Az’s Recreational Marijuana Sales Plummet to Annual Low in November as Market Struggles

In November, Arizona’s adult-use marijuana sales dipped to $73.1 million, marking the lowest monthly total since September and signaling a continuing contraction in the market.

Medical marijuana sales also fell significantly, reaching $16.5 million. This is the lowest recorded revenue since legal recreational sales began, reflecting a trend where patients are increasingly opting for the recreational market over medical alternatives.

The Arizona Department of Revenue’s latest report illustrates this downturn. Recreational dispensaries amassed $906 million in sales through November, while medical dispensaries contributed $224 million. This trajectory suggests the market may conclude the year below last year’s total of $1.42 billion and the previous year’s $1.43 billion.

Particularly troubling is the sharp decline in the medical marijuana sector, which has experienced a staggering 37.3% drop in sales from this year and 57% from 2022. Adult-use sales have also seen a decrease of 14.5% compared to the previous year, when recreational sales peaked at $1.06 billion.

Tax collection data echoes these trends. Arizona gathered $245.3 million in marijuana taxes through November, which includes $151.2 million in excise taxes, $75.7 million from recreational sales, and $18.5 million from medical sources. Under Proposition 207, approved by voters in 2020, a 16% excise tax is imposed on recreational sales, supplemented by the standard sales tax. Medical patients are subject to approximately 6% state sales tax, along with an additional local tax of around 2% on all marijuana sales.

The allocation of excise tax revenue is noteworthy: one-third supports community colleges; 31% funds public safety initiatives, including police and fire departments; 25% contributes to the Arizona Highway User Revenue Fund; and 10% backs the justice reinvestment fund, which aims to provide social services to communities adversely impacted by marijuana-related criminalization.

Moreover, the revenue department’s report indicated notable upward revisions to previously reported sales figures. Notably, October’s adult-use sales were adjusted upward by $7.2 million to $82.5 million, while September’s sales increased by $7.9 million to $75.2 million. Such revisions are typical as late tax returns are processed.

Arizona’s market contraction aligns with trends observed in other mature cannabis markets. For instance, Colorado, which legalized recreational use in 2012, experienced its first significant year-over-year decline in 2022. Similarly, Oregon faced market adjustments, characterized by price compression and increased competition, resulting in decreased revenue despite stable unit sales.

Analysts suggest that this downturn may stem from several factors frequently seen in matured cannabis markets: intensified competition leading to price compression, market saturation following the initial excitement of legalization, and decreased cannabis tourism as neighboring states establish their own legal sales.