Colorado Cannabis Industry continues to face uncertainty
Oversupply, lack of demand, competition with neighboring legal states, and black market sales, puts Colorado cannabis businesses in a bind.
A recent report from The Denver Post analyzes the fallout of the post-pandemic cannabis industry in Colorado. While once the state reached a peak of $226 million in combined recreational and medical cannabis sales, current sales have decreased and small businesses struggle to stay afloat.
“The market’s just bad. It’s bad right now,” cannabis salesperson Val Tonazzi told The Denver Post. “There’s businesses closing, left and right.”
In February, Colorado’s medical cannabis sales decreased to $15 million, the lowest collection since retail sales began in 2014. March brought a slight increase in medical cannabis sales, approximately $17 million, but was $5 million less than March 2022. Likewise, March recreational sales were recorded at $122 million this year, but it’s a $17 million decrease from last year’s numbers.
On May 9, the U.S. Department of Health and Human Services announced a fact sheet detailing the “End of the COVID-19 Public Health Emergency.” While the nation and many of its industries return to normal operations, cannabis business owners continue to see ripples of oversupply of cannabis products, lack of demand, pricing dropping to record lows, and lack of cannabis tourism.
Over the past few years, many states bordering Colorado have approved recreational cannabis. This includes Montana and Arizona in 2020, and New Mexico in 2021, creating competition for Colorado.
Vangst, a cannabis job company, recently released its 2023 Vangst Jobs Report. The report states that there was a 2% drop in cannabis jobs, and Colorado was ranked as the second highest state for cannabis job losses. It was also ranked number six on a list of top cannabis jobs with less positions than states like California, Michigan, Illinois, Florida, and Massachusetts.
It isn’t just small cannabis businesses falling under hard times. Bigger companies, like Curaleaf, are also pivoting as well. In January, Curaleaf closed down its offices in Colorado, California and Oregon, “as part of its continued effort to streamline its business.” According to Curaleaf CEO Matt Darin, this move was also made due to thriving black market competition. “We believe these states will represent opportunities in the future, but the current price compression caused by a lack of meaningful enforcement of the illicit market prevent us from generating an acceptable return on our investments,” Darin said in a press release.
The closure of cannabis businesses is affecting the real estate market as well. A National Association of Realtors report recently explained “a decline in commercial property purchases by marijuana industry-related businesses and a corresponding increase in leasing activity.”
The Denver Post spoke with local entrepreneur Renée Grossman, who founded five retail storefronts in Colorado since 2013, and also moved into cultivation and manufacturing as well. “There’s too many stores, there’s too much cultivation, there’s too many products,” Grossman explained to The Denver Post. “Right now, all the investors are sitting on the sidelines, and kind of waiting to time the bottom—and nobody knows exactly when that’s going to happen.”
Amidst the uncertainty of the situation, Grossman and many other business owners have had to lay off many of their staff to continue paying the bills. “Most companies I know are losing money, or they’ve shut down and scaled back,” said Grossman. “A lot of companies that are my size or smaller are really feeling the burn.” She also suggested that more mergers may take place in order to help bolster smaller businesses against larger companies.
Initially there was a drive for cannabis tourism to bring people to Colorado, but even as travel has become safer in the wake of COVID-19, the increase in states with recreational cannabis has caused a shift in interest. According to Native Roots Cannabis Company vice president of marketing, Buck Dutton, sales for 4/20 decreased from recent years: “…people don’t see the need to travel here to spend their 4/20 with us,” Dutton told The Denver Post. “The only expectation that it lived up to is that we thought it was going to be bad.”
Marijuana Industry Group executive director Truman Bradley likens Colorado’s current situation to “the ghost of Christmas future.” The excitement that drove sales for Colorado as the first state to legalize recreational cannabis has since slowed. Bradley stated that the only way Colorado can survive now is for the industry to “get leaner,” in terms of competition being thinned out. He also calls on state legislators to reevaluate legalization. “It’s critical that lawmakers understand that decade No. 2 of legalization needs to look fundamentally different from decade No. 1,” Bradley stated.
