The cannabis industry in Colorado continues to face uncertainty

A recent report from the Denver Post analyzes the fallout from the cannabis industry in the wake of the pandemic in Colorado. After the state peaked at $226 million in combined recreational and medicinal cannabis sales, current sales have been down and small businesses are struggling to stay afloat.

“The market is just bad. It’s bad right now,” cannabis salesman Val Tonazzi told the Denver Post. “Shops are closing left and right.”

In February, medical cannabis sales in Colorado fell to $15 million, the lowest since retail sales began in 2014. March saw a slight increase in medical cannabis sales, about $17 million, but 5 million $100,000 down from March 2022. Likewise, March leisure sales were recorded at $122 million this year, but that’s down $17 million from a year earlier.

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.” As the country and many of its industries return to normal operations, cannabis entrepreneurs continue to see an oversupply of cannabis products, a lack of demand, prices falling to record lows, and a lack of cannabis tourism.

In recent years, many states bordering Colorado have legalized recreational cannabis. These include Montana and Arizona in 2020 and New Mexico in 2021, giving Colorado competition.

Vangst, a cannabis jobs company, recently released their 2023 Vangst jobs report. The report said there was a 2% drop in cannabis jobs, with Colorado being the second-highest state with cannabis job losses. It also ranked sixth on a list of top cannabis jobs with fewer jobs than states like California, Michigan, Illinois, Florida, and Massachusetts.

It’s not just small cannabis companies that are going through tough times. Bigger companies like Curaleaf are also changing. In January, Curaleaf closed its offices in Colorado, California and Oregon “as part of its continued efforts to streamline its business.” According to Curaleaf CEO Matt Darin, the move was also due to thriving black market competition. “We believe these states will offer opportunities in the future, but the current price decline caused by a lack of effective illicit market enforcement prevents us from achieving an acceptable return on our investments,” Darin said in a press release.

The closure of cannabis stores is also affecting the real estate market. A recent report from the National Association of Realtors stated that “there has been a decline in commercial real estate purchases by companies associated with the marijuana industry and a corresponding increase in leasing activity.”

The Denver Post spoke to local entrepreneur Renée Grossman, who has opened five retail stores in Colorado since 2013 and is also devoted to growing and manufacturing. “There are too many stores, there are too many crops, there are too many products,” Grossman told the Denver Post. “Right now, all investors are sitting on the sidelines waiting for the bottom to hit – and no one knows exactly when that will happen.”

In the midst of uncertainty, Grossman and many other business owners have had to lay off many of their employees to continue paying their bills. “Most of the companies I know are making losses or have closed and downsized,” Grossman said. “A lot of companies my size or smaller are really feeling the pressure.” She also suggested that there could be more mergers to strengthen smaller companies over larger companies.

There was originally a cannabis tourism initiative to bring people to Colorado, but while travel has become safer in the wake of COVID-19, the increase in recreational cannabis states has prompted a shift in interest. According to Buck Dutton, Vice President of Marketing at Native Roots Cannabis Company, sales of 4/20 were down compared to the last few years: “…people don’t see a need to travel here to do their 4/20 with us ‘ Dutton told The Denver Post. “The only expectation it lived up to was that we thought it was going to be bad.”

Truman Bradley, executive director of the Marijuana Industry Group, likens the current situation in Colorado to “the spirit of the Christmas future.” The excitement that drove Colorado sales as the first state to legalize recreational cannabis has since waned. Bradley explained that Colorado’s only way of surviving now is if the industry “leans down” and competition is thinned out. He also urges state legislatures to reevaluate legalization. “It’s critical that lawmakers understand that the second decade of legalization must look fundamentally different than the first decade,” Bradley said.