The Arizona cannabis industry celebrates its fifth anniversary this month, marking half a decade since voters in 2020 overwhelmingly approved legalized retail sales of cannabis products here.
Since then, the state’s cannabis industry has been a “Wild West” of sorts, riding the business cycles of jackrabbit-quick growth, regulatory confusion and market volatility into today’s intense competition and consolidation. This has required industry players to focus on efficiency and product differentiation to appeal to an array of consumers.
While these are all hallmarks of a developing and maturing business, they don’t make it easier to navigate. Companies born in Arizona have grown and evolved, or have left or been bought out. Companies from other states are seeking opportunities here. Some companies are either entering into product alliances or eschewing the traditional consumption market for wellness products.
In the midst of all this, we asked some executives: What will the next generation of cannabis look like in Arizona?
“The Arizona cannabis industry is in a full-swing market correction,” says Carolyn Riggs, vice president for sales and marketing at Copperstate Farms, an Arizona-grown brand and largest greenhouse cultivator in the country with an array of products and nine dispensaries around the state. The company’s flagship dispensary in Tempe is the site of a new 20,000 square-foot, state-of-the-art manufacturing, distribution and commercial kitchen facility.
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Needs of the industry
Riggs says that while the industry right now is resizing “to match real demand instead of inflated projections,” future success will require “lean operations, controlled inventory, product segmentation and retail innovation.
“Leaders in this evolving space must be a relentless student – being agile, curious, and disciplined are vital to the state’s market sustainability,” she adds.
What would Riggs do to help get Arizona there? “Establish Wholesale standards to prevent race-to-the-bottom pricing,” she says. “Lean into retail procurement discipline with a focus on proven strain diversity, and consumer education.”
Jeff Freeman, co-founder of Mfused, which moved into Arizona after establishing itself as one of the largest cannabis companies in the Pacific Northwest, agrees but stresses Arizona’s cannabis industry already is transforming into a consumer-driven market.
“The future of Arizona cannabis will be built on three pillars: consolidation, innovation, and consumption,” he says. “The companies that can scale, introduce new formats and integrate into mainstream culture will be the ones shaping this market.”
Consumer focus already is shifting toward innovative technology, new creative products and small-batch craft, Freeman adds. “It used to be a one-size-fits-all market, now customers are rewarding risk-takers and innovators, where brands either evolve and double down, or get left behind.”
To Thomas Rimbach, a U.S. military veteran and the founder and CEO of gummy and syrup maker Baked Bros and who has been in the business for nearly 10 years, Arizona has become a blueprint for how to build lasting cannabis operations that can weather both regulatory and economic challenges.
The next decade, Rimbach says, “will be defined by efficiency, authenticity, and brand loyalty. As prices continue to compress and the market consolidates, only the companies with operational excellence and a clear identity will thrive.”
And while technology and automation will transform production, the real differentiator will be trust: “Brands that consumers know, love, and return to again and again,” he says.
The cannabis industry is working to meet customers where they are now, with an eye to where they will be. Today’s challenging economic climate and evolving consumer tastes require companies to focus on what consumers want and nimbly anticipate the next trend. And they must do that as efficiently as possible.
Changing industry
Analyses already point out how consumers’ preferences are changing. For instance, the market is rising for concentrates and infused pre-rolled products, but plateauing for flower, the traditional cannabis product. This is requiring companies to pivot.
According to Headset, which analyzes cannabis markets across the country, Arizona-wide cannabis sales for July were $85.53 million, representing a slight increase in sales and unit growth month over month; however, on a year-over-year basis that translates into a 13.1 percent decline in sales, and a 3.6 percent drop in units sold.
Nevertheless, that is not out of step with what is going on in California and Colorado. And it’s reflective of all kinds of markets that are relatively young, yet maturing.
There of course are major hurdles to overcome to improve the market for cannabis and counter the stereotype of cannabis as unsafe and unregulated.
One of them is the need to close the “hemp loophole” in the most recent Farm Bill, which allows even children to buy intoxicating hemp products online with no testing, regulation or consumer protection. Baked Bros’ Rimbach says this is a must-do.
“Hemp should be legal everywhere, but the highly processed conversion of hemp into intoxicating cannabinoids should never be allowed,” he says. “The only place consumers should be able to purchase intoxicating cannabis products is through legal, regulated, licensed dispensaries.”
To protect consumers and the credibility of the industry, “all intoxicating products must be tested, regulated, and sold only through dispensaries that are held to the highest standards,” Rimbach says.
While 41 states, the District of Columbia and Puerto Rico allow cannabis use for medical purposes and 23 states have legalized cannabis for adult recreational use, each state market must operate on its own, under state regulation and oversight. This means no interstate sales, and no applicable federal standards, regulations or even income tax policies.
All eyes are on Washington, D.C., where there are hopes that the current administration could signal that tight restrictions are lifted. But it remains unclear when, or if, it will happen.
Those anticipated changes “will force Arizona operators to elevate standards to compete on a national stage,” Baked Bros’ Rimbach says. “The companies that build scalable, disciplined systems today will lead tomorrow.”
Can the evolving Arizona market accommodate both big players and smaller independents? Andrea Sandoval, vice president of sales for PURE Edibles, a cannabis infusion company whose products are available throughout the Valley, thinks so.
“If independent operators continue to support one another, I believe it will keep the Arizona market healthy and ensure strong retail experiences for consumers,” she says. “Independent stores tend to really listen to their customers and remain closely connected to their communities, which is vital for the industry’s growth.
“At the same time, corporate players have a role to play too,” Sandoval adds. “Like any thriving community, we need a balance – just as chain restaurants and mom-and-pop shops both bring value. A healthy mix of independents and larger operators is what will define a strong, sustainable future for cannabis in Arizona.”
Hope for the future
Leah Sigety, COO of Consensus Holdings, an Arizona-based company involved in cultivation, production and branded products with partner operations here and in Oregon, Missouri and New Mexico, says it is all about the product, and the industry must collectively remember “why we are here in the first place.
“Cannabis will be defined by the individuals that stand up for what is right; those that choose education and inclusion over profit,” she says. Sigety added she wants to “encourage the next generation and pave a path for my replacement, like folks have done for me. I would try to open up the truth of where the cannabis dollar is landing and the good people backing this plant and these organizations.”
To Jake Ritter, Arizona sales director for Aeriz, a nationally known aeroponic cannabis cultivator operating in Arizona and Illinois and whose operations use 30 percent less water than hydroponic growers and 95 percent less water than soil-based cultivation, the Arizona market of the future will be defined by “players that will be able to weather the storm on minimal profit overhead and can withstand the lack of A/R being paid by current Arizona retails,” he says.
And if there were anything he could do to help move the Arizona industry into the future? “Create a canopy cap on how many pounds a company can produce,” he says. “Create a limit on the amount of brands that can be established under one license.”
Marvina Thomas started FourTwenty Collections as a nurse with a single bar of soap and an interest in how cannabis-based products can help promote a healthy body and mind. She infused her skin care products to provide relief to clients and give back to those in need. Today, her Goddess Boutique in Glendale, offers her skin care and clothing lines, while her FourTwenty Collections Dispensary and consumption lounge in Las Cruces, N.M., features specialty items from her collection as well as “medibles,” pre-roll packs and skin care products.
“The Arizona industry will continue to grow and change,” Thomas says. “While we are experiencing a slight downturn today, as rescheduling and possible federal legalization take place in the future, the industry will continue to grow. More and more, the stigma is being replaced by an understanding of the medical and healthier aspects of the plant.”
Others echo the hope, and expectation, that removing legal restrictions that serve to set cannabis apart from other industries is necessary for the future.
“I think if we had the ability to market cannabis more like other regulated products, we could help normalize it and give consumers a clearer understanding of what cannabis does – and what it doesn’t do,” said PURE Edibles’ Sandoval. “Responsible marketing would allow us to better educate the public, reduce stigma, and build consumer confidence. It’s about meeting people where they are with honest information, so cannabis can be seen for what it is: a product that can enhance well-being, social experiences, and quality of life when used responsibly.”
Mfused’s Freeman agrees. “It’s time to demystify cannabis, increase access, and focus on different product types and new places to share the products,” he says.
“Arizona deserves the same level of connectivity between retailers, brands, and consumers that you see in adjacent industries like food and alcohol,” he adds. “Opening up new industry-related businesses could significantly boost the local economy and create jobs. I see entertainment venues, restaurants, and in-person tastings playing a huge role in the local industry, helping each person experience the product the way local talent intended – comfortably and without overwhelm.”
