers across legal states. After recreational cannabis is legalized, it’s common to see a significant reduction in the number of people who rely on medical marijuana, as more patients switch to the adult-use market.
This shift is partly due to price differences, as adult-use cannabis is often taxed at a higher rate than medical marijuana. Additionally, adult-use dispensaries may offer more variety and less stringent access requirements, making them an attractive alternative for former medical marijuana patients.
What’s Next for Arizona’s Cannabis Market?
So, where does Arizona go from here? With two consecutive years of revenue declines, the state’s cannabis market could face ongoing challenges. While adult-use cannabis still generates the lion’s share of sales, the drastic drop in medical marijuana sales is a cause for concern. For dispensaries, the next steps may involve pivoting their business models, adjusting product lines, and finding new ways to engage consumers.
Some operators may look to expand into new markets, especially with neighboring states like New Mexico and Nevada continuing to ramp up their own cannabis programs. Meanwhile, others may focus on diversifying their product offerings to appeal to a wider range of consumers, from those seeking wellness-focused products to recreational users looking for the latest trends.
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Total cannabis sales in Arizona dropped by 11.4% in 2024, totaling $1.25 billion.
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Medical marijuana sales took a significant hit, down 31.8% from 2023.
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Adult-use sales saw a smaller dip, declining by 4.5% year-over-year.
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National trends show that similar declines are happening across states that have legalized recreational cannabis.
While the cannabis market in Arizona faces challenges, it remains to be seen whether these declines are temporary or the beginning of a longer-term trend. Dispensaries will need to adapt to shifting consumer preferences and market conditions to stay afloat in an increasingly competitive industry.