July 11, 2013

Latest Colorado Retail Marijuana Sales Estimates: $291 Million, With 44% Generated in Denver

coloradocannabis

How much revenue will recreational marijuana sales generate in Colorado?

It’s the million-dollar question for investors and entrepreneurs hoping to get involved in this promising new industry, as the size of the market will dictate the level of business opportunities.

State and local officials are now taking a stab at answering that question as they look to project tax revenues.

The Colorado legislature estimates that annual recreational marijuana sales will total $291 million statewide next year, while local officials project that Denver will account for $128 million (or 44%) of that total, according to data provided by the city this week.

The estimates closely mirror (but do not include) the current market for medical marijuana. Sales of medical cannabis, edibles and related products via dispensaries totaled around $200 million for fiscal year 2012, and MMJ Business Daily expects they’ll reach somewhere between $250 million and $300 million for fiscal year 2013, which ended June 30. Colorado will release data for that period in the coming weeks.

Denver currently accounts for roughly 44% of the state’s total medical marijuana sales, so local officials are using a similar percentage for estimating the city’s take of recreational sales.

Several other groups and organizations have released their own estimates for adult-use marijuana sales in Colorado:

– The Marijuana Business Factbook, published by MMJ Business Daily, estimates that annual sales will total around $500 million in the first full year of operation and could hit $1 billion in a few years when the market is fully functioning.

– The Colorado Futures Center at Colorado State University recently released a report estimating retail sales via state-licensed shops at $605 million annually.

– A Colorado Center on Law and Policy from last fall on the tax impact of Amendment 64 projected that sales would come in around $300 million annually for the first few years of the program.

The numbers vary greatly, with the lowest estimate roughly half of the highest projected total.

But making projections in this industry is a challenging task, given the huge number of unknowns as the state enters uncharted waters.

“It’s very difficult to predict what the adult use market is going to look like when there’s so many outstanding variables, such as localities having the option to allow the businesses or not, tourism and not knowing whether the legal market is going to successfully replace the black market,” said Mike Elliot, director of the Medical Marijuana Industry Group, a trade organization in Colorado.

It’s even more challenging now that Colorado will allow visitors to purchase marijuana, which opens the door for cannabis tourism. Visitors to Colorado spent nearly $16 billion in 2011, according to the latest available data from the Colorado Tourism Office. Even if cannabis sales account for 1% of that total, the industry would generate $160 million from visitors alone.The numbers could be much higher if a large number of tourists from across the world start flocking to Colorado specifically to use marijuana.

Additionally, it’s unclear how much overlap there will be with the current medical marijuana customer base – so recreational sales could siphon off revenue from the medical side.

Washington State, which also legalized marijuana for adult use, released a report last year estimating about $1 billion in sales there, though other projections put the total much lower.


2 Comments:

  1. The problem with these initial numbers is that once cannabis is both legal (state and federal) and available the risk that keeps the price currently elevated is eliminated. With reduced risk comes reduced prices. The black market prices will drop to retain sales and stores will have to compete with that price to stay in business. Eventually the risk of illegal sales versus sanctioned sales will equal out at a significantly lower price than current street prices. That is the price these estimates should be basing taxation values on. And maybe dollars should be matched with corresponding quantities of cannabis and extracts. The dollars are not comparable because there are risk dollars and post risk dollars.

  2. Before projecting revenue from general retail sales of cannabis to adults, it would be necessary to know what the effective retail tax on cannabis will be. The prohibitionists are pursuing the strategy of trying to tax legal cannabis out of existence. The General Assembly ignored the Constitution’s requirement that it levy up to a 15% excise tax on wholesale transfers of cannabis, and has referred a single initiative asking voters to approve the full 15% excise tax and a 10% sales tax surcharge on cannabis too. I will vote against these exorbitant, conflated taxes, which are not what we authorized last November. Not to be outdone, Boulder and Denver contemplate charging up to an additional 15% sales tax surcharge too — the effective retail tax on cannabis could be 40% or even higher, which will at least perpetuate the black market (which suits the prohibitionists just fine; the GA reinstituted all the felony penalties for cannabis, despite the facts that We the People just declared that cannabis “should be regulated in a manner similar to alcohol” and that violations of the Liquor Code are just misdemeanors). There is no justification for any of these taxes whatsoever — the State should save money by not trying to suppress the use of cannabis and by not persecuting those who choose to use it, but that is not the plan.

    Voters should repudiate the extraconstitutional State sales tax surcharge, and since the General Assembly improperly combined it with the excise tax voters authorized them to request of voters, the Supreme Court should throw out the GA’s referred initiative; failing that, voters should vote against both. Denver’s claims about revenue versus expenditures, and its lunatic proposal to give Denver Health over $2,500,000 to tell consumers that cannabis is harmful are just contemptible; voters should reject any sales tax surcharge. If I could vote to deprive the City of all sales tax revenue from general retail sales of cannabis to adults, I would, because Denver government has already demonstrated bad faith and evinced the determination to misspend any such revenue — it does not deserve a single cent. Denver voted two-to-one to legalize retail sales of cannabis to adults, but because it returns idiot prohibitionists like Jeanne Faatz to the City Council time and again, its supposed representatives are sure that the electorate will not hold them to account for trying to sabotage the legal market with excessive taxes.

    Cannabis is not remotely comparable to tobacco as a threat to public health, and the City’s proposed taxes will not redound to the public health or any other public good anyway. State and local governments in Colorado are torn between their hostility towards cannabis and their insatiable greed, but the fifteen percent excise tax on cannabis and the tax applied to the sales of most goods would suffice both to regulate the sales of cannabis and provide significant revenue besides — first we need to reject all the excess taxes, then we need to reject all those in government who proposed them. The ruling class in Colorado is so stupid that it would kill the goose that lays golden eggs before obtaining even one

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