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On Jan. 1, 2014, dispensaries opened their doors to eager crowds and Colorado became the first state—and the first place in the world—to sell regulated recreational marijuana. Ten years later, the state’s marijuana industry appears to be experiencing some growing pains.Ìý

From January 2014 through August 2023, total sales of marijuana, including medical and recreational cannabis, surpassed $15 billion, according to the Colorado Department of Revenue. In 2023, sales were $1.3 billion as of the end of October, trailing 2022’s $1.77 billion in sales and 2021’s $2.2 billion in sales.

Meanwhile, prices are decreasing and marijuana business licenses are on the decline. The average price per gram of recreational marijuana flower was $4.83 in 2021, $3.84 in 2022 and $3.43 in 2023. The state issued 685 licenses for the year as of June 2023, a 10.7% decrease from a year earlier. The number of renewals has decreased more than 11%, and the number of licenses expiring increased almost 9%.

The Business Research Division at Leeds School of Business maintains a for Colorado’s Marijuana Enforcement Division that tracks everything from sales, pricing and licensing to potency and contaminant testing.

Brian Lewandowski, executive director of BRD, recently sat down with ÍÃ×ÓÏÈÉú´«Ã½ÎÄ»¯×÷Æ· Today to discuss the state of the industry.

Since sales went live in 2014, how would you describe the rollout and performance of recreational marijuana in Colorado?

Since Colorado voters approved Amendment 64 in 2012, legalizing recreational use of marijuana by adults, the state had some time to prepare. The Marijuana Enforcement Division was charged with regulating this brand new industry, and they had to decide how many licenses to issue. They were very methodical about this.Ìý

Colorado imposed a vertical integration requirement where they issued a license for a business to be both a grower and a wholesaler. The state also signed up with a company called Metrc and established seed-to-sale tracking, which meant that plants have barcodes, which travel all the way to the customer sale.Ìý

Burdens were placed on the cannabis industry, for good reason—it was a brand-new market with a restricted drug becoming legal. So all of these restrictions were put in place, which meant extra costs on the industry. Not only for complying with the regulatory environment, but also companies are not able to write off operating expenses to reduce their taxable income. Anyone who wanted to work in the industry had to go through a background check, so you had to find people who could legally work in the industry.

So it ended up a very costly business. But the first movers also did very well. We saw people become millionaires overnight. And we saw an explosive growth in sales. We saw a little bit of a waning in sales pre-pandemic, but then we sawÌýa real surge in sales during the pandemic.

Where does the industry stand now?

When industries mature, it gets a little bit harder to be profitable. I think we've seen some of the marijuana tourism wane a bit as other states have legalized.

We've also seen some companies struggle in Colorado. As the industry has matured, companies have had to adapt to remain competitive. Colorado no longer requires vertical integration, so companies can specialize in growing and sell to many retailers.

Since the legalization of adult-use marijuana, medical marijuana use declined. We saw a bit of a shift from people who were on the medical side to the adult-use side.

Since peaking in 2021, revenue has been on a downward trajectory. I think there are a couple of things happening. One, we've seen a lot of compression in the sales price per gram both on the medical and on the adult-use marijuana side. Colorado's plant counts are also down. So maybe there's a decrease in the volume of sales there. We started to see some companies fail, and we saw some companies pull back on their inventory. There's also this gray market where people can grow out of their homes legally.

Colorado is certainly more in a mature stage of its lifecycle. But there are companies that are still thriving and out-competing other companies.

I think the data is showing perhaps more stability in the industry as the sales aren't decreasing at an increasing rate. That looks like it's starting to level off a little bit. Perhaps we’ve found that operating equilibrium for the industry.

What might change in the future for cannabis in Colorado?

I expect some sort of national legalization at some point, and I think the industry will be banked in the future. I think some of these tax issues can be worked out. If it becomes a national industry, we could see some interstate commerce since right now it's illegal to transport across state lines.

I also expect more efficiency in the industry. Think about ways a grower could specialize. They could go to places where warehouse space is cheap and electricity is cheap, or they could grow outdoors in a natural environment. Think of the warmer Southern states. We’ll see other states follow the product life cycle—a surge of growth in the beginning, followed by a maturing industry.