California’s marijuana sales on decline as consumers buy less expensive products

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California marijuana consumers aren’t buying less product at state-licensed stores, but they do appear to be buying cheaper ones.

That’s one takeaway from state data released this week that showed a significant decrease in quarterly sales revenue even as track-and-trace data showed more unique units sold.

According to the California Department of Tax and Fee Administration, legal marijuana stores reported $1.08 billion in sales from Jan. 1 through the end of March.

That’s the lowest total for the first quarter of the calendar year since 2020 and a significant year-over-year decrease from the $1.2 billion reported over the same period in 2024.

However, according to Metrc’s track-and-trace data provided to MJBizDaily by the state Department of Cannabis Control (DCC), retailers sold 57.4 million “units” in the first quarter of 2025.

That’s a 0.92% increase from the 56.9 million distinct items sold in 2024.

Some observers interpreted the data as a sign of yet more trouble ahead for the legal marijuana industry, an outlook further tainted by a looming increase in the excise tax scheduled for July 1.

But for others, there’s more nuance: the role marijuana plays in the broader retail economy, which has suffered across the board amid inflation and worries over trade wars and unstable investments.

Marijuana sales not immune to consumer confidence

For one, the data has significant limitations; it’s impossible to track profit margins.

And without a more granular dive into state track-and-trace data – which California law protects from public disclosure – it’s impossible to say with certainty that consumers are ditching $300 ounces en masse for $5  pre-rolls.

Overall, the data supports the idea that cannabis – long popularly considered recession-proof, as well as a vital medicine that some medical marijuana patients will seek out regardless of macroeconomics – is subject to the same forces that affect traditional retail sectors.

And as the closely watched University of Michigan consumer confidence index has shown for more than a year now, inflation and trade wars are making Americans nervous – and nervous people tend to buy less or, when they do make purchases, they buy cheaper goods.

“That’s exactly it,” said Wesley Hein, the head of global brand expansion at Los Angeles-based Mammoth Distribution and president of the Cannabis Distributors Association.

“Anytime there’s the appearance of economic uncertainty, people are going to say, ‘Let’s cut back.’

“But we also know cannabis is one of these things that people value. They’re not going to say, ‘I’m not going to get high,’ but they will downgrade.

“They might get a little bit less.”

Cannabis’ long COVID-19 problem

But if roughly the same number of consumers buy cheaper products, that’s bad news for the industry’s bottom line – no matter how anyone might try to spin it.

“I think ‘units sold are stable’ is a bit of a copout, and (it) sidesteps the question of the health and trajectory of the market,” said Hirsh Jain, the principal of Los Angeles-based consultancy Ananda Strategy and lecturer in cannabis policy at the University of Nevada, Las Vegas.

Also, many observers believe the marijuana industry is still suffering the lingering effects of a false dawn that appeared during the COVID-19 pandemic, when sales spiked to still-record highs.

Stores declared essential businesses during the pandemic enjoyed a temporary sales boost, fueled in part by consumers with extra cash thanks to COVID-19 stimulus payments.

That appears to have led to unrealistic sales projections and inflated company valuations, all of which is now experiencing a sobering reality check.

But as the Metrc figures released by the DCC show, consumers are still buying marijuana in California, which remains the biggest cannabis market in the U.S. with more than $4.6 billion in annual sales.

California consumers’ confidence recovered slightly in May, after President Donald Trump backed away from imposing punitive tariffs that many critics said would tank American businesses.

That’s bolstering hopes that cannabis sales in the second quarter – when stores experience a rush from the 4/20 celebration – will see a boost.

Marijuana excise tax increase looms

The central concern for California cannabis businesses is high taxes, a problem that’s likely going to get worse very soon.

The industry is nervously anticipating July 1, when California’s 15% state excise tax is scheduled to increase to 19%.

Some observers fear the tax increase, piled on top of state and local levies that already tally close to 30%, will encourage even more marijuana consumers to seek illicit-market options.

A bill that would freeze the state excise tax increase – written by Assembly Member Matt Haney, a San Francisco Democrat – passed the lower house of the California Legislature on Monday.

It now heads to the state Senate.

However, extraordinary maneuvering might be required to convince lawmakers to fold a tax freeze into a budget trailer bill that could take effect before July 1 or soon after.

The impending tax hike will “reduce the size of the licensed cannabis market,” according to the state Legislative Analyst’s Office.

That’s leading Hein to compare California’s cannabis industry to the first dot-com bubble.

“Usage is rising, but monetization is failing,” he said.

“Just as the internet’s growth masked the insolvency of many early tech firms, rising unit sales in today’s cannabis industry are masking the harsher reality in our industry – operators are moving more product, but increasingly at a loss.”

However, Hein added, some of today’s tech titans survived similar wreckage in their industry.

“If you look past the carnage,” he said, “the same thing is happening in today’s cannabis industry, where operators with compelling products and disciplined execution are quietly gaining ground.”

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.

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California’s marijuana sales on decline as consumers buy less expensive products