Colorado marijuana market seen ‘constrained’ next year amid license decline

A recreational marijuana dispensary in Rifle in 2015.Photo byThomas Cizauskas via Flickr

Marijuana sales in Colorado are looking like they’re going drop for the second year in a row in 2023, and a new report doesn’t expect next year to be much better.

Year-to-date marijuana sales through September are down 13% to less than $1.2 billion from the same period in 2022, data from the state’s Marijuana Enforcement Division show.

Part of the reason sales are continuing to slump may be that the number of licenses is falling, according to a 2024 business outlook published this week by the University of Colorado Boulder.

As of September, total active retail establishment licenses—those with sales during a given month—had fallen 1.7% year-over-year to 912, according to an online data dashboard from the enforcement division and the university. Meanwhile, total occupational licenses were down more than 14%.

“The overall decreasing number of licenses available to sell cannabis products could be a contributing factor to the declines seen in sales through September 2023,” the university’s report said.

Other factors have also been contributing to the sales slump in Colorado.

Last year, statewide marijuana revenue fell for the first time since retail sales began in 2014, declining roughly 20% as competition from the illegal market combined with legislative limits on medical purchases, inflation sapping personal spending, lower marijuana prices because of a supply glut and legal weed in other states reducing marijuana tourism.

The business experts at the university don’t expect things to get much better next year.

“After decreasing in 2023, market growth is expected to remain constrained in Colorado in 2024,” the report said.

Meanwhile, state marijuana regulators have ramped up enforcement actions, with the Lakewood-based Marijuana Enforcement Division issuing 19 health and safety advisories so far this year, compared with 11 for all of 2022.

All the while, legal cannabis businesses in Colorado, like in other states, labor under an Internal Revenue Service tax code that doesn’t allow them to take deductions like other businesses, making legal cannabis much less competitive against weed sold illegally. Cannabis research firm Whitney Economics expects cannabis operators will have to shell out more than $2 billion in extra taxes in 2023 if marijuana remains subject to that tax provision.

Colorado Gov. Jared Polis on Tuesday in a letter with other governors urged the administration of President Joe Biden to reclassify marijuana as a less-addicting drug, a move that would allow marijuana businesses to take normal tax deductions.