The authority when it comes to analyzing the cannabis industry

Colorado Retail & Medical Market Update

Over two years have passed since retail marijuana has been available for consumption in the state of Colorado, and the trends we see in the retail and medical markets are very interesting.

As shown in the above graph, within the CO commercial regulated system the volume of medical and retail sold marijuana has been increasing; since recreational cannabis became legal in January 2014 to the end of September 2015, over 116,000 pounds of retail cannabis have been sold, with the volume of flower sold increasing by over 900% from 1,000 pounds sold in January to 11,000 pounds sold in September.

While one could have guessed that the volume of flower sold in the recreational market would soon overtake that of the medical one, medical sales have also surged, increasing from 3,200 pounds in January 2014 to over 14,100 pounds in September 2015 and supplying a total of 220,000 pounds of flower. That’s more than the weight of 20 elephants! The gap between medical and retail sales has been narrowing: since the beginning of 2014, medical market marijuana volume was 6.0x that of retail volumes but during the first three quarters of 2015 medical market volumes was a more modest 1.4x that of retail. We believe this medical-to-retail ratio of flower sold will continue to decline slightly in 2016, but we don’t anticipate it to change significantly or fall lower than 1.0x – there are incentives that will keep medical volumes up because for those with registration cards, it’s often cheaper, one can obtain up to two ounces as opposed to one ounce in the recreational market, and registry cards can be obtained by people under 21.

While we believe the volume gap will continue to close slightly, the total growth in the overall volume of the market is evident, increasing 75% in 2015 over 2014. From a revenue perspective, total sales in 2015 were upwards of $1B, with $600MM coming from retail sales and $400MM from medical, over 40% more than 2014’s $700M in total sales. Although retail marijuana brings in higher revenues, do not forget that the majority of marijuana is still sold in the medical market, which will just as well continue to offer all sorts of opportunities to be exploited as it keeps on expanding (e.g. cannabis testing, security, delivery, glass piece manufacturing, etc).

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