The current decline in the state’s weed biz is a surprising and troubling turn of events
While weed has become a staple in Colorado, the state is experiencing its first real downturn in the cannabis industry since weed was legalized in 2014. Market saturation, inflation, and competition from other legal states are playing a role in the decline. There has been a steady decline for over a year now. The ugly results of 13 months of declining sales is starting to show its face.
Colorado is currently witnessing dispensaries lay off employees and some are even closing their doors. Delivery services are struggling to keep their head above water and tax revenues are sinking as more states approve legalization and inflation causes people to start pinching their pennies. 2022 has seen more than $906 million in marijuana sold, which is down from $1.2 billion in 2021.
Colorado has brought in 21% less revenue from the cannabis industry than from the same months of the year before. That is $53.7 million less than from the year before. Less revenue means city and state budgets will be affected in the future. Many important programs and projects are funded through the revenue generated from cannabis sales. School construction, recreation centers, substance abuse prevention, treatment programs and health services.
If this decline continues to march downward throughout 2022, the retail marijuana tax distribution to local governments will drop from $27.8 million last year, to roughly $22 million in 2022. The State Public School Fund will also see a drop in its funding. It will fall from $31.5 million it received last year down to $24.9 million in 2022. The reality is that all programs that receive funding from marijuana taxes are going to be affected.
According to the state Marijuana Enforcement Division, the average price per pound has fallen nearly 60% since January of last year. Currently, a pound of flower is selling for roughly $700 which is almost half the price it was selling for in 2021. The trim used for things such as edibles, tinctures and oils was going for around $425 per pound last year. This year is seeing the same amount sell for $225 per pound. This is the lowest price since the state began tracking retail prices in 2014.
The state keeps offering more licenses as the doors of older establishments close. One of Colorado’s biggest brands, Veritas Fine Cannabis, laid off 33 employees this year. That is almost a quarter of its entire staff. They also closed one of their cultivation sites citing that the economic climate being a big factor in the decision. Other businesses that have decided to scale back are Bonfire Cannabis, Pure Greens, and the group behind the Buddy Boy Dispensaries. The reality is we are going to see more dispensaries shut down, and a lot of the brands you recognize could possibly go away.
Neighboring states legalizing canna-bis seems to have played a large role in the downturn. With New Mexico and Arizona legalizing cannabis, Colorado is seeing less visitors come from out of state for purchases. This not only affects cannabis sales and tax revenue, but also tourism dollars. The sales from the neighboring states aren’t doing any better than Colorado, but those dollars are being spent in those states and unfortunately not in Colorado.
Denver’s MySpark ballot measure could raise the taxes on cannabis products by 5% in only Denver. Not everyone is behind this proposed tax increase. Shop owners worry the increase in taxes will affect their sales and cause buyers to simply purchase less or drive outside of the city to make their purchases. This is going to potentially put a strain on a business owner within the city by putting him on an unequal footing when compared to a business owner outside of Denver. Many worry that if the measure does pass, that it will drive sales down even further.
