AZ recreational marijuana sales plateau while medical continues its slide to irrelevance

Arizona’s recreational marijuana marketplace has remained robust, although slightly down through July, while the medical marijuana market continued its slide into irrelevance, according to the most recent reports by the Arizona Department of Revenue and Arizona Department of Health Services.

The ADOR report includes total sales through July 2022, while the ADHS report covers August, offering a possible glimpse of what is to come for a struggling sector of the cannabis economy.

For the month of July, recreational cannabis sales continued a three-month decline from a record high of $81.2 million in April. May sales slid to $76.7 million, while June weighed in at $74.4 million and dipped to $73.8 million in July. Arizona voters approved adult-use recreational marijuana in 2020, and sales began in early 2021.

The medical marijuana market, which began in 2012, continued its precipitous decline through July, and August will likely be worse. July sales were nearly $4 million less than June, $38.9 million to $35.2 million respectively.

September 2021 was the last time medical marijuana sales were larger than recreational. That month, ADOR reported $63.4 million in medical sales to $58.5 million in recreational sales — but every month’s reporting since then has shown the two programs going opposite directions.

In October 2021, medical sales were about $65. 1 million — the last month-over-month increase — and recreational sales were $65.6 million, a difference of around $500,000. Since then, the programs have charted dramatically different trajectories, with the recreational program now outperforming medical sales by an astounding $38.6 million.

Since recreational sales began in January 2021, cannabis suppliers in the state have sold nearly $3.3 billion in product: medical accounts for about $1.1 billion and recreational is slightly less than $1.2 billion.

ADHS presents a not-so-rosy outlook on the medical program, which lost an additional 13,476 certified patients from July to August. The number of active cardholders in the state dropped precipitously from 191,682 in June to 144,678 in August.

Along with the drop in revenues is a commensurate decline in the amount of medical marijuana sold. Since January, when patients purchased 9,273 pounds via nearly 600,000 transactions, the amount of medical cannabis sold dropped by more than one-third to 5,271 pounds and slightly more than 300,000 transactions in August. 

Total tax revenues for medical and recreational sales for July were slightly more than $20 million, with about $11.6 million from the 16% marijuana excise tax imposed on recreational sales. That is down from the May total of $24.3 million, and the June total of nearly $22 million.

Taxes are divided and disbursed by the voter-approved Proposition 207.

One-third of taxes collected are dedicated to community college and provisional community college districts; 31% to public safety — police, fire departments, fire districts, first responders — 25% to the Arizona Highway User Revenue Fund, and 10% to the justice reinvestment fund, dedicated to providing public health services, counseling, job training and other social services for communities that have been adversely affected and disproportionately impacted by marijuana arrests and criminalization.