Colorado Marijuana Enforcement Division’s 2019 Regulated Marijuana Market Update Indicates Market Maturity

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DENVER, Monday, October 19, 2020 -- The Colorado Department of Revenue (DOR)’s Marijuana Enforcement Division (MED) today released the 2019 Regulated Marijuana Market Update. This year’s Update shows the regulated marijuana market continues to meet resident and visitor demand, concentrates continue to gain market share in the legal marijuana marketplace, Colorado remains a competitive place for marijuana businesses and price stabilization suggests market maturity. New to this year’s report is an in-depth analysis of individual sales transactions comparing the medical and adult-use markets and includes additional charts and graphics that help illustrate marijuana production and sales trends.

“It is more important than ever to understand the landscape of Colorado’s legal marijuana market using sophisticated data analysis,” said Jim Burack, MED Director. “This report serves as a vital tool to regulators, policymakers, public health experts, stakeholders and the public in providing insights on how market share, price and potency evolve over the years.”

Key findings of the study include:

  • Colorado’s marijuana market has matured, given the prices first bottoming out in Spring 2019 and now remaining steady after a gradual increase. Additionally, the slow decline in the number of new business licenses, supply and cultivation volume showing steady patterns throughout the year, and slowing growth overall supports evidence of market maturity. 
  • The concentrate market continues to grow. Concentrates now make up over 32% of the adult-use market share, compared to 46% for flower and 13% for edibles. In 2017, concentrates made up about 23% of the adult-use market. Concentrates, which are higher in potency than flower, are now being sold at roughly the same price per dose as flower. The price per dose analysis is conducted by converting concentrate to a flower equivalent number. 
  • Though consolidation continued in 2019, Colorado remains a highly competitive marketplace for marijuana businesses. The largest five operators accounted for 18% of total market sales in 2019, while the top 10 operators accounted for 25% of sales (up slightly from 23% in 2017).
  • New to the report this year is an analysis of individual sales transactions. Data shows that the average medical transaction is almost double the average adult-use transaction. This may be consistent with higher purchase limits allowed for medical marijuana patients. While adult-use marijuana sales are still increasing, medical marijuana sales have been relatively steady for several years.
  • The total amount of regulated marijuana that is seized, destroyed, does not meet quality assurance standards, or is otherwise taken out of the supply chain has continually decreased over the last three years. This ‘residual’ as a percentage of the inventory has declined each year and now represents only 3% of the total supply, down from 5% in 2017. This measure indicates continued improvement in compliance, more accurate reporting, better internal controls, better use of the inventory tracking system by state and industry, and an effective regulatory and enforcement system. 
    • The gains in compliance are notable when considering the overall supply increased over the same period.
  • Per capita sales numbers were evaluated, and there are higher sales numbers in counties with a high number of tourists and visitors from out of state, as well as in some border regions. Monthly adult-use sales per capita for Colorado was $21.68 in 2019.
  • Overall, marijuana cultivators are not utilizing the maximum plant count allocations authorized by MED, which indicates licensees are engaging in responsible production and cultivation practices, and that the market appears to adjust appropriately based on supply, demand and seasonality. Actively monitoring production management remains an MED priority to discourage over-supply and right-size cultivation levels. 
    • The medical marijuana industry has historically utilized 40-60% of the possible allocations, declining from 60% in 2017 to 42% in mid-2019, but then slowly increased to 48% by the end of 2019.
    • The adult-use marijuana industry has utilized 38-45% of the available allocations, with seasonal influxes likely driven by outdoor cultivations during the growing season.

Once again, the study authors from the University of Colorado Leeds School of Business and MPG Consulting used the measure they created called ‘flower equivalent,’ which allows for an effective comparison of supply, demand, potency and pricing across different product types such as flower, edibles and concentrates. Flower equivalent converts non-flower sales to consumers into weight-based units of flower. 

In 2019, regulated cultivators in Colorado produced 552 metric tons of flower equivalent and medical and adult-use retailers sold 357 tons to consumers, which represent a continuation of a steady increasing trend.  

Federal survey data suggests that the expected annual resident and visitor consumption could be estimated between 223 and 275 tons. The difference between the amount sold and the consumption estimate is partially due to the difference between the amount purchased versus the amount consumed. With the market trending towards concentrates, some individuals and visitors are likely to make purchases that exceed the amount they consume, which remains on their shelves at home or thrown away before consuming. Additionally, consumption of non-flower products is not captured in the Federal survey data, which leads to underestimating of resident and visitor consumption estimates, especially legal in-state purchases made from out-of-state visitors who come to Colorado specifically for marijuana.

“By all measures the Colorado regulated marijuana market reached the next step in its evolution by year end 2019, it has become more productive, efficient and compliant,” said Adam Orens, Managing Director of MPG Consulting. “The sales and price figures show that a well-structured market can replace the illicit market for residents and visitors, and provide an economic driver for the state. These trends have largely continued throughout this year.”

This study was commissioned by DOR and MED. The Business Research Division of the University of Colorado Boulder and their subcontractor MPG Consulting jointly produced the analysis and report. As part of the study, the authors assessed the data from METRC, Colorado’s marijuana inventory tracking system.

To view the complete 2019 Regulated Marijuana Market Update and supplemental materials, visit MED’s website: