We have always thought that one of the best ways to normalize and increase access to cannabis is to give it to your neighbors. In this particular case, it’s neighboring states.
This is a great example of that theory. For years now, adults from Missouri have been traveling to Illinois for just that reason. But now the travel is in the other direction, the shoe is literally on the proverbial other foot. Illinois has lost its first-mover advantage and now must compete with Missouri’s lower tax rates and larger product offerings. Based on this most recent report Illinois is going to need to make some changes.
The Prairie State of Illinois recently experienced its lowest percentage of out-of-state sales since the launch of its adult-use cannabis market in 2020. February’s 25.5% of overall sales from customers traveling across state lines marks a 5% decrease from previous years and is estimated to cost Illinois roughly $75 million in annual sales.
The decrease has been mostly attributed to the legalization of adult-use cannabis in neighboring Missouri, which launched just three months prior and has already seen impressive success with its own retailers. As an early legalization mover in the Midwest, Illinois dispensaries have enjoyed a heavy presence of cannabis tourism for its available products but are now facing declining numbers as more states continue to join the industry.
Overview of Illinois’ decreasing out-of-state cannabis sales
Of the $120.5 million in adult-use cannabis sales recorded by Illinois’ licensed retailers in February 2023, only 25.5% of overall sales were attributed to out-of-state residents, according to the state’s Department of Financial and Professional Regulation (IDFPR). This is a 5% decrease from 2021 and 2022 levels when out-of-state customers accounted for 31% and 31.6%, respectively.
Missouri’s Adult-Use Cannabis Market Launching Three Months Prior and its Success
In February 2023, just three short months after Missouri voters approved lowest percentage of out-of-state sales on the statewide ballot, the Show-Me State launched its adult-use cannabis market. With 6.2 million people in total and more than 350 miles of real estate along the Mississippi River that it shares with Illinois, cannabis retailers in Missouri saw incredible success in the first month of sales. According to data from the state’s Department of Health and Senior Services (DHSS), over $102 million worth of cannabis was sold including $71 million to adult-use customers.
The overwhelming success in these early stages has cut into Illinois’ out-of-state sales dropping them to their lowest levels since 2020 when Illinois first launched its own commercial retail market. This decrease in out-of-state traffic is estimated to cost the state roughly $75 million in annual sales, highlighting the fading appeal for traveling cannabis customers.
As more states legalize and launch their own adult-use cannabis markets, Illinois will have to take a hard look at ways they can remain competitive. With Missouri just over the border, it will be key for them to stay ahead of the curve or risk a further decline in sales figures moving into 2023 and beyond.
Illinois’ Lowest Percentage of Out-of-State Sales Since Early 2020
Illinois has seen a steady decrease in out-of-state cannabis sales since early 2020 when it first launched its commercial retail market. According to data from Illinois’ Department of Financial and Professional Regulation (IDFPR), February 2023 saw the lowest percentage of out-of-state sales since the beginning, with 25.5% of overall cannabis sales attributed to customers from outside the state.
The decreasing figures can be partly attributed to neighboring Missouri’s adult-use cannabis market launching just three months prior, as retailers in that state reported over $102 million worth of sales.
The Border Town Effect Reversing Course in Illinois
The border town effect, which has seen Illinois cannabis retailers in close proximity to the Missouri border benefit significantly from out-of-state customers traveling across the state line to take advantage of legal cannabis purchases, appears to now be reversing course. February 2023 saw sales figures drop across all counties along the border with out-of-state customer traffic accounting for only 15.6% of total sales—down 4.2 percentage points from 2019 and 2020 levels.
The staggering decrease signifies a shift away from Illinois as a destination for adult-use cannabis consumers and could spell further trouble for retailers in towns near or on the state line who rely on travelers for much of their business. Without adequate measures taken to remain competitive, these retailers
Decrease in Out-of-State Traffic Equivalent to Roughly $75 Million in Annual Sales for Illinois
The decrease in out-of-state traffic is equivalent to roughly $75 million in annual sales for Illinois. According to the Illinois Economic Policy Institute, the state’s cannabis industry had already produced nearly 5,000 new jobs by 2020 and was expected to exceed 10,000 positions by 2025 if it continues on its current trajectory. The recent dip in out-of-state customers, however, could jeopardize these projections and have a negative impact on job creation within the state.
Though other factors such as supply chain issues and pandemic-related risks undoubtedly contribute to the lower figures seen over the last few months, it is clear that Missouri’s adult-use cannabis market has caused a disruption in what was previously a lucrative source of revenue.
Fading Appeal To Traveling Cannabis Consumers
The fading appeal for traveling cannabis customers signals a shift away from Illinois as a destination for adult-use cannabis consumers. With Missouri’s legal market offering greater variety and lower prices, many consumers are making the decision to purchase their products closer to home. This has had an especially notable effect in border towns, which have seen out-of-state customer traffic drop since 2019 and 2020 levels.
To stay ahead of the competition and recoup some of those lost sales figures, it is essential that Illinois take steps to remain competitive with neighboring states’ marijuana markets going forward. Efforts like establishing lower taxes on recreational marijuana sales or introducing new product lines could help attract more travelers back into the state and provide.
Estimated Total Cannabis Sales From February 2023
In February 2023, Illinois cannabis sales totaled an estimated $93.2 million—a notable drop compared to the previous year when total sales were at $106.6 million. The decrease marks the lowest monthly total since October 2020, and is a further indication of the impact Missouri’s adult-use market has had on neighboring states. It also represents a 4% decline in overall cannabis sales from 2021 and 2022 levels when out-of-state customers accounted for 31% and 31.6%, respectively.
The staggering figures show just how much of an effect Missouri’s launch into the legal marijuana space has had in a very short amount of time, as retailers there reported over $102 million worth of sales including taxes in their inaugural.
The launch of Missouri’s adult-use cannabis market appears to have had a significant impact on Illinois’ cannabis sales. In February 2023, total sales dropped to $93.2 million—the lowest monthly figure since October 2020. Out-of-state customers only accounted for 15.6% of overall sales, down 4.2 percentage points from 2019 and 2020 levels, representing an estimated loss of $75 million in annual revenue for the state. Though other factors such as supply chain issues and pandemic-related risks undoubtedly contribute to lower figures, it is clear that Missouri’s legal market has caused a disruption within the region and potentially jeopardized job growth projections within Illinois’ cannabis industry unless appropriate steps are taken to remain competitive with neighboring states.
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