Colorado’s cannabis industry is evolving with the legalization of marijuana in neighboring states and the adoption of CBD in other states where the drug is not legal.
Giants in the cannabis industry – as well as other large companies – are scooping up smaller retailers, finding ways to operate with fewer employees and tightening their belts to address declining sales, said some Durango-area dispensary managers.
But some industry workers say the decline in sales may be leveling out after spiking during the COVID-19 pandemic, when many people stayed home social distancing.
Declining sales are reflected in year-over-year state and local sales tax revenues. State marijuana sales tax revenues peaked in 2021 at nearly $423.5 million collected over the calendar year, Colorado Department of Revenue data show.
In the years following, the revenue stream fell 23% to $325 million in 2022, then almost 16% to $274 million in 2023 and another 7% to $255 million last year.
Marijuana sales tax revenues in the city of Durango also peaked in 2021 at $659,295 and have since declined to $349,239 in 2024.
The state distributes the majority of its marijuana tax revenues to its Marijuana Tax Cash Fund (for health care and health education, substance abuse prevention and treatment, and law enforcement programs); and the remainder of revenues to local governments; a state public school fund; and the state general fund. The city of Durango, on the other hand, doesn’t allocate marijuana tax revenues for specific uses.
All city marijuana tax revenues are received into the city’s general fund, which funds police, parks and recreation, community development and internal services – among other uses, said Tom Sluis, city spokesman.
He said the reduction of marijuana tax revenues in recent years doesn’t have a noticeable impact on city services or programs, given it’s such a small drop in the city’s general fund bucket.
“This is not a small amount of money, but it represents less than 1% of the total General Fund revenue for 2024, which was $48 million, and is 0.003% of the city's $132 million total revenue in 2024,” he said. “We always balance the budget based on revenues and expenses, according to the priorities required by the public, but this nominal decrease in revenue is not going to affect our operations.”
But reduced sales has impacted Durango retailers.
“A number of different states surrounding Colorado have gone legal,” said CJ Poulin, Durango Rec Room dispensary manager. “So the people from those states and the people from the states surrounding those states no longer feel as though they need to come to Colorado to purchase legal marijuana.”
When licensed cannabis sales began in Arizona and New Mexico in 2021 and 2022, respectively, suddenly those states’ residents no longer needed to visit Durango for the sole purpose of purchasing marijuana. Then Missouri began selling recreational pot in 2023.
Poulin said Arizona and New Mexico joining the legalization bandwagon hit the Rec Room’s sales the hardest. Texans, for example, no longer need to travel to Durango or Colorado generally for their weed. But Missouri’s entrance onto the recreational cannabis scene “ate up” former Kansas customers too, he said.
Rocky Mountain High Manager Ken Aab said sales have been declining since the COVID-19 pandemic, after sales initially spiked because people were isolated and were encouraged to “buy locally” to boost the economy.
“It overinflated the market. During the COVID period, we were sitting at home, nothing to do,” he said. “We were getting bonus checks, told to go spend money in the economy. There wasn't a lot of places open.”
He said CBD (a chemical in cannabis plants called cannabidiol that does not cause a “high” and is applied in other health uses) is gaining acceptance in states with marijuana prohibitions, and even that may be reducing the number of cannabis customers.
“Newer products are topicals, like patches, for instance, as well as newer edible options like colas, drinks, fruit punches, that kind of thing, and a higher saturation in the gummy market of variety,” Poulin said.
He said that doesn’t mean consumers are moving away from “combustibles” like smokable weed, but there are many more ways of ingesting THC these days.
Aab said larger companies are buying retail stores and capturing larger shares of the cannabis market, just like what often happens in other industries.
Aab said the healthiest thing for the industry is the legalization of cannabis at the federal or national level.
“We need a full-fledged national legalization program so that we can be a standard business market,” he said. “Because then you’ll be able to get supply where supply is cheaper.”
Production costs in the state of Oregon, for example, will always be cheaper than the costs in Colorado, he said. Oregon is “gluttonous” with low-priced, good quality cannabis. If it were easier for a Durango dispensary to purchase product from a source in Oregon, that dispensary would be better positioned to offer lower prices and thus compete with businesses on a countrywide level.
That isn’t an end-all, be-all solution to Colorado’s cannabis growing pains, he said. But it is an important factor.
cburney@durangoherald.com
