Colorado sales and budget projections show that the growth of the marijuana industry is finally flattening after the sales spurt from COVID-19.
Unlike much of the economy, the cannabis industry benefited largely from the COVID-19 pandemic, with Colorado pharmacies breaking records on their way to sales of nearly $ 2.2 billion last year. Those strong sales continued through 2021, but as the weather warmed and local gathering restrictions were relaxed, pharmacies became less active.
After six straight years of annual growth in June, July, and August, pot sales fell year-over-year in the summer of 2021, according to data from the State Marijuana Enforcement Division, and state economists are predicting further contraction. The Governor’s Office of State Planning and Budgeting’s most recent quarterly economic forecast found that Colorado marijuana tax revenues fell nearly 6 percent for fiscal year 2021-22, according to “relatively weaker surveys than expected in July and August.” By 2024, sales are expected to grow again – albeit at a slower pace.
“There was definitely a COVID bump; I think that’s pretty clear,” said Truman Bradley, executive director of the Marijuana Industry Group. “It makes perfect sense: all the bars and concert halls were closed. People couldn’t get together and there just weren’t a lot of things Coloradans could do.”
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Although the governor’s office report says more data is needed to draw firm conclusions about the slump, the theory suggests that home cannabis use in Colorado will have declined in 2021. Outdoor use by residents and tourists increased over the same period, the report adds, pointing to increased sales rates in mountain towns – but that wasn’t enough to counter the lower numbers of people who smoked weed at home in Denver.
As CEO of Slang Worldwide, a marijuana holding company that owns multiple brands in Colorado, Chris Driessen must oversee sales trends in order to position and label Slang’s subsidiaries. According to Driessen, the plateau was expected by the majority of the cannabis industry, but it could be more complicated than getting people back outside. Driessen has found that cheaper products have been bought in higher quantities since 2020 and believes consumers have become more spending conscious in the face of income insecurity.
“People have become more aware of what they are spending, but they have been spending more overall because they have been consuming more,” he says. “But now people are working less from home. We are seeing this eviction moratorium and unemployment benefits end, and people will pay more attention to their disposable expenses as their workload increases.”
Marijuana sales in Colorado from 2014 through July 2021.
Colorado Marijuana Enforcement Division
Despite the slowdown, marijuana business owners still have cause for optimism, according to Driessen, pointing out that Colorado tourism, a big driver of pharmacy sales, has still not fully returned since the pandemic. Bradley sees more long-term potential after a “very strange” year.
“It’s not going to go up forever, but as people move away from other substances like alcohol, cannabis is becoming increasingly popular. The state is also growing in population, and tourist numbers are typically large for Colorado. I don’t understand. These three trends are slowing down, so I’m optimistic about cannabis sales, “predicts Bradley.
The marijuana industry is also making a comeback in the labor market. Fall sees an increase in the number of temporary workers helping with the outdoor harvest every year, but business owners are struggling to fill those positions this year, according to Veridian Staffing, a recruiting agency for marijuana companies.
According to CEO Kara Bradford, Viridian noted growing staffing needs in the Colorado marijuana industry in July, with a particularly large need in Denver. This has led to a demand for higher wages among marijuana trimmers and harvest workers.
“[Marijuana workers] appear in gastronomy and service, where they don’t necessarily get the same hourly rate, but a lot of tips. So we’ve talked to some of our customers about considering an hourly wage bonus for employees who do a good job at harvesting and trimming, ”she explains. “We have been in an employer market for so long, and now we’re getting into a situation where people are choosing not to go back to work for various reasons, and some workers have just moved away during COVID.”
Rural businesses with a smaller labor pool in areas with lower cost of living could be even more affected. Driessen, who oversees slang’s partnerships across the state, says he knows about marijuana manufacturing facilities in Copper Mountain that closed in 2021 due to staff shortages.
The trend towards higher wages is another sign of the industry’s development, but it is also leading to lower profit margins, Bradford explains. While new to Colorado marijuana, it could be a necessary growing pain for business owners.
“We’re watching it go from state to state. I think Washington and Colorado and to some extent California and Oregon are experiencing this scarcity. When other markets go online, they go through similar changes, ”she says.