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A Snapshot Of America's Medical Marijuana Markets: Colorado

April 21, 2020 12:37 pm
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A Snapshot Of America's Medical Marijuana Markets: Colorado

Colorado was the first state to begin adult use sales in 2014. The Centennial State was an early adopter of medical cannabis as well, with voters passing a ballot initiative in 2000.

Like other states that adopted adult-use laws, Colorado has seen declines in medical patient enrollment and projected sales over the years. Compared to other decreases, however, Colorado's medical marijuana market appears stable, yet declining, in the years to come.

The state, with some 5.9 million citizens, continues to tweak its regulations, which include a sales, excise and wholesale tax on products of 2.9%, 10% and 15%, respectively.

Colorado serves out-of-state patients with reciprocity laws, helping its medical market sell $332 million in products during 2018, according to Arcview Market Research and BDS Analytics.

The report projects that figure will decline to $235 million by 2024.

Businesses are not required to be vertically integrated. The state does, however, place restrictions on out-of-state workers and owners.

The out-of-state rules may be revisited as the nation’s markets mature.

Adult Use Impacts Medical Market

As is the case in each state, Colorado’s medical market took a hit as adult use arrived in the state. The market’s decline has not been as staggering as in some other states.

“Colorado intelligently created two markets, medical and recreational, with different regulations and supply chains,” said Michael Mangi, director of solutions consulting at Denver's Flowhub.

“This allows medical patients to access higher potency products, and stores to cater to medical patients.”

These circumstances helped maintain the integrity of the state’s medical market while allowing a robust adult use market to flourish, Mangi said.

The market for medical cannabis is shrinking to a degree. State program statistics reveal that 86,443 patients and 6,488 caregivers were active in the program during March 2019. Those figures are now 81,722 active patients and 6,287 caregivers.

The decline likely stems from a well-represented adult use marketplace that offers an array of product options. While patients can benefit from more significant purchase limits, the likelihood is that many don't see the hurdles to enroll and renew a license as being worthwhile. 

"There are many medical patients that have decided not to renew their medical card because adult use cannabis is so widely available, and the diversity of products and cannabinoid content is sufficient for their needs,” said Vangst COO Christine Hodgdon.

Colorado Slow To Roll Out Cannabis Delivery

By and large, participants in Colorado’s medical market that Benzinga spoke with view it in a positive light.

For Vangst's Hodgdon, job creation and tax revenue have been standout achievements. As of March, the state has collected $1.28 billion in taxes and fees from the medical and adult use markets since 2014.

The staffing executive also highlighted the decriminalization of marijuana as a significant step in reform.

“While there's much more work to be done when it comes to expungement for previous cannabis-related charges, decriminalization is the first small step in the right direction.”

Colorado still has points worth addressing in the market, according to some. Hodgdon’s earlier point about shifting away from medical products was echoed by Jeffrey Zucker, co-founder and president of Green Lion Partners.

"It would be interesting for the state to incentivize cannabis companies to create more differentiated products on the medical side that apply to specific ailments," Zucker told Benzinga.

That said, he said he understands there are limitations, including extensive funding.

Flowhub's Mangi highlighted market stagnation as Colorado's biggest pain point.

"The more I travel to other states, the more antiquated Colorado’s market looks to me," he said.

Mangi highlighted buying experience, product selection, consumption lounges and delivery as specific factors. 

"I see states like Michigan and California allowing businesses to be more creative, leading to a better customer experience and a more dynamic market," he said. 

At the same time, Mangi said Colorado is a well-run market that is more stable than many others, with a deep talent pool. 

Another key concern in the market is delivery. Delivery was rolled out this year and limited to two cities. 

Boulder's The Dandelion dispensary, owned by Native Roots, was the first to receive a delivery license

What’s Next For Colorado 

Recent developments have Colorado looking at reform and public concerns.

The reform includes chances to address the COVID-19 pandemic in the cannabis space. While the state has been chided for its slow rollout of delivery, Gov. Jared Polis' March 20 executive order helped ensure dispensaries and customers can obtain product while adhering to social distancing protocols.

The governor signed another executive order that urged dispensaries outside of Denver city limits to pivot to curbside pick-ups until April 10 or longer.

In non-COVID-19 news, the Denver City Council approved a research license in April as the city aims to update its cannabis business laws. The City Council also approved a social equity plan aimed at issuing additional business licenses to minority applicants.

Even as the virus continues to affect the nation, Colorado and its municipalities appear to continue researching, revising and advancing the cannabis market.

Related Links:

Cannabis Sales Rise 57% In Colorado During Pandemic

Medical Marijuana Sales Decline Continues In Colorado As Recreational Weed Disrupts Market  


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