December 21, 2021

Colorado Retail Cannabis Sales Stall as Wholesale Prices Continue to Decline

Photo: Mana5280/Unsplash

The Colorado Department of Revenue (CDOR) released its monthly Marijuana Sales Report for October 2021 this week. Combined retail (the state’s term for adult use) and medical sales were $176.4 million, down 2.6% from $181.1 million in September 2021 and down 11.7% from October 2020’s $199.8 million.

Year-to-date CDOR reports $1.9 billion in combined adult use and medical sales through October, 13.2% below 2020 total sales. Year-to-date sales are on pace to exceed 2020’s combined adult use and medical sales by $91.9 million.

October 2021 retail sales (adult use), at $147 million, were down 2.4% from September’s retail sales of $150.8 million and down 8.6% from October 2020’s $161 million.

CDOR also reported on November 2021 Marijuana Tax Revenue, which corresponds generally to October sales activity. The 15% wholesale tax is levied on adult use cultivators when unprocessed cannabis plant material is sold or transferred to a processor or retailer. November 2021 brought $8.6 million to state coffers from that tax, 3.2% less than the $8.9 million collected in October 2021 figure and down 15.2% year-on-year. Year-to-date as of November 2021, the 15% excise tax collected stands at $110.1 million and is 18.8% higher than the amount collected from January through November 2020.

Average Market Rates (AMRs) are used by the state to assess the wholesale excise tax on internal transfers of flower, trim, and other plant material between commonly-owned adult use licenses. After a surge in AMRs in July 2021, such that AMRs for bud for extraction jumped 70% and trim for extraction jumped 26%, AMRs have generally fallen since Q3. AMRs are calculated on prices gathered in previous quarters, such that Q1 2022 rates are based on data from the METRC reporting system for September, October, and November 2021. AMRs have been adjusted for Q1 2022, as depicted in the table below.

Colorado wholesale flower prices are down about $219 per pound since June 2021, but the pace of weekly losses has slowed. The 20-week average loss per pound is -$7.33, but the 10-week average loss per pound each week has narrowed by 84% to just -$1.16, suggesting downside price momentum is slowing. Indeed, there has been a small uptick in prices for outdoor and indoor product as the immediate effects of the harvest wane. Spot losses have narrowed, though the trend is still down.

September 21, 2021

Colorado Marijuana Sales on Track to Surpass 2020 Totals

Colorado Landscape
Photo: Shelby Smith

The Colorado Department of Revenue (CDOR) recently released its monthly Marijuana Sales Report for July 2021. According to that report, demand picked up month-on-month, to levels not seen since early spring 2021. While there’s been a good bit of variability in monthly sales in 2021, the last three months have seen medical sales move forward on their average monthly sales for the year at $36.4 million per month. The adult-use monthly sales were $167.8 million — well over 2021 average monthly sales at $156.8 million.

In July, combined retail sales of adult-use and medical cannabis totaled $202.8 million, up by 8.3% from June’s combined revenues of over $187.3 million. On a year-on-year basis, those July 2021 sales, at $202.8 million, are up just 2% from the July 2020, $198.9 million data. Year-to-date, combined adult-use and medical cannabis sales in Colorado, at $1.35 billion, put Colorado on pace to exceed the 2020 total sales, which came in at $2.2 billion.

Adult-use retailers in Colorado tallied over $167.8 million in July, a 9.9% increase over June adult-use retailer sales. Year-over-year, July 2021 adult use retail sales, at $167.8 million, were down 9.1% from July 2020’s monthly figure of $183.1 million. Retail revenues from the adult-use sector expanded by over 24% from 2019 to 2020 but look set to expand by just 6.7% in 2021 if retail revenues keep their current monthly pace.

Medical cannabis revenues in July 2021 came in at just over $35 million, up 1.5% from June 2021’s $34.5 million, but down by 23.6% from the July 2020 figure of $43.3 million.

In the wholesale realm, tax collection data for August 2021 – which corresponds generally to wholesale transfers and transactions executed in July – shows that the 15% excise tax on wholesale activity in Colorado’s adult-use system resulted in nearly $9.5 million accruing to state coffers. August wholesale excise tax receipts are down by 3.9%, compared to tax collections from the previous month, which amounted to just under $9.9 million.

Average Market Rates (AMRs), used by the state to assess the wholesale excise tax on internal transfers of flower, trim, and other plant material between commonly-owned adult-use licenses, increased from June to July. (Since August 2017, AMRs are adjusted quarterly by the Colorado Department of Revenue.) The Q3, 2021 effective tax on internal transfers of flower from licensed cultivation businesses to commonly-owned retailers went up $1 per pound to $1,309 for flower, effective through September 30, 2021. While some AMRs were little changed in July, the tax on bud allocated for extraction jumped by 71.6% to $901 per pound, the retail trim rate jumped by over 20% to $425 per pound and trim allocated for extraction went up nearly 7% to $425 per pound. These changes suggest that the downturn in July tax collections is likely due to less wholesale product being transferred between commonly owned adult use licenses. The table below shows AMRs for all of 2021 with the newly issued October AMR at the top of the table.

The AMR for bud allocated for extraction will fall over 50% to $405 per pound in Q3, but the AMR for trim will rise nearly 24% to $302 per pound, commencing on October 1, 2021.

CDOR calculates AMR for each quarter by averaging the first two months of the previous quarter with the last month of the quarter before, to come up with the AMR for the next quarter.  For instance, to find the AMR for Q4, 2021, CDOR averages prices from June 1 through August 31, 2021, thus the average captures part of the previous two quarters in calculating the next quarter AMR.