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Colorado Cannabis Industry Experiences First-Ever Decline

The industry has seen a steady uptake since recreational cannabis was legalized in Colorado. The Colorado cannabis industry is now trending downwards for the first ever time. 

The most visible sign was the reduction in tax revenue. However, there are many other warning signs. Dispensaries are closing down, and delivery services and social clubs are still working to find their footing. As more states legalize cannabis, this is reducing tax revenue. People are starting to fear that the Colorado marijuana boom may be over.

“More people are going to get laid off. We are probably going to see more small shops close down and a lot of brands are going to go away,” says Spencer Ward, salesman for Bronnor Corp., a company that manufactures edibles and infused products for brands across Colorado stores.

Taxes and fees from cannabis retail sales reached $198.3million as of July. This is a decrease of $53.7 million (21%) from 2021. Colorado had record-breaking sales in 2021. Dispensaries in Colorado accounted for $2.2 billion in revenue and earned $423.5million in taxes. However, this year’s numbers are significantly lower.

The fear now is that this fall will continue throughout the year and that the state taxes going to public schools fund, like the Public School Fund may drop. It’s possible that the industry could bring in closer to $24.9 million for the Fund versus the $31.5 million brought in last year. It is possible that the retail sales tax distributions to local governments could decrease from $27.8 to $22 millions.

This also goes hand in hand with the 44% drop that has been seen in medical cannabis sales, which Truman Bardley, head of the Marijuana Industry Group trade organization, calls “a big, big deal.”

“All the programs that rely on marijuana taxes are going to take a big cut,” Bradley claims.

Also, the prices are dropping. The price of cannabis flower in 2021 was $1,300 per kilogram, while the cost for trimming for oil and tinctures was $425 per pound. According to the Colorado Department of Revenue, cannabis is now selling for $700 per pound and the trim price is $225 per pound. These prices are at their lowest level since 2014.

With falling prices and less tax money being raised, supply begins to exceed demand. Although new licenses for cannabis businesses continue to be granted, many businesses are now closing.

“We’ve seen time and time again that communities end up legalizing because they see the value in the regulated market and they see the cannabis industry as a potential solution to help bring more revenue into the community,” says Bradley. “But there is a point where taxation becomes predatory or unsustainable or both. And that’s what we are approaching…”

John Bailey is the founder and CEO of Black Cannabis Equity Initiative. The industry has been around for a while so this seems like an inevitable shift.

“What you are seeing is not a decline, but a leveling off of a saturated industry,” says Bailey. “Even in the midst of a decline, folks are still buying weed. It’s possible they are not buying as much. This is the marketing leveling off and it’s leveling off for a lot of reasons, it could be that we saturated the market with so many businesses.”

Others think that the states take advantage of local industries by overtaxing them. Although this was necessary in order to remove stigma from cannabis, it is now that there are many states with an industry. The novelty is over and these taxes are taking money away from small and medium-sized businesses.

“Ultimately, I think federal legalization is the only way where we can start to grow a stronger industry,” Chaz Faille, a Denver-based sourcing manager for the Willie’s Reserve brand, says. “Just being able to source product from other states and have distribution warehouses where that product is actually grown would go a long way. Instead of having a bunch of states that are running things differently.”

It is unclear how many cannabis sales in Colorado will decline and whether it will be a steady step for an industry that is already established or if it will spell bad news. However, the fact is that both the industry and the state can feel the fall.