Marijuana Industry Group executive director Truman Bradley details the challenges facing the state industry in 2024
Colorado became the face of recreational cannabis when the state launched recreational sales on January 1, 2014. The state’s ebbs and flows often signified the similar fluxes other recreational state markets would go through in the coming years.
But the state has seen a much more dramatic shift in sales than other state markets during the past two years. By the end of 2023, the state had seen a near $700 million drop in sales from its annual high of $2.2 billion in 2021.
Marijuana Venture sat down with Marijuana Industry Group executive director Truman Bradley to discuss the current state of cannabis in Colorado and the potential changes that are coming on the horizon.
Marijuana Venture: What is the current state of the market in Colorado for 2024?
Truman Bradley: The pandemic brought high highs, so to speak, in Colorado. Marijuana was declared essential here after being declared nonessential for an afternoon, and that afternoon, to this day represents the largest single sales day in marijuana history in our state. The day that Denver Mayor Michael Hancock said that the marijuana dispensaries would be shut down.
That decision was reversed a few hours later.
That represents the high mark. Sales in the years since COVID have seen a year-over-year, month-after-month drop.
MV: Why the downturn in sales?
Bradley: A number of reasons including inflation, the high cost of regulations, market maturity and the legalization in other states. We don’t get the cross-border tourism that we used to which has significantly impacted sales in southern municipalities.
It must also be said that one of the reasons for the downturn is oversupply. In the years following COVID, we had the two best outdoor harvests we’ve ever had. That contributed to a lot of cannabis in the system. And as you know, due to the federal nature of cannabis, marijuana can’t cross state lines.
The last reason is the rise of intoxicating products manufactured from hemp. It’s a public safety issue first, but it’s a business issue second.
Those are the reasons for the downturn. Colorado is not a limited licensed state, although at the local level there are moratoria on retail stores in most places. It’s very, very difficult right now in Colorado cannabis, although there are some small signs for optimism.
MV: What about the medical program, how was that affected?
Bradley: In 2021, hurtful legislation passed that put big burdens on the medical market and on medical patients, including requiring doctors to do things that they considered not possible, such as writing a prescription instead of a recommendation. It also required them to recommend specific products as well as a potency level. And in that same legislative session the patient and the cannabis industry’s push for access to telemedicine was defeated. Telemedicine was legal by executive order as part of the COVID safety protocols that the governor put in place. But when the emergency order went away, so did telemedicine. With all of those limitations placed on medical patients, many of them have returned back to the old ways. It’s very expensive to see the doctor and they don’t want to see limitations put on their care for themselves or their loved ones.
MV: You mentioned signs for optimism in 2024. What is going to be different?
Bradley: In terms of the outlook for 2024, I think there are some signs for, I would call it, guarded optimism.
Many producers have right-sized their cultivations, including walking away from hundreds of cultivation licenses. This can be verified by looking at the Marijuana Enforcement Division’s website that tracks active licenses. You can see a drop in hundreds of cultivations across the state. Some of this was going to happen because the 5,000-square-foot generation cultivation facilities just aren’t built for modern cannabis. They’re not efficient enough. The cost of renting a warehouse space has continued to go up and it’s just not worth it to grow in a 5,000-square-foot indoor facility. But we’ve also seen outdoor farms shut down. CuraLeaf bought the Los Suenos outdoor grow facility, which at one time was the largest outdoor cultivation in the state and then less than two years later Curaleaf exited the state.
So, there is less cannabis in the market and we’ve also seen the introduction of use-buy dates and expiration dates on most products which will also help move through some of the backlog.
MV: When were the use-by and expiration dates introduced?
Bradley: The use-by date requirement went into effect on January 1, this year. Another sign for optimism is that a limited number of municipalities are recognizing the challenges facing the regulated industry and are taking steps to streamline regulations and provide some regulatory relief. MIG is partnering with others in industry to run legislation this year to streamline regulations for the cannabis industry, which is a first for Colorado.
MV: What is the legislation?
Bradley: It’s Senate Bill 076. We are seeing the continued expansion at the municipal level of communities legalizing retail sales.
So there’s a little bit of sign for optimism on the ancillary side; as the regulated industry goes, so goes the ancillary companies. The companies that support the industry have also seen decreases in sales and profits, because every single company in this state has had to tighten the belt multiple times.
We lost 10,000 plant-touching jobs last year. That’s about a quarter of the workforce. It’s not a rosy picture for Colorado marijuana right now.
MV: I remember hearing about the exodus of license holders last year. Do you have any idea how many have actually left?
Bradley: In terms of outright businesses walking away from the state, I’m not entirely sure. But in terms of number of licenses surrendered or not renewed, that’s a big number, but there have been some high profile exits — CuraLeaf at least being the biggest one. The mom-and-pops don’t always make the headlines, but they’re leaving as well.
There was one recently in Westword. It was a single store location on Broadway, which is one of the main shopping areas here, they’re going out of business. And 1906 just left the state, Coda Signature just left the state, those are two big edibles manufacturers and there are several other companies that I’m aware of going through a receivership.
MV: For a while it seemed like consolidation was the story over there. Has that dried up? Is there still a good mix of mom-and-pop businesses?
Bradley: I would say yes, but a lot of people are barely holding on right now and I think the COVID federal ERC money is what’s keeping people afloat now. That’s going to come to an end soon.
The thing about consolidation is somebody has to have money to do the consolidating. Right now raising capital in cannabis is harder than it’s ever been and it was always hard. Very few hedge funds got involved in cannabis and, of those that have, there aren’t many deploying capital. Everybody’s waiting for rescheduling. So, if you’re going to consolidate, you have to have cash to be able to do that.
One thing on the horizon that is a potential shock to the system is the second effort for Colorado Springs to go recreational at the ballot in November. That would be a game changer for the customers and the businesses that have been medical.
MV: Why has the city held out against rec for so long?
Bradley: It’s a conservative town. It has several military bases and the former mayor is an absolute marijuana hater. One of the unique wrinkles about Colorado is that the richest person in Colorado is a billionaire named Phil Anschutz. He funds several prohibitionist organizations. You don’t typically see that in the mature states where reefer madness has had the opportunity to dissipate over 10 years.
MV: How is MIG pushing back against that effort?
Bradley: We recently formed a small donor committee and put together an elections committee to start discussing ways to let patients and customers know about the politicians that actually support them and don’t bring reefer madness to the table.
Other things on the radar, not for ‘24, but probably for ‘25, are relooking at Colorado’s hospitality laws at the state and local level. Marijuana hospitality is legal in Colorado, but it’s completely broken. There are less than four licensed hospitality venues in the entire state, and I’m not sure if any of them are profitable.
That has to change, because patients and customers need public places to consume and because it will help destigmatize the industry. It will also help with new customers who would move from alcohol to a product that is demonstrably better, like cannabis. But those folks aren’t necessarily going to be comfortable walking into a dispensary. You would need to see change to change state and local law.
MV: Any other potential changes this year?
Bradley: One of the things that is potentially on the table this year in legislation is a bill that would carve out nearly $3 million of marijuana cash tax revenue to fund the Cannabis Business Office, which does grants and loans for marijuana social equity businesses.
That would be a game changer for a segment of the industry that has not gotten off to a good start.
As we discussed, raising capital and cannabis is darn near impossible. Even if you have a decade of tax returns and sales, it’s literally impossible if you’re a startup.
MV: Are there still new businesses looking to set up in Colorado? Have they all moved on to newer markets?
Bradley: Well, I can’t speak as much to other states. But what I can tell you is there’s a desire to form new and innovative businesses, whether that’s hospitality, delivery, or on the ancillary side. There are some really interesting companies here in the data space, as well as logistics. So the desire is there, but it’s very difficult to raise money and when the margins are as slim as they are right now it’s hard for companies to take a chance on changing the way they do business when all they see is red in their profit and loss statements.
The companies that I see being successful are ones that are on the cost-savings side that allow companies to do more with less.
MV: Has there been a lot of scrutiny put on the MED’s and the need for it?
Bradley: MIG supports a robust regulatory agency. But decade number two of legalization needs to fundamentally look different than decade number one. We know a lot more than we did when Colorado was the first state to legalize. For example, fears of cartels coming in, that’s not a thing. Youth use has not gone up.
The cannabis industry in Colorado has set records for compliance when compared to other regulated industries such as liquor, gaming and tobacco. So you have an extremely compliant industry and you have an industry that has proven to be safe. Much safer than the Chicken Littles would have had you believe back in the day. Now that it’s a mature industry, other states have come online, we know what this looks like. It is critical to right-size both the regulations and the regulatory bodies if this industry is going to continue paying their bills.
This interview has been edited for length and clarity.