The waning of the pandemic, along with a decline in demand from customers coming in from out of state, has continued to burn into Colorado’s marijuana market this summer, during what are generally some of the strongest months for pot sales.
Sales of cannabis products for July 2022 show a decline of $72 million over their highest mark during July 2020, according to the latest cannabis sales reports compiled by the Colorado Department of Revenue, which monitors tax proceeds that fund important earmark programs for state and local governments.
Even figuring in the rapid rise in demand for marijuana that followed the stay-at-home orders and other virus-related shutdowns during 2020, the market has still failed to recover its pre-pandemic strength.
In July 2019, before COVID became a household word, the Colorado market had seen over $166 million in sales — some $30 million of that from medical marijuana sales. Sales this past July were down $12 million over the three-year span, and medical sales were off 40%, just $18 million.
That drop in medical sales may be a consequence of HB21-1317, signed into law a year ago, capping medical concentrates at eight grams per purchase, from a previous 40 grams, said Ryan Shipp, director of retail sales at Native Roots, with 19 outlets around the state, the second largest dispensary chain.
“That is definitely a large part of it,” Shipp said. He added that the process of obtaining a medical card is now more difficult, requiring patients to jump through more hoops, while doctors are being more deliberate about prescribing the drug for individual patient thresholds.
Meanwhile, the gap in pricing between medical and non-medical products has stabilized, prompting some customers to opt for recreational cannabis instead, skipping the hassles required in getting medical authorization.
But recreational sales are down, as well. July marked the 14th straight month showing a year-over-year decline in sales, according to the report.
This year’s inflation and the tighter household budgets that result are also factors biting into cannabis purchases, said Chris Mapson, vice president with Chicago-based ParmaCann, which owns LivWell dispensaries in Colorado. He added that Section 280E of the Internal Revenue Code, which denies some tax deductions and credits to sellers of controlled substances, has put a burden on providers particularly of medical products.
Figuring into that general decline is a loss in out-of-state customers, who had traveled to Colorado for the novelty of legalization, but now have access to pot closer to home.
“We’ve seen a huge decline in out-of-state traffic,” said Native Roots’ Shipp, noting that purchases to customers from Illinois and Texas showed the largest drop. In Trinidad, where Native Roots’ shop is just 11 miles north of the New Mexico state line, the drop in non-Colorado sales was marked, he added.
New Mexico, a shorter drive for Texans, legalized recreational marijuana just a year ago.
State taxes from marijuana sales, combing state sales tax, retail marijuana sales tax, a retail excise tax, and licenses and fees, were off in August by some $7,917,000 over August 2021, according to the report. Marijuana taxes are reported a month ahead of sales.
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