Cannabis sales in the U.S. are projected to grow at an average of 7% annually over the next five years to reach $37 billion in 2027, according to investment bank TD Cowen, after growing 11% to $29 billion in 2023.

While established markets like California and Colorado have struggled lately, newly legal adult-use states like New York, Connecticut, Maryland, and Missouri have boosted growth opportunities for the industry.“The recent Gallup poll revealing a record 70% of Americans support cannabis legalization shows more than ever that Americans are choosing cannabis for well-being,” said Ben Kovler, chairman and CEO at multi-state operator Green Thumb Industries. “We’re excited to build on the momentum from the recent adult-use sales launch in Maryland as we prepare for transitions in Ohio, Minnesota, and hopefully other states that may have adult-use on the ballot in 2024.”

TD Cowen sees cannabis growth among the 18-25 age group as laying the foundation for gains in the years ahead, noting that past-month cannabis category retention among that group has risen markedly to 68%. They add that about two-thirds of cannabis users report cutting back on alcohol.

“As the newest generation of drinkers reevaluate their relationship with alcohol, the popularity of cannabis beverages are an enticing alternative,” observes Paul Weaver, head of cannabis at Boston Beer Co., which is active in the Canadian market with its TeaPot brand.

Cowen adds that legal cannabis sales in Colorado, which legalized 11 years ago, are now about 11% the size of alcohol in the state, up from 4% five years ago. Further, the group sees the cannabis category adding 18 million past-month consumers nationwide in the next half-decade, with alcohol losing 2 million past-month consumers.

Further boosting the outlook for cannabis in the U.S. is the prospect of more large medical-only states like Florida and Pennsylvania transitioning to adult-use. A similar transition in Missouri over the past year has seen that state rapidly grow into a billion-dollar market.—Daniel Marsteller