Amid layoffs and falling sales, Colorado’s cannabis industry grapples with an economic downturn
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Jonathan Spadafora knew that April 20, 2022, the cannabis high holy day, when used for Colorado’s marijuana retailers, failed to wind up. Across the state, dispensary sales fell nearly 25 percent compared to 4/20 a year ago. But it wasn’t until last May, when demand continued to decline, that Spadafora, president of Veritas Fine Cannabis, realized the industry was in a free fall.
Two years after legalization, the first time since the sale of licensed recreational weed began in Colorado in 2014, Centennial State’s cannabis sector is experiencing a prolonged recession. Mid-2022 saw sales decline for the fourth consecutive quarter, a nearly reversal of record-setting revenues the industry saw in the early days of the pandemic. (The medical and retail sectors have experienced roughly similar slowdowns.) In response to declining demand, dispensaries that had stockpiled for 4/20 found themselves stuck with excess inventory and fewer purchase orders to producers such as Veritas. Turns out, which flower and pre-rolled additions to stores across the state. Large companies are also struggling; The chains Buddy Boy and Tweedleaf closed seven stores each during the summer.
Spadafora believes that several factors have contributed to the tailspin of cannabis. To start, the pandemic boom was a bubble driven by the fact that people were stuck at home – and often bored or stressed. “People weren’t in the office,” Spadafora says. “They were at home and had the ability to roll a joint and do their emails all day.” Then there were stimulus checks, which helped fund Noss’s run with total sales hitting an annual peak of $2.2 billion in 2021. Fast-forward to today, and people are worried about inflation, Spadafora notes. In addition, nine more states have legalized recreational weed during the past two years, making a dent in Colorado’s cannabis tourism trade, says Truman Bradley of Denver-based Marijuana Industry Group, a cannabis trade association. New Mexico’s market entry in 2021 has been particularly painful, with cannabis sales down 40 to 50 percent in Colorado’s southern border towns.
Graph Illustration by Sean Parsons
Veritas, one of the state’s larger marijuana growers, couldn’t cope with a downturn without size: In June, the company decided to close one of its three farming facilities and lay off 33 staff members—its employees. about a quarter of the number. “It’s hard because it wasn’t the people who were making the mistakes,” Spadafora says. “I think one thing we’ve learned is that Colorado isn’t a $2.2 billion market. It’s probably a $1.8 or $1.7 or $1.6 billion market.” Producers and sellers alike have to expect the market to collapse before their companies go up in smoke.
Read also: 'Wonderful': Cannabis sales in New Jersey bring in excited shoppers
This article was originally published on 5280 November 2022.