Cannabis sales in Colorado have fallen year over year for 11 straight months, should we still be concerned?

Fall in Cannabis Sales in Colorado, Should We Be Concerned?

There’s an alarming trend in Colorado, and we should all be aware of it. The cannabis industry has been the outlier in the global market for the most part, as it continued to grow in size and revenue during the pandemic. Is the cannabis market already saturated?

Where other companies have been crushed under global stagnation, the cannabis industry has seen increased revenue, created new markets and seemingly integrated on a global scale.

However, the world has been in a state of pseudo-lockdown for the last two and a half years and we are now beginning to see the fruits of this action. Some may argue that these lockdowns were necessary due to the Covid-19 pandemic. Considering that after almost 3 years there have been 6.3 million deaths worldwide (at the time of writing this article) out of a world population of 7.9 billion people (and counting)

While the loss of life due to the virus has been significant when viewed from the individual perspective. People have lost family members and friends to the virus and their loss should never diminish. At the same time, however, society needs to assess the macro effects of the current social restrictions the world is facing.

Statistically, the total number of deaths from Covid has claimed 0.0797% of the world’s population, with the median age of death ranging from 73 years and older, depending on the population data considered.

The reason it’s important to look at the issue from this perspective is because society remains in a state of uncertainty where a lockdown or mandate could impede the free movement of goods – every institution and business bleeds money to death.

Combine this with high inflation and a devaluation of the currency, and you will see the economic impact take its toll on all sectors of society.

Perhaps even cannabis is no longer immune to this kind of economic turmoil, as Colorado’s recent financial statements for the industry have shown.

A Westword.com article reveals;

Dispensaries in Colorado broke record sales for marijuana in 2021, raking in over $2.2 billion. However, sales volume and wholesale marijuana prices began to decline this past summer. April 2022 marked the 11th consecutive month of declining year-over-year dispensary sales, while the price of wholesale marijuana flower fell an average of over 46 percent from January 2021 to April this year, according to the state’s Marijuana Enforcement Division. – SOURCE

The article also outlined how pharmacy owners saw sales drop by as much as 20% to 420 compared to their year-earlier earnings. But what could be the reason for this? Is this part of the relentless drudgery of the pandemic for consumers that they are now having to choose between staples like edibles versus products like cannabis, or could there be another reason?

Maybe regulations?

Goodbye buddy boy…

“The bigger they are, the harder they fall,” says John Fritzel, owner of Buddy Boy, a chain of pharmacies in Denver, Colorado. “When you have that kind of overhead, you just can’t sustain that. We would like to, but there is not enough capital in this market. If there was a bright spot and the numbers improved, we would have tried.” – Source

In another Westword.com article, this time about the closure of a chain of pharmacies, the article notes that Fritzel believes the drop is due to a new law that went into effect on January 1.

This law capped the daily purchase allowance for consumers to just 8 grams. Previously, medical marijuana patients could purchase up to 40 grams per day. In the case of Buddy Boy, this was 90% of his earnings.

In the first four months of 2022, the Colorado industry didn’t even surpass $100 million in revenue, which was 43% worse than the year before. However, there has been a general trend of price reductions across all sectors of the cannabis industry, from wholesale prices to consumer demand.

“With the new regulations in the first year, which reduced the daily concentrate limits allowed by 80 percent, plus all the inflationary conditions and general market downturn, it was just too much,” notes Fritzel. – Westword

If the state limits the amount of concentrate available, from a consumer perspective, you would just hit the streets. Cannabis is not like other products where the state has a monopoly on production. Rather, it is a decentralized crop and anyone with a bucket, soil and water can grow it.

Therefore, when the state restricts consumer options, they force the consumer onto the black market. However, Fritzel also believes said;

“There will be hundreds [marijuana businesses] Path. They are already closing. The industry as a whole is really struggling unless you’re in a limited licensing market,” he notes. “The novelty wears off.”

Again, this is an important detail to pay attention to. Colorado has been actively selling recreational cannabis for 10 years. The novelty is worn out. Cannabis is simply “something you do”, meaning that the user has caught up with the industry.

They now hold purchasing power because the market is so saturated that there are “many options.” This means the companies with the deepest pockets will be able to survive at the lowest price.

Unfortunately, Buddy Boy didn’t have the deep pockets of Wall Street-backed companies. And when people invest in the market, they offer a different level of service, usually at a competitive price.

Unless you restrict licensing or create mechanisms and tax deductions for local businesses, the money machine will gobble up the market as it does everywhere. But Fritzel also alludes to the introduction of this article … the world economy has become more expensive.

“The prices of everything we need as a business have gone up, while the prices of everything we sell as a business have gone down. We’re not seeing less foot traffic, but the average ticket price has dropped dramatically, and the prices are so low,” adds Fritzel.

When you take wholesale price cuts coupled with market saturation and then turn up the heat with hyperinflation due to global geopolitical politics, you have the perfect recipe for mass lockdown.

Thomas Mitchell, the author of the Westword article, concludes;

Pharmacy takeovers have been widespread in the past two years, but permanent closures have been rare in Denver until recently. Mile High Green Cross, a Capitol Hill pharmacy under the Pure Greens ownership group, closed in May to make way for another Pure Greens-owned store, La Conte’s, in the same neighborhood. A month earlier, Colorado dispensary chain Bonfire Cannabis closed its Denver medical marijuana dispensary after the company failed to obtain a recreational sales license.

Which leaves us with a bitter taste in the mouth.

The calm after the storm…

As you go through intense moments in life, or in this case as a global society – much of what we know will go the way of the dodo. However, this is only because a major shift is taking place in the entire fabric of society – from our spiritual affiliations to the way we make our money. If you’re reading this article and thinking, “Man, we’re so screwed!” you’re right!

I personally believe that the world will probably get a little darker before the light comes. But especially in times like these, community is important. It is one of humanity’s greatest strengths. However, we are forced to isolate ourselves and hide behind loose-fitting cloth masks that pretend to protect us from an unseen threat.

While it is noble to want to accommodate the whole world to care for the most vulnerable, at some point we have to weigh the cost/risk/benefit to society of trying to protect the 1% at the expense of the 99%.

The rebalancing of Colorado’s cannabis industry cannot be blamed solely on the pandemic. However, the rising cost of living is forcing entrepreneurs to cut back, and that usually means laying off hundreds or even thousands of employees.

Employees who would rely on government funds to get another job… in a market that is offloading employees. If the cycle continues and we’re not very careful, it could be a recipe for disaster.

It is only by coming together that we can weather the coming storm, and once we weather it and the dust settles, we will experience a whole new dynamic. How good or how bad is entirely up to us.

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