Legal cannabis sales are on a bad trip in the latest sign of a reckoning for the once-booming industry
Legal cannabis sales in states including California and Colorado have tumbled amid the uncertain economy and the end of the pandemic-fueled boom, adding to the industry’s long list of problems after years of euphoric growth.
Taxable sales in California fell 8.3% last year to $5.3 billion, the state department that administers the collection of business taxes and fees, said last week. Part of the decline was due to the elimination of a cultivation tax,
In Colorado, marijuana sales fell 20% to $1.8 billion over the same period, according to the state revenue department. Meanwhile, in Washington state, retail revenue for fiscal 2022 fell 8% to $1.4 billion.
The annual declines, the first ever for all three states, marks a huge turnaround from rapid growth in prior years. The initial optimism gave rise to a growing number of retail stores, a mini-industry of suppliers of cannabis paraphernalia, and an army of wholesale cannabis producers.
During the pandemic, when many people worked from home and had limited entertainment options, cannabis sales ballooned. At the same time, state coffers filled with increasing amounts of tax revenue from cannabis sales.
But that changed last year when the economy soured, causing some people to cut back on their spending. Additionally, many workers returned to the office, leaving less time for using recreational cannabis.
Those factors, plus growing competition from unlicensed cannabis sellers that charge less for their products, has created a huge drag on legal pot sales. Retail stores, which like any kind of business, must deal with fixed costs like rent, are facing particular pressure.
For example, MedMen, a cannabis retail chain known as the “Apple store of weed,’ has warned investors that it’s near financial collapse. It was once worth $1.7 billion as a publicly traded company in Canada, but it’s now worth just $33 million and has closed a number of its stores in an effort to cut costs.
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