Colorado Medical Marijuana Dispensary Sales Soar to Estimated $300M Despite Consolidation

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Annual medical marijuana sales in Colorado have surged over the past year and are now hovering around $300 million, a huge increase that highlights the industry’s growth despite a wave of consolidation.

Dispensaries racked up roughly $225 million in sales during the first three quarters of fiscal year 2012-2013, according to the latest data from the Colorado Department of Revenue (DOR). That amounts to an average of $75 million a quarter, putting the state on track for an estimated $300 million in sales when the numbers for the fourth quarter are tallied – a 37% increase from the prior year. (The state revised its number for the 2011-2012 fiscal year, saying that sales came in at $219 million rather than $200 million.)

Colorado’s most recent fiscal year ended June 30, and officials will release full annual numbers for that period this fall.

The state’s sales tax collections on MMJ transactions – which include all products sold at dispensaries, including edibles – are expected to top $8 million.

The significant sales spike comes even though the number of dispensaries is at its lowest point in years. There are currently around 500 MMJ centers in Colorado and about two dozen more awaiting approval, down from upwards of 1,000 operating dispensaries at the peak in early 2011. New regulations that took effect last year and increasing competitive pressures as the market matured forced many dispensaries out of business, while others were gobbled up by larger operations.

The revenue figures indicate that the remaining dispensaries are stronger than ever and capturing a much bigger piece of a larger pie. The average dispensary in Colorado now generates $600,000 in annual sales – more than double the average from just a year ago, according to MMJ Business Daily’s estimates.

Several factors could be at play, including a rise in patient numbers; an improving economy that has led to more discretionary income for patients who also consume marijuana for recreational purposes; increasing acceptance; a slight uptick in prices; more accurate reporting by dispensaries and tracking by the state; and possibly even a spike in diversion.

Additionally, patients are not relying on the black market as much now that the industry consistently churns out reliable products.

“In Colorado we’re producing all of our medicine independently now, and it’s more consistent, especially on the edibles side,” said Luke Ramirez, co-owner of Walking Raven Medical Marijuana Center and the founder of Cannabusiness School and Consulting. “It’s reliable and we test the marijuana, so we’re offering more to the consumer than ever before.”

Regardless of the reasons, many dispensaries that survived the wave of consolidation are thriving.

“We have seen prices go up a little bit, and there’s more stability in general,” said industry consultant Matt Cook. “Virtually everyone I’m working with is selling everything they’re growing and are having to get creative to find additional product. That’s a hell of a problem to have.”

Sales via dispensaries have quadrupled since 2010, when the state’s MMJ industry was still in its infancy and centers began popping up on every street corner in some areas. Denver accounts for roughly 45% of all medical marijuana sales in the state, followed by the Colorado Springs area (16%) and the Boulder region (11%). Colorado ranks as the second-largest MMJ state in the nation in terms of annual medical cannabis sales behind California.

It’s unclear how the legalization of marijuana for adult use in Colorado will affect medical cannabis sales going forward. While retail stores will likely siphon off some business from MMJ dispensaries that remain focused on the medical side, high taxes on recreational marijuana could limit the impact.