Chart of the Week: Initial Rec Marijuana Sales in 3 States Highlight Role of Business, Regulatory Environment

By Becky Olson

All cannabis markets are not created equal.

The first three states to launch recreational marijuana programs had vastly different experiences during their initial week of sales.

Colorado posted an impressive tally early last year, Washington State recorded an anemic total in mid-2014 and Oregon blew both out of the water earlier this month.

At first blush, these three states appear to have a lot in common.

They’e all located in the western part of the country, where attitudes toward cannabis are more liberal and use of marijuana is higher. They also each had pre-existing medical cannabis markets, and all three states were already popular tourist destinations for reasons unrelated to marijuana.

But vast differences in state regulations and the circumstances surrounding the commencement of recreational sales tell another story.

When recreational sales first began in Colorado on Jan. 1, 2014, the state already had a well-established and regulated network of medical cannabis dispensaries in place. Those dispensaries were the only businesses initially allowed to sell recreational cannabis, and they had to obtain a new license to do so.

Additionally, they had to cultivate at least 70% of their inventory, so it wasn’t just a matter of setting up a storefront and calling around to wholesale growers to procure inventory.

The end result: approximately 30 MMJ dispensaries in the state were ready to sell when the program launched. Prices averaged around $15 per gram, plus nearly 30% in state taxes, leading to an estimated $5 million to $6 million in sales.

In Washington State, the circumstances around the beginning of rec sales on July 8, 2014 led to a very different outcome.

Dispensaries existed prior to the legalization of recreational marijuana, but they weren’t governed by any statewide regulations. So there was little understanding of how to operate in a regulated environment. Most dispensaries also didn’t apply for rec licenses. Instead, newbies to the cannabis game did, and they had to start from the ground up.

When rec sales began, only five stores actually opened, and they faced severe inventory shortages due to an insufficient number of growers licensed in time to produce a harvest for the big day.

Top that off with some of the highest prices ($20 a gram) and sales tax rates in the country at the time – as well as the ongoing existence of the unregulated, vastly cheaper MMJ market – and demand wasn’t nearly as strong as it was in Colorado, with sales hitting just half a million dollars.

By contrast, the circumstances in Oregon when rec sales began last week were more conducive to a fast start.

Existing MMJ dispensaries were free to begin sales to the general public without a new business license, and rec-specific shops won’t be licensed until next year.

Dispensaries and growers had ample time to prepare – so supply was abundant – and recreational sales are currently not taxed, leading to average prices of about $10 per gram.

The end result: nearly 250 businesses started selling to rec customers right out of the gate, leading to just over $12 million in sales during the first week, according to estimates released by the Oregon Retailers of Cannabis Association. (Note: The association only estimated six days of sales, but Marijuana Business Daily extrapolated out to a full week to allow a comparison to the numbers for Colorado and Washington State.)

It remains to be seen where Oregon’s market will settle in, but each of these cases underscores how much of an impact these factors make in the overall business environment when a state is ready to begin recreational marijuana sales.

Becky Olson can be reached at [email protected]

11 comments on “Chart of the Week: Initial Rec Marijuana Sales in 3 States Highlight Role of Business, Regulatory Environment
  1. Janet king on

    In Washington state we have a completely incompetent legislature and to top it off we have sheriff departments who LOVE to raid and steal private property with out due process. Corruption and incompetence are making a thriving black market that law enforcement loves so much

    • Janet king on

      Pretty soon if the state has it’s way, everyone associated with this business will get a nice felony tag for the rest of their lives

      • Janet king on

        Another thing I don’t understand is why the heck the media ALWAYS say the mmj market in Washington is unregulated. You have to have a medical card, if you are growing for yourself you can only have a certain number of plants, if you can’t grow your own and have to join a collective, only ten people can be a part of that collective. The dispensaries usually don’t buy stuff that has not been tested, so that’s self regulation and a good thing. Why they say it’s unregulated is beyond me and every one I talk with. The dispensaries are supposed to be npo’s not taxable but they do pay b and o taxes every quarter and I know of at least one that I use that pays every month to avoid hassles with the state and they STILL get raided by kcso regularly.

        • David Harkness on

          Laws that apply to individual citizens and collectives of up to ten don’t really count as regulation of the cannabis *market*. California has had similar restrictions for over a decade in the form of the Compassionate Use Act, but dispensaries remained unregulated beyond the collective requirements.

          It isn’t until 2018 when AB 266 and SB 643 go into effect that the market itself (growers, extractors, edible makers, and dispensaries) will be truly regulated.

          I’m not arguing for one or the other; I’m merely pointing out what I think the industry means when they discuss regulations.

          “The dispensaries usually don’t buy stuff that has not been tested, so that’s self regulation and a good thing.”

          Self-regulation is not market regulation since there’s no rule or enforcement to back it up. It could work with random inspections, but otherwise it’s basically “hope for the best.” Waiting for people to get sick from mold or pesticide—and can it be tracked back to the source to do a recall?—is not regulation.

    • Dr. Jake Felice on

      Recent laws in Washington make it almost impossible for patients to receive medicine that has not been sprayed or treated with agricultural chemicals. The legislators in the state of Washington named their bill “The Patient Protection Act”. It should have been called “The Profit Protection Act” because it centralized of the profits of a few large cannabis corporations at the expense of many sick people, as well as the rest of the general population. This law has been a great burden to many of my patients, largely because poor and sick people are paying higher prices. The quality and degree of selection has also gone down for the vast majority of my patients. Additionally, there is very little in the way of quality control for patients, including no published information on the use of pesticides for patients who are purchasing their medicine under the new laws.

  2. Gentle Jim on

    Here in Michigan we have been dealing with the same drug warrior mentality sense 2008. we have a choice of growing our own or having a caregiver but most went to dispensaries until the reefer madness politicians closed most of them down. There is no problem with cannabis here, just the same corrupt officials on big pharma’s payrole now rewriting the rules to get their cut or protect the REAL cash cow “asset forfeiture”. I am afraid that this will continue and/or get worse until the electorate puts the “fear of god” into those power drunken officials at the ballot box. They will only listen when members of any party, standing in the way, get tossed out of office. Hang in there friends.
    God bless all those who work to end the war on drugs.
    Gentle Jim

    • Lawrence Goodwin on

      And may Goddess bless Ms. Becky Olson for so consistently cranking out excellent reports! Her noble work–and Marijuana Business Daily as a whole–gives the cannabis movement solid legs to stand on.

  3. Janet king on

    California does not place any limits on how many people can be in a collective. Washington state does. I am aware that self regulation as far as testing goes is not market regulation. If the state required the same testing as the dispensaries do it wouldn’t be a problem. I believe in the free market, and if you have identification and a medical card you shouldn’t have to be looking over your shoulder and if you’re employed in the industry you should, first of all be glad you have a job, and second, not have to worry that the po po is gonna take anything you have of value just cause you go to work on any given day

  4. steve on

    this Says a Lot about Any type of Business Regulation and Governmental freedom or Strangulation . this Happens in EVERY sector and the Majority of New Reg’s Passed on Every Level are Pushed to Stifle the Small business in favor of the established Oligarchy , that is why our economy is So slow to rebound ….

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