Hawaii adult-use cannabis legalization is $1 billion opportunity

Adult-use marijuana legalization in Hawaii could usher in a billion-dollar industry, according to a recent government-commissioned report.

Commissioned by the Hawaii Department of Health, the report evaluated the current medical cannabis framework and forecasted the economic impact of adult-use legalization.

“Should Hawaii choose to legalize adult-use cannabis, by year 5 the total cannabis market across all sources is projected to reach $59-95 million per month,” the report said.

Hawaii medical cannabis is about $60 million annually

According to the report, the state’s MMJ market currently generates about $5.3 million in monthly sales, capturing up to 87% of patient spending. That’s slightly below an MJBiz Factbook projection.

“In other words, the regulated medical market accounts for the vast majority of patient spending and functions as the primary channel through which patients obtain cannabis product,” the report reads in part.

Hawaii’s roughly 30,000 medical cannabis patients account for 25% of all cannabis consumers in the state.

The state has eight licensed vertically integrated medical cannabis operators.

Tourism as a driver of Hawaii’s cannabis market

Tourism will be a major contributor to the state’s cannabis industry, the report predicted.

• Tourists are expected to add at least $11.5 million per month to Hawaii’s cannabis demand under adult-use legalization.
• Domestic tourists are the primary market, spending an average of $125 per trip on cannabis, compared to $12.46 for international tourists.
• Most survey respondents (57.4% in Japan, 64.5% in Canada) said that legalization would not impact their travel plans.

If Hawaii legalizes adult-use cannabis, it will require a substantial expansion of its cultivation capacity:

• Adult-use, medical and tourism will require 117,500 plants to be grown annually.
• The state will need up to 67 indoor facilities and as many as 376 outdoor grows, depending on canopy regulations.
• Managing production, including scaling canopy sizes, issuing licenses and preventing oversupply or illicit market diversion.

About 65 retail marijuana stores statewide will be needed to satisfy demand, the report added.

Balancing tax policy and licensing to foster a thriving cannabis market

The report also identifies a 15% tax rate as optimal for maximizing revenue while maintaining consumer participation. Higher rates could push consumers toward the illicit market, the report said.

Legacy farmers and small-business applicants have a low willingness to pay for cannabis licenses, according to the report. Regulators should implement affordable or waived fees to encourage diverse participation.

To support small businesses, jurisdictions could adopt flexible licensing structures, scalable opportunities and transfer allowances to promote longevity and provide viable exit strategies.

When will Hawaii legalize adult-use marijuana?

Adult-use cannabis legalization has been stalled in Hawaii thanks to opposition in the state legislature.

That’s despite the state Senate passing a legalization bill in the past.

Advocates are hopeful that Hawaii lawmakers may be the next state to pass a legalization bill given Democratic control.