By Matt Whittaker / NewsBreak Denver
(Across Colorado) Colorado marijuana sales are on pace for their first yearly decline since legal retail sales began as legislation limits purchases, inflation limits spending and the illegal market offers competition.
From January through May, Colorado marijuana sales totaled a little less than $760 million, well off the pace from the first five months of last year when sales hit more than $960 million, according to figures from the Colorado Department of Revenue.
If that pace continues through the end of the year, 2022 will mark the first annual decline since state-licensed retail marijuana sales began in 2014.
One of the reasons is simply that the previous two years saw a surge in demand during the worst of the pandemic, meaning a return to more normal sales levels is a retreat, said Jay Czarkowski, co-founder of Boulder-headquartered consultancy Canna Advisors.
Last year, Colorado had more than $2.22 billion in marijuana sales, a slight jump above 2020’s then-record of $2.19 billion, according to Department of Revenue data. Last year, marijuana sales tax revenue also hit a record, rising 9.3% year-on-year to $423.48 million.
Another factor in Colorado’s 2022 marijuana sales decline is state legislation that went into effect this year limiting sales of marijuana concentrates, products that contain high levels of the psychotropic compound THC, said Czarkowski and Matt Karnes, founder of New York-based cannabis consultancy GreenWave Advisors.
The law limits medical patients older than 20 to eight grams of concentrates in a daily purchase, well below the previous limit of 40 grams. Patients 18-20 can only buy 2 grams daily, with some exceptions.
Meanwhile, sales are also under pressure in Colorado, and nationally, as inflation and other economic pressures sap people’s ability and willingness to spend money, Czarkowski said.
Cannabis tourism in Colorado – when people who live in states where marijuana sales are illegal come to the Centennial state to buy and consume marijuana products – is also waning as more states legalize the drug, he said.
Consumers are also turning to the illegal cannabis market, cutting into legitimate sales.
“As we have seen in other states, (the) illicit market provides a cheaper alternative,” said Karnes, who estimates the best-case scenario for Colorado marijuana sales this year is flat to slightly higher as the medical market continues to take a hit.
Legal cannabis dispensaries, farms and customers are at a cost disadvantage compared with the illegal market. Black market sellers don’t have to pay licensing fees or hire consultants to help them navigate regulations; illegal growers aren’t concerned with pesticide, labor and health regulations; and taxes aren’t factored into the price of illicit weed.
Truman Bradley, executive director of the Wheat Ridge-based Marijuana Industry Group, expects the sales drop will continue through the year, led by declining medical sales.
“While there are likely many factors at play here including inflation, we know that high taxes and burdensome regulations are having a serious impact on both marijuana businesses and their customers,” he said.
Colorado House Speaker Alec Garnett, a Denver Democrat who sponsored last year’s bill further limiting concentrate sales, said he wanted to reduce teen access to high potency THC. The bill passed with broad bipartisan support.