Colorado recently hits its 5-year anniversary since when it legalized marijuana. And the results have been very strong. The Colorado Department of Revenue recently updated its numbers for the past year, and 2018 finished with sales of $1.545 billion, which is only 2.5% up from 2017. However, marijuana sales since legalization have now totaled more than $6 billion.
The numbers are likely a little inflated because when Colorado legalized marijuana it attracted a lot of pot tourists. Now, with as many as 10 U.S. States having legalized recreational cannabis use, there are simply more options for users to consumer in many different parts of the country. Nevada, California and Michigan are just some examples of places people can go to smoke up. In a sense, Colorado’s lost the advantage it had and so that’s why its rate of growth has declined sharply.
In 2015, Colorado saw some months rise more than 50% from the prior year. However, fast forward to 2018 and you’re looking at single-digit growth in most months. There were even a few months that had no growth and one that was down from the prior year.
It’s looking more and more that $1.5 billion might be a bit of a ceiling for the industry in Colorado. However, with beverages not really making a big dent in the industry yet and with the Farm Bill recently passing, we could see more types of marijuana products, which could drive some more growth.
Recreational sales have dominated – but is medicinal where the opportunity is?
Medical marijuana has made up about one-third of total sales during the past five years, generating a little less than $2 billion. Recreational-use sales, however, were more than double that with just over $4 billion in revenue. The popularity of edibles, including cookies, chocolates, gummy bears and other products have helped grow sales in the State over the years. It’s no more noticeable than when looking at the split in sales between medical and recreational segments.
In 2014, medicinal sales made up over 50% of the market that year, but those percentages quickly fell to less than 35% in 2016. And by 2018, recreational sales made up around 80% of the market. There’s no mystery surrounding what’s been driving growth in the industry.
But it also highlights one important consideration – the medicinal market still has a lot more room to grow. Many doctors are still hesitant when it comes to prescribing medical marijuana and many patients are also reluctant to try the drug. The stigma surrounding cannabis is still a very big obstacle and if it can be overcome, it could unlock significant growth potential for the industry.
In 2018, medical sales were the lowest they’ve ever been – at just $332 million. They’ve also declined for two consecutive years. This could be the result of more parts of the country legalizing medical marijuana where patients no longer have to travel to get treatment. Or it could also be that patients are simply not seeing the benefits or being told about the possible advantages of using medicinal marijuana.
Whatever the case, there is still clearly a lot of room for growth in the industry despite Colorado hitting the $6 billion mark, and that’s great news for investors.