Overview

Cannabis Public Policy Consulting (CPPC) conducted this study on behalf of the Virginia Cannabis Control Authority (CCA) to evaluate licensing and cultivation capacity needs for Virginia's developing adult-use cannabis market. The study responds to a statutory requirement directing the CCA to analyze whether limits should be placed on marijuana establishment licenses, evaluate potential adjustments to cultivation canopy limits, and report its findings to the General Assembly by November 1, 2026. The analysis was designed to provide the CCA with an empirical assessment of Virginia's projected regulated cannabis market and the retail and cultivation capacity necessary to support anticipated consumer demand to launch the market. The study evaluates alternative licensing scenarios, geographic distribution, market competition, and the potential implications of different licensing levels for consumer access, business conditions, public health and safety, and regulatory oversight. This analysis is intended to serve as an evidence-based planning framework to help the CCA establish a viable adult-use cannabis market aligned with its policy objectives, rather than predict how the market will behave once operational.

Methodology

This study integrates multiple data sources and analytical approaches to evaluate Virginia's current cannabis demand and projected adult-use market capacity. Analyses combined findings from CPPC's Virginia-specific Regulatory Determinants of Cannabis Outcomes Survey (VA-RDCOS), two years of Virginia's Behavioral Risk Factor Surveillance System (BRFSS), 12 months of medical cannabis sales and cultivation data, and comparative market and regulatory information from five states with operational adult-use markets. These data were used to estimate consumer expenditures and regulated market demand, evaluate the existing medical market's retail and production capacity, and model retail and cultivation license requirements under alternative market assumptions. Analytical methods included imputation, survey weighting, demand forecasting, economic modeling, market concentration analysis, geographic demand estimation, and comparative policy analysis. Because Virginia's commercial adult-use market has not yet launched, licensing estimates reflect projected market conditions rather than observed adult-use market performance.

Virginia Cannabis Demand Analysis

CPPC evaluated cannabis consumption and purchasing behaviors among Virginia residents, examining expenditures, product preferences, and participation across regulated medical, unregulated, and informal cannabis markets. The analysis also evaluated differences between registered medical patients and non-patient consumers, as well as the geographic distribution of projected regulated demand.

Key Findings:

• Virginia's past-month cannabis consuming population is estimated at approximately 872,216 adults aged 21 and older.

• Current cannabis purchasing patterns differ substantially by medical registration status. Registered medical patients report greater reliance on Virginia's medical dispensaries and home cultivation, while non-patient consumers obtain cannabis from a broader range of sources, including out-of-state licensed dispensaries, unlicensed sellers, and gifting arrangements.

• Flower represents the largest cannabis product category by both quantity and consumer expenditure. Vape products and edibles are also substantial components of consumer demand, although purchasing and sourcing patterns differ between medical patients and non-patient consumers.

Retail Licensing and Market Capacity

CPPC evaluated Virginia's projected retail infrastructure needs using observed medical cannabis dispensary sales as a baseline. Estimated regulated adult-use expenditures were compared with alternative assumptions regarding monthly sales per retail location to identify ranges of retail capacity that could accommodate estimated consumer demand. The analysis also considered Virginia's statutory maximum of 350 stand-alone retail licenses and the additional retail capacity available through microbusinesses and dual-use pharmaceutical processors.

Key Findings:

• Virginia's total cannabis market among cannabis consumers in Virginia twenty-one years and older is estimated to represent approximately $1.05 billion in annual consumer expenditures, with a projected range of $835.7 million to $1.27 billion across all acquisition sources based on current cannabis spending. These estimates provide the basis for evaluating the retail capacity needed to accommodate existing cannabis demand as consumers transition into the regulated adult-use market. Importantly, these estimates reflect demand among Virginia residents and do not account for additional expenditures from tourists and out-of-state consumers, which could further increase the Commonwealth's potential retail market.

• Using the average sales performance of Virginia's existing medical cannabis dispensaries as a benchmark, the analysis estimates that projected consumer demand could support approximately 107 to 163 retail access locations statewide. The upper end of this range (163 locations) may provide a reasonable reference point for initial retail capacity, particularly when considering a phased licensing approach. The contribution of microbusinesses and dual-use pharmaceutical processors to total retail capacity should also be considered when determining the number of retail licenses to issue over time.

• An HHI analysis of the medical market’s concentration of retail sales found relative and stable competition across the past year. As such, using this base for the adult-use modeling of retail license distribution, which assumes the operational efficiencies observed in Virginia’s medical cannabis market as a baseline, suggests that the modeled retail license base case would support competition at the facility level with low market concentration. However, the number of retail licenses alone does not necessarily reflect the degree of market competition, as multiple licenses may be held by the same owner.

• The analysis supports retaining Virginia's statutory maximum of 350 retail licenses. The maximum is generally consistent with the upper bound of the higher-capacity licensing scenario (326 locations) and preserves flexibility to accommodate future market growth, including potential demand from out-of-state consumers.

• A phased approach to retail licensing would allow the CCA to establish initial retail capacity while preserving opportunities for additional market entry as the adult-use market develops. This approach is consistent with Virginia's statutory framework, which contemplates multiple licensing rounds, and would allow subsequent license quantities to be informed by observed market conditions rather than relying exclusively on pre-market projections.

• Continued market monitoring will be essential to evaluating the sufficiency of initial licensing levels and determining whether additional licenses are warranted. Key indicators include regulated retail sales, license activation, geographic consumer access, market concentration, average sales per establishment, and the contribution of microbusinesses and dual-use pharmaceutical processors to total retail capacity.

Cultivation Licensing and Production Capacity

CPPC evaluated cultivation capacity needs by examining plant production and harvest activity within Virginia's existing medical cannabis market and extrapolating observed production requirements to the projected adult-use consumer population. These estimates were evaluated against the maximum authorized canopy associated with Virginia's five cultivation license tiers and alternative assumptions regarding cultivation efficiency and production capacity.

Key Findings:

• The number and distribution of cultivation licenses necessary to meet projected demand depend substantially on the allocation of capacity across license types. Different combinations of smaller and larger cultivation facilities, including microbusinesses, can provide comparable aggregate capacity while creating different conditions for competition, small-business participation, production efficiency, and regulatory oversight.

• The analysis uses maximum potential indoor cultivation capacity to evaluate initial licensing requirements. Because the relative productivity of indoor and outdoor cultivation cannot be reliably established using available data, the model assumes that all cultivation licenses operate at their maximum authorized indoor canopy. This approach is intended to reduce the risk of authorizing cultivation capacity that substantially exceeds projected demand, while recognizing that actual production will depend on licensee decisions, cultivation methods, and operational efficiency.

• The analysis identifies issuing three Tier V cultivation licenses as an option worth considering for initial market implementation. These licenses would authorize up to 105,000 square feet of indoor cultivation canopy, providing larger-scale production capacity while preserving opportunities for microbusinesses and smaller cultivation tiers. The equal-share and microbusiness-priority scenarios may provide suitable starting points for distributing the remaining cultivation capacity, depending on the CCA's policy objectives.

• Microbusinesses and dual-use pharmaceutical processors will play important roles in determining total cultivation capacity. Microbusinesses are incorporated into the modeled cultivation allocations because of their required vertical integration, while pharmaceutical processors may contribute additional production capacity beyond the modeled scenarios. However, the extent of pharmaceutical processor contributions will depend on existing medical production requirements, canopy utilization, and the amount of capacity available to serve adult-use demand.

• A phased approach to cultivation licensing would allow the CCA to evaluate production capacity as Virginia's adult-use market develops. Initial licensing decisions should consider the importance of issuing Tier V and microbusiness licenses at market launch, while preserving flexibility to adjust cultivation capacity through smaller license tiers in subsequent rounds. Future licensing decisions should be informed by observed production, canopy utilization, inventory, wholesale prices, and downstream demand.

• Cultivators should have the opportunity to scale into higher licensing tiers upon demonstrating that their existing canopy utilization and resulting sales are approaching capacity. This approach would allow the CCA to maintain opportunities for smaller cultivators while providing a pathway for existing businesses to expand as their operations and market demand develop.

• Continued market monitoring and data collection will be essential to evaluating future cultivation capacity needs. Following market launch, observed production, sales, and market conditions should inform whether additional cultivation licenses or adjustments to canopy limits are warranted. The CCA should proactively establish data collection and reporting processes informed by the findings of this study to ensure the necessary data are collected in consistent formats and at appropriate intervals to support future assessments in 2027 and 2028.

Cultivation Canopy Limits

The analysis does not identify a sufficient empirical basis for adjusting Virginia's existing cultivation canopy limits prior to the launch of the adult-use market. Although the statutory tier structure establishes maximum authorized cultivation capacity, the proportion of canopy that future licensees will utilize and the production generated from that capacity cannot yet be reliably determined.

Key Findings:

• Authorized canopy does not necessarily represent actual production capacity, as cultivation facilities may initially operate below their maximum permitted canopy depending on capital availability, facility development, and operational conditions.

• The existing canopy limits provide a consistent framework for evaluating initial cultivation license requirements, but available pre-market data do not establish whether those limits will be sufficient or excessive once the adult-use market is operational.

• The 2027 and 2028 statutory analyses will provide an opportunity to evaluate canopy utilization, production efficiency, inventory levels, transfers, and downstream demand using observed operational data, with THC grams produced (output of total canopy) as a standardized unit.

Accordingly, the available evidence does not support adjustments to existing canopy limits prior to the launch of the adult-use market. Future assessments will benefit from observed data on cultivation production, canopy utilization, and market demand to determine whether adjustments to the existing limits are warranted.

Manufacturing and Other License Categories

CPPC evaluated the potential implications of numerical limits for manufacturing and other marijuana establishment license categories. Unlike retail and cultivation, manufacturing represents a specialized, value-added segment of the cannabis supply chain in which businesses compete through technical expertise, product innovation, and specialized services. Establishing numerical limits on manufacturing licenses could restrict entry by qualified businesses without providing a corresponding benefit to managing primary cannabis supply or consumer access. Similar considerations apply to testing facilities, transporters, and delivery operators, which provide specialized services or facilitate product distribution rather than directly determine primary market capacity.