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The Colorado Department of Revenue (CDOR) recently released its monthly Marijuana Sales Report with data for August 2023. Both adult use and medical sales were down month-on-month, indicating that July will likely be the peak sales month for 2023. This article examines trends in sales and wholesale prices that have emerged this year after the disruption of the Covid-19 pandemic.
Total sales reached $132.4 million in August 2023, down 3.6% month-on-month and 12% year-on-year.
Sales in the adult use portion of the market amounted to $116.8 million in August 2023, down 3.7% from the month prior and 11.2% year-on-year.
The medical cannabis sector saw $15.7 million in sales in August 2023, down 2.3% month-on-month and 17.3% year-on-year.
As the chart above shows, monthly sales peaked in March in both 2021 and 2022, breaking with historical trends that typically saw sales rise to their highest point in July or August of any given year. Three years on from the Covid-19 pandemic, it appears that sales patterns are returning to trends from prior to that disruption. However, as can be seen in the chart, month-to-month demand is much steadier this year compared to 2019.
CDOR also published its monthly Marijuana Tax Report for September 2023. Collections from the state’s wholesale excise tax in September, which correspond generally to wholesale sales and transfers made by adult use cultivators in August, were $4.4 million, down 7.7% month-on-month.
The state’s wholesale excise tax is levied on licensed adult use cultivators at the first transfer or sale of raw plant material to a processor or retailer. In the case of a bilateral sale, the tax is levied as 15% of the actual transaction price. In the case of a transfer between a cultivation facility and commonly-owned processor or retailer, then the tax is calculated by taking 15% of the appropriate Average Market Rate (AMR).
AMRs were unchanged from July to August. As such, the lower collections suggest a decline in wholesale activity in the latter month, which is unsurprising with sales slipping in August and likely to proceed lower through the rest of the year.
Colorado’s spot wholesale flower price has tracked between $750 and $850 per pound since August 2022. The stability in wholesale prices has largely coincided with the recent steadiness in month-to-month sales totals, which have ranged between roughly $125 million and $150 million monthly from August 2022, a range that tightened to between $125 million and $140 million so far this year, as seen in the chart below.
In fact, viewing the course of total monthly sales from 2019 to present with that of wholesale prices, below, reveals striking similarities. Spikes in sales in August 2019, July 2020, and March 2021 have been followed by peaks in wholesale prices in December 2019, October 2020, and June 2021.
The overall similar path displayed by sales and wholesale prices, along with the fact that significant surges in demand preceded wholesale price rises, indicates that the periods of elevated prices in recent years have been largely event-driven or due to seasonality.
As the market has matured and settled, and the disruption of the Covid pandemic has receded, wholesale prices have steadied at relatively low levels with sales revenue subsiding. With the outdoor harvest coming in this month, along with cooler weather leading to consumers facing higher heating bills and seasonal spending for the upcoming holidays, it’s possible both sales and prices could proceed lower this quarter.