According to reps of the industry, the sales of medical cannabis in Colorado is currently at its lowest point, bringing the cannabis industry of the state to a tipping point.
The revenue from cannabis in Colorado in July was almost $154 million for medical and recreational combined, according to figures gotten from the Department of Revenue Colorado. Total sales for this calendar year so far have reached over $1 billion.
Nevertheless, medical cannabis sales for July were only a little over $18 million, the poorest monthly total since the state’s legalization of retail sales in January 2014. According to Tiffany Goldman, executive chair of the Cannabis Industry Group, “there is a dangerous idea that Colorado’s marijuana sector is a cash cow. But this impression is untrue, she said.
Sales of cannabis for recreational use performed better, reaching over $135 million, an increase from the figures in April, May, and June. However, that’s a lot smaller than last July at approximately $168 million.
MARKET RATES FOR MARIJUANA
Every three months, the DOR publishes its AMR (average market rates) for wholesale cannabis. The average market rate evaluates the median costs of different wholesale cannabis components, including plant matter, trim, and flower designated for extraction, even after the word “average” appears in the acronym. Since the DOR started collecting this information, two of the components have decreased.
The latest report on the average market rates indicates that cannabis flower is currently selling for $658 per pound, which is nearly 7% less than the former record lowest average market rate of $709, which was published in June. Trim allotted to extraction and infused products also fell to $76 per pound, which is the lowest level since the category started to be monitored in 2018 and a 37 percent decrease from the former low of $120.
According to the DOR, the cost per pound of cannabis flower designated for regular trim ($249), immature plants ($13 each), extraction ($277), complete plants ($126), and seeds ($4 each), as well as all other cannabis products, remained unchanged.
EFFECTS ON CANNABIS BUSINESSES
Upwards of 41,000 people are employed directly by the sector in the Centennial State, although Goldman cited the closure of tiny cannabis enterprises. Owner, John Fritzel attributed the closure of Buddy Boy Brands’ seven subway dispensaries in June to “a tax balance,” a decline in the industry, and exorbitant prices.
Goldman stated that in the future, they hope policymakers and elected officials will grasp the sad fact that Colorado marijuana companies are suffering and that we have to work to preserve a sector that provides our state with well-paying employment and tax revenue.”
Other chains, including LivWell Enlightened Health, are growing, nevertheless. With 26 dispensaries, it is expected to dominate the Colorado industry after PharmaCann recently revealed its intention to buy boutique dispensary group The Clinic.
The state’s cannabis business is not on the verge of collapse overall, according to Ryan Shipp, director of retail at independently founded Native Roots Cannabis Co. He refers to the recreational and medical cannabis markets as “two separate markets.”
Both are declining, but for different reasons, he added. Cannabis tourism is declining as more states legalize cannabis use for recreational purposes.
He noted that House Bill 1317 was a significant factor in the medical sector and added that the fall in sales was due to that factor. Patients who use medical marijuana now have to comply with extra regulations, and the amount of substance they can purchase each day has been limited to eight grams. The upper limit was raised to two grams for people between the ages of 18 and 20.
I don’t think we anticipated such a significant reduction, Shipp continued in an interview over the phone. Some of them are choosing to avoid having to go through that procedure and just purchase on the recreation side since it’s a little bit more difficult to successfully get a medical card today than it used to be.
He expresses optimism that the sales downturn has “flatlined” despite noting that Native Roots has steadily experienced a rise in medical patients in the past few months. Shipp said that the organization is committed to expanding its medical division. But he doesn’t anticipate a return to the peak of the medical market.
The marijuana sector in Colorado still has some optimism, as they were able to exhale last week after a ballot initiative to raise cannabis taxes in the Mile High Town was defeated.
THE FUTURE OF CANNABIS IN THE STATE
Based on a rolling market projection by cannabis analytics company BDSA, sales of marijuana worldwide and in the United States are expected to increase in the future. Yearly worldwide marijuana sales are predicted to increase from $30 billion last year to $57 billion in 2026, with the U.S. market growing from $25 billion to $42 billion in 2021.
According to the figures provided on Tuesday, the country’s legal cannabis sales are anticipated to have gotten to $27 billion at the end of this year, an increase of 7% over the previous year’s sales. But according to BDSA, older adult-use markets like Colorado would likely experience “the most severe sales decreases,” while newer markets will likely witness an increase in sales. As patients gain access to more variety and reduced prices in nearby adult-use markets, it observes the trend of declining medical marijuana sales.
According to Roy Bingham, CEO of BDSA, The ‘hockey stick’ trajectory of sales growth witnessed in the beginning years of legal marijuana has gone and regulatory and economic challenges are imposing pressure on legitimate marijuana markets. The cannabis market is still anticipated to rise topline in 2022, led by high sales in emerging and developing markets, such as the populated states of New York and New Jersey, even if mature licensed marijuana markets in the United States saw sales decrease in 2022.
I would like to think this fall in marijuana sales in Colorado can be directly linked to the fact that a lot of other states have gone on to legalize recreational marijuana. That reduces the revenue from cannabis tourism, whereby outsiders do not need to come into Colorado to get their buzz on as much as they would in the past.