How much revenue will recreational marijuana sales generate in Colorado?
It’s the million-dollar question for investors and entrepreneurs hoping to get involved in this promising new industry, as the size of the market will dictate the level of business opportunities.
State and local officials are now taking a stab at answering that question as they look to project tax revenues.
The Colorado legislature estimates that annual recreational marijuana sales will total $291 million statewide next year, while local officials project that Denver will account for $128 million (or 44%) of that total, according to data provided by the city this week.
The estimates closely mirror (but do not include) the current market for medical marijuana. Sales of medical cannabis, edibles and related products via dispensaries totaled around $200 million for fiscal year 2012, and MMJ Business Daily expects they’ll reach somewhere between $250 million and $300 million for fiscal year 2013, which ended June 30. Colorado will release data for that period in the coming weeks.
Denver currently accounts for roughly 44% of the state’s total medical marijuana sales, so local officials are using a similar percentage for estimating the city’s take of recreational sales.
Several other groups and organizations have released their own estimates for adult-use marijuana sales in Colorado:
– The Marijuana Business Factbook, published by MMJ Business Daily, estimates that annual sales will total around $500 million in the first full year of operation and could hit $1 billion in a few years when the market is fully functioning.
– The Colorado Futures Center at Colorado State University recently released a report estimating retail sales via state-licensed shops at $605 million annually.
– A Colorado Center on Law and Policy from last fall on the tax impact of Amendment 64 projected that sales would come in around $300 million annually for the first few years of the program.
The numbers vary greatly, with the lowest estimate roughly half of the highest projected total.
But making projections in this industry is a challenging task, given the huge number of unknowns as the state enters uncharted waters.
“It’s very difficult to predict what the adult use market is going to look like when there’s so many outstanding variables, such as localities having the option to allow the businesses or not, tourism and not knowing whether the legal market is going to successfully replace the black market,” said Mike Elliot, director of the Medical Marijuana Industry Group, a trade organization in Colorado.
It’s even more challenging now that Colorado will allow visitors to purchase marijuana, which opens the door for cannabis tourism. Visitors to Colorado spent nearly $16 billion in 2011, according to the latest available data from the Colorado Tourism Office. Even if cannabis sales account for 1% of that total, the industry would generate $160 million from visitors alone.The numbers could be much higher if a large number of tourists from across the world start flocking to Colorado specifically to use marijuana.
Additionally, it’s unclear how much overlap there will be with the current medical marijuana customer base – so recreational sales could siphon off revenue from the medical side.
Washington State, which also legalized marijuana for adult use, released a report last year estimating about $1 billion in sales there, though other projections put the total much lower.