Article Author: Sara Gullickson, CEO and Founder
This November, will mark the two-year anniversary since Arizona voters passed Prop 207 to legalize marijuana. Since the passage of adult-use cannabis, the state has emerged as a top market for industry investors due to its rapid implementation of adult-use sales (a three-month timeline versus four years in other markets), and increased M&A activity including a $2.1B acquisition and $211M acquisition by an MSO.
For those interested in the Arizona market, national consulting firm The Cannabis Business Advisors (CB Advisors) has provided an overview of the program for stakeholders.
State Overview
Arizona Population: 7.15M (U.S. Census, 2020)
Percentage change in population 2010-2020: up 11.9%
Percentage of population Age 18+: 77.5%
Marijuana Program Overview:
Medical Cannabis: Legalized in 2010
Recreational Cannabis: Legalized in 2020
Arizona License Cap: 169 licenses for the entire state
Adult-use sales Began: January 22, 2021
Annual Sales in 2021: $1.9B in combined sales (medical and adult-use)
With an Arizona Recreational Marijuana Business License a marijuana establishment will be allowed to operate all of the following:
- A single retail location at which the licensee may sell marijuana and marijuana products to consumers, cultivate marijuana, and manufacture marijuana products.
- A single off-site cultivation location at which the licensee may cultivate marijuana, process marijuana, and manufacture marijuana products, but from which marijuana and marijuana products may not be transferred or sold to consumers.
- A single off-site location at which the licensee may manufacture marijuana products, and package and store marijuana and marijuana products, but from which marijuana and marijuana products may not be transferred or sold to consumers.
Social Equity Ownership Program Overview:
Recently Issued Marijuana Dispensary Licenses
- Social Equity (Recreational-only): 26 issued
- 62% of the social equity licenses went to MSOs
- 19% of licenses need further review
- 19% of remaining licenses are believed to be non-MSO
Estimated Market Value of New Dispensary Licenses: $10M+
Timeline to Open: 18 months from April 8, 2022
Market Opportunities & Challenges
Arizona is a robust marijuana market that saw more demand than other states in its first year of legalization. The Arizona Department of Revenue projected $1.2B in cannabis sales for 2021, and sales actually reached $1.9B. As a limited market, Arizona licenses are scarce and therefore valuable since the state has capped its program to 169 vertically integrated marijuana business permits. The 26 social equity licenses that were issued in 2022, may be one of the last opportunities for eligible individuals to join the Arizona cannabis market as license-holders.
Zoning for marijuana establishments is one of the biggest challenges. Local municipalities have their own individual zoning laws and cities like Phoenix and Tucson have existing rules that only account for dispensaries that sell medical marijuana, while the newest social equity licenses allow recreational sales only. Since most municipalities will need to change their zoning codes to accommodate the new licenses, social equity winners have no room for error if they plan on opening within the 18-month timeline required by law.
Entry Points into the Arizona Marijuana Market
Despite being a limited license market, there are a variety of investment opportunities in the Arizona marijuana industry including joint venture partnerships, franchising opportunities, real estate, and capital investment. CB Advisors is offering strategic business guidance for Arizona license holders and investors throughout all stages of growth. If you are interested in learning more, contact [email protected].