California’s legal marijuana production rose by 11.8% in 2024, reaching 1.4 million pounds, according to a newly released report by the state’s Department of Cannabis Control (DCC).
Despite this growth, the illegal cannabis trade remains dominant, with unlicensed production estimated at 11.4 million pounds. Although its exact destinations remain unclear, a significant portion of this illicit marijuana finds its way outside California.
The report highlights a significant gap between legal production and total marijuana consumption within California, which stands at 3.8 million pounds annually. Illegal sales within the state nearly double those of licensed retailers, indicating that while the legal industry has room for growth, major policy changes are necessary to shift consumer preferences away from unauthorized sellers.
DCC director Nicole Elliott acknowledged the progress made in stabilizing California’s legal market. She emphasized that expanding access, lowering costs, and tightening enforcement efforts are key strategies to create a more sustainable and regulated industry.
The report, prepared by ERA Economics, a California-based research firm specializing in water and agriculture economics, sheds light on ongoing challenges in the state’s cannabis sector. Despite California maintaining its position as the largest legal marijuana market in the U.S., signs of industry struggles persist.
The number of surrendered or inactive business permits has surpassed active licenses, raising concerns about the sector’s long-term viability.
Encouraging trends include a nearly 5% rise in wholesale cannabis prices, a 7.5% increase in the industry’s total value, and the continued growth of legal production. However, the overall market still faces difficulties, with persistently low prices and challenging business conditions. The situation may worsen if a proposed increase in California’s excise tax—potentially rising from 15% to 19%—takes effect by mid-year.
Although the legal cannabis market’s total production value rebounded to $1 billion last year, it remains below the $1.2 billion peak seen in 2021. By contrast, the estimated wholesale value of illegal operations is significantly higher, reaching $7.9 billion. Meanwhile, the number of state-issued retail licenses rose, yet many businesses have exited local markets. For instance, licensed retailers in Alameda County dropped from 157 in 2022 to 100 in 2024.
Statewide cannabis sales declined by 4% in 2023, with several counties seeing notable drops. Los Angeles County’s sales fell from $1.5 billion to $1.3 billion, while Alameda County dropped from $296.95 million to $263.11 million. Orange County, however, remained stable at approximately $279 million.
The report suggests that supply restrictions, including Governor Gavin Newsom’s ban on hemp products, could help stabilize prices for the remaining licensed operators.
The general marijuana industry, including enterprises like Aurora Cannabis Inc. (NASDAQ: ACB) (TSX: ACB), hopes that California and other states with legal marijuana programs find effective ways to deal with the black market so that licensed firms can have a chance to thrive and consumers can be protected from the risks associated with unregulated products.
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