Six years after Colorado launched the first legal adult use cannabis sales in the world, a new report suggests the state’s cannabis market has matured.
On Monday, the Colorado Department of Revenue’s Marijuana Enforcement Division (MED) released the 2019 Regulated Marijuana Market Update, which provides a clear snapshot of the state’s cannabis industry. The report, produced by researchers from the University of Colorado Leeds School of Business and MPG Consulting, included data from METRC, the cannabis inventory tracking software used by the state.
Three major takeaways: the regulated adult use cannabis market is meeting the demand of both residents and tourists; demand for cannabis concentrate products is rising; and the stabilization of prices points toward maturation of the state’s market.
“It is more important than ever to understand the landscape of Colorado’s legal marijuana market using sophisticated data analysis,” Jim Burack, the director of MED, said in a statement. “This report serves as a vital tool to regulators, policymakers, public health experts, stakeholders and the public in providing insights on how market share, price and potency evolve over the years.”
Researchers note two indicators of market maturity. First, cannabis prices “bottomed out” in the spring of 2019, and, while they have since experienced a slight bump, they have otherwise stabilized. Second, the number of people seeking cannabis licenses has slowed.
Notably, cannabis concentrate sales are rising. In 2017, cannabis concentrates comprised about 23% of sales, while the most recent figures show concentrates representing 32% of sales. And, sales figures overall continue to climb: in July, the state saw more than $200 million in cannabis sales, an unprecedented level.
Which type of customer is buying more cannabis these days, medical or adult use? The data show that the average medical patient is buying almost twice as much as adult use customers, though “this may be consistent with higher purchase limits allowed for medical marijuana patients,” the report notes. And while the number of medical patients buying cannabis has been stable for several years, the number of adult use customers continues to climb, perhaps a nod to visitors or tourists. On the tourist note, regions that are hotspot tourist areas also saw more cannabis sales.
Compliance among legal operators is rising, too. The report highlights that the “total amount of regulated marijuana that is seized, destroyed, does not meet quality assurance standards, or is otherwise taken out of the supply chain has continually decreased over the last three years.” The report also noted increased compliance and more accurate track-and-trace, and that the “gains in compliance are notable” because the state-licensed entities produced more cannabis and cannabis products during this time period.
This report comes on the heels of the state’s adoption of permanent rules on residency requirements and social equity, which will transform the state’s cannabis industry. After hosting many public hearings, MED filed permanent rules earlier this month, including for HB20-1080, which eliminates the residency requirements for employees of licensed cannabis businesses, and for HB20-1424, a bill aimed at providing “direction and authority” to create a social equity program. These rules will take effect on January 1.
(Read Cannabis Wire’s extensive coverage of Colorado’s efforts to establish a social equity program here, here, and here.)
Also, a new law that went into effect in 2019 that opened the state’s industry to out-of-state investors. This, as Cannabis Wire has reported, led to a series of acquisitions across the state.
“Though consolidation continued in 2019, Colorado remains a highly competitive marketplace for marijuana businesses,” the MED report notes. “The largest five operators accounted for 18% of total market sales in 2019, while the top 10 operators accounted for 25% of sales (up slightly from 23% in 2017).”
