As Kentucky set to launch adult use marijuana sales in early February, expectations were high. But in the first weekend, Kentucky marijuana proved to be more formidable than anyone had predicted.

Over $12 million in sales over the course of three days translate to more than $102 million in retail revenue during the shortened month of February.

Across the river in Illinois, the impact of Kentucky legalization was seen quickly.

In Kentucky, sales tax on adult use marijuana is a flat 6%, with municipalities able to add up to 3% in local sales tax, while Illinois’ sliding scale can see items taxed at up to 35%. 

The tax difference, combined with the sheer number of dispensaries makes the Kentucky market appealing to Illinois shoppers. More importantly, the ease of access and low cost final ticket prices have ensured that Kentucky residents who may have crossed the river to make purchases previously are keeping their dollars in state.

Despite a three-year headstart on its recreational marijuana program, Illinois is home to roughly half as many dispensaries with 113 active dispensaries in the state. Kentucky currently has over 190 dispensaries approved to sell recreational marijuana. 

In the first month of adult use sales in Kentucky, Illinois saw out-of-state revenues dip nearly six million dollars, falling from $36,117,116.55 in January to $30,764,036.89 in February, a 15% slide, with stores closer to Kentucky dropping 30% according to Cantor Fitzgerald. Perhaps more concerning for Illinois operators, while January sales numbers grew over $1 million over the prior year, February sales represent a $4 million decrease from 2022. 

Nearly one-third of Illinois’ total marijuana sales are attributed to out-of-state sales. The roughly $6 million decline in out-of-state sales is echoed in the total sales decrease with dispensary sales declining from $127,938,019.85 in January to $120,488,569.91 in February.

While the success of Kentucky’s operators may be a step back for Illinois marijuana retailers near the border, Kentucky businesses are poised to reap the benefits of neighboring states who have failed to legalize marijuana.

Of the eight states bordering Kentucky, only Arkansas, Illinois, and Oklahoma have any significant level of access to medical marijuana. Additionally, in the last four months, both Arkansas and Oklahoma have declined to legalize adult use, meaning out-of-state customers and those without medical marijuana cards will continue to flock to Kentucky.

 

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