Colorado Cannabis Industry Braces For Tough Times As US Recession Looms | Company

0

MEGAN ULU-LANI BOYANTON The Denver Post (TNS)

Colorado’s cannabis industry is bracing for tough times as marijuana sales plummet and economic troubles mount.

During the COVID-19 pandemic shutdowns, cannabis companies served consumers eager to stock up on their favorite edibles, concentrates, and pre-rolls. That high has since given way to a low for the industry, as lower consumer spending means lower sales in the recreational and medical markets, according to Headset, which provides insight into cannabis consumption trends.

In Colorado, total marijuana sales were $153 million in April, down 26% from $206 million sold that month last year, according to the Marijuana Industry Group. state cannabis industry trade association. Medical sales specifically took a hit, plunging to around $20 million in April from nearly $40 million last April.

On top of that, the cannabis industry is grappling with the impending US recession, profitability hurdles, supply chain issues, and weakening flower prices. And the downward spiral isn’t limited to Colorado businesses — it’s a national challenge, said Aaron Smith, CEO of the National Cannabis Industry Association.

People also read…

“Obviously the inflation factor is happening everywhere,” he said, pointing to some cannabis users who “are probably cutting back because they’re struggling to make ends meet or pay their bills. “.

“It’s a much deeper issue than cannabis,” Smith added. However, he sees a bright side to the situation: the longevity of the industry.

“I don’t have a crystal ball,” he said, but “I don’t see the legal cannabis market disappearing by any means.”

This year, the U.S. cannabis market is worth more than $30 billion and the cannabis tourism industry is valued at around $17 billion, Headset reported. In Colorado, median store sales are around $2 million, with millennial men counting as the state’s biggest spenders on cannabis.

However, Truman Bradley of the Marijuana Industry Group said he sees “a borderline industry,” with regulations and taxes hurting the state’s marijuana businesses.

“Our industry faces an effective tax rate of over 70%, and no other industry faces this,” he said.

Bradley pointed to House Bill 1317, which places more requirements on medical marijuana patients and limits the amount of concentrate a patient can purchase in a day to eight grams. For 18 to 20 year olds, the limit is increased to two grams.

Alec Garnett, the speaker of the Colorado House of Representatives and primary architect of the bill, defended it, saying it was intended to reduce the amount of high-potency concentrate that appears on high school campuses.

“Over 85% of the legislature voted in favor of the legislation,” Garnett said. “Many other states are looking to what we’ve done to make sure young people with developing brains don’t have unlimited access to high potency products.”

For Bradley, there could be more changes on the horizon. He pointed to a potential ballot measure to increase total taxes on recreational weed sales by up to more than 30% in Denver. “My members are deeply concerned,” he said. “We’re looking at the barrel of real layoffs and closing doors.”

Buddy Boy Brands’ seven metro-area dispensaries closed permanently this month, with owner John Fritzel facing “a tax balance” and blaming a market downturn.

Paul Seaborn, an assistant professor at the University of Virginia, said the industry squeeze in Colorado and other states with mature cannabis markets is due to a combination of factors, including sales stabilizing after the spike. of COVID-19, lower prices, increased competition for customers, and lower rates of cannabis-related tourism.

Liz Zukowski, head of policy and public affairs at Native Roots Cannabis Co., said her company “is not immune” to macroeconomic forces affecting the industry, but the team relies on its strengths, such as its vertical integration in managing everything from production to sales, to combat these factors.

Native Roots started in 2010 as a medical grower and extractor in Boulder. Today, it includes 20 outlets statewide and two production facilities in Denver, with nearly 500 employees.

Zukowski pointed to an industry trend that she sees as problematic in the long term. “Dispensaries are trying to compete with each other and they’re rushing down to offer discounted products, so people keep buying,” she said in a phone interview.

She also noticed fewer medical patients coming through the doors of Native Roots, attributing this to House Bill 1317.

“This industry is not filled with cash. We run on cash, but our margins are so thin,” she said. “There’s not a lot of extra cash to spend” , so policy changes have a ripple effect on business.

On the other hand, Green Dragon, which was founded in Colorado in 2012, has “not seen much change in our sales,” said co-founder Alex Levine, though he acknowledged that the industry in as a whole seems to be on a downward trend. .

Green Dragon consists of 16 locations in Colorado and seven locations in Florida, with plans for rapid expansion in the latter. In both states, the company employs more than 300 people.

“Consumers across the board are cutting retail spending due to inflationary pressures and reduced disposal revenue,” Levine said in an emailed statement. “However, we offer everyday low prices and great promotions that continue to attract customers.”

He predicts an increase in sales in the future.

Share.

About Author

Comments are closed.