The Colorado cannabis rollercoaster

by DGO Staff

A glimpse at how the state’s weed industry is on a wild (and occasionally terrifying) ride

The Colorado marijuana industry has been a rollercoaster ride over the past few years. After achieving record-breaking sales in 2021, the market took a sharp downturn, leading to business closures and job losses. But recently, there has been a glimmer of hope with a slight uptick in wholesale marijuana prices. Let’s take a closer look at the highs and lows of the Colorado pot industry and how it’s coping with the changing landscape.

The pandemic boom and subsequent slump
The COVID-19 pandemic brought unexpected windfalls for the Colorado marijuana industry, as dispensaries saw a surge in sales, crossing the $2.2 billion mark in 2021. However, the situation took a turn for the worse, and the market saw a steady decline thereafter. Wholesale marijuana prices hit rock bottom, and dispensary sales plummeted by 21 percent between 2021 and 2022. This downturn took a significant toll on the industry, leading to a drop of nearly 30 percent in the marijuana workforce from 2022 to 2023.

A glimmer of hope: Up-tick in wholesale prices
Amidst the gloomy atmosphere, there is a glimmer of hope for growers and dispensaries. The latest memo from the Colorado Marijuana Enforcement Division (MED) reveals an increase in the average market rate (AMR) for a pound of retail marijuana flower, albeit a modest 8.3 percent rise from April to July. While this marks the first positive shift in nearly two years for wholesale flower prices, it’s essential to note that the current figures are still 60 percent lower than the prices commanded by growers in 2021.

Understanding the AMR and its impact
The AMR may be somewhat misleading, as it measures median prices rather than actual averages for various wholesale marijuana categories. However, it remains a crucial metric affecting the wholesale game. Products in higher demand generally command better prices, and the fluctuations in AMR influence growers and dispensaries alike. Malek Noueiry, owner of wholesale cultivation Malek’s Premium Cannabis, attests to this, highlighting the impact of market averages on the industry.

Business closures and license expirations
One of the significant factors contributing to the market’s instability is the closure of numerous marijuana businesses in Colorado. The MED reports a substantial drop in marijuana business licenses, with the number decreasing from over 3,500 in 2021 to around 2,700 recently. Most of the expired licenses were for growing operations, and the closure of these operations might be influencing prices in different AMR categories.

The price volatility of extraction products
Apart from wholesale flower prices, the state also monitors the prices of marijuana trim and plant matter allocated for extraction, as well as whole wet plants used for “live” extractions like resin and rosin. Interestingly, while the price of whole wet plants remained steady, the price of trim allocated for extraction dropped nearly 20 percent since April.

The most significant fluctuations, however, were seen in the category of bud allocated for extraction, commonly used to produce products like shatter, wax, distillate, and infused joints. The AMR for this category saw a massive drop of over 183 percent, indicating considerable volatility in this segment.

The hazy line
The Colorado marijuana industry has experienced its fair share of ups and downs in recent years. After a remarkable boom during the pandemic, the market faced a prolonged slump, impacting growers and dispensaries, leading to closures and job losses. However, the recent uptick in wholesale marijuana prices offers a glimmer of hope for the industry’s recovery.

As the market navigates through these challenging times, it will be essential for businesses to remain resilient and adaptive. Understanding market trends, consumer preferences, and the impact of price fluctuations will be crucial for surviving and thriving in this ever-evolving landscape. The Colorado marijuana industry may be facing headwinds, but with determination and strategic planning, it has the potential to overcome these challenges and find stability once again.

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