For the fourth consecutive quarter, The Colorado Department of Revenues posted negative comps both QoQ and YoY. For the six months ending June 30th, sales have fallen 21% to $906M mostly driven by a precipitous drop in Medical Marijuana (-46% ) due to new regulations effective Jan 1 that limits daily purchases. The results are generally consistent with reported Q2 results from those pubcos that have exposure to the Colorado market (including, but not limited to, Schwazze, Columbia Care, Curaleaf).
We think this year will likely be the first in which total sales are down YoY (in 2021, revenues were essentially flat). The drop off is not surprising given that cannabis is now fully legal in 17 states (albeit not all are up and running) and 2022 marks the state’s 9th year of recreational use sales. The challenges that many operators are faced with is highlighted by reports of layoffs and facility shutdowns compounded by a slowing economy with lower discretionary spending levels.
STATE OF COLORADO – CANNABIS REVENUES ($MM)
Cardholder counts have fallen from 85.1K in January to 76.5K by the end of June (peaked at 117K just prior to the implementation of rec in ’14) . The average patient spend per month has also dropped to ~$250 in H1 ($382 in 2021 and $444 2020). As we have written about in the past, it is likely that, prior to new regulations effective Jan 1, medical patients made excessive purchases for resale into the “gray” market – this is suggested by the higher average monthly spend.
In 2015 we published, “Colorado: Year 1 – The Co-existence of legalized Medical and Recreational Use Marijuana Markets” and asserted that “ investors may call attention to the inherent evolution of consumer spending preferences in a dual marketplace, as the easing of recreational use restrictions has disrupted the growth rate of the presently constituted medical marijuana market. That said, we believe that the medicinal use market will recalibrate when the pipeline of new, more targeted medications become available and as the medical profession gains more comfort in “pushing” a marijuana treatment rather than a patient having to “pull” a recommendation from a doctor.
STATE OF COLORADO – MEDICAL MARIJUANA STATISTICS
