With two weeks left in 2019, Colorado’s legal cannabis industry is about to set a new record for cannabis sales for the 5th consecutive year.
Most recent cannabis numbers for Colorado showed $150.5 million in sales for the month of October. That was actually down from September’s sales. But this followed several consecutive monthly sales records earlier this year. It also follows a consistent pattern of seasonal declines in the fall.
Altogether, Colorado has racked up cannabis sales of $1.46 billion through the end of October. This compares to $1.54 billion for all of 2018. With even decent cannabis sales for November and December, Colorado will clear 2018’s sales record by a full 10%.
In percentage terms, this increase in sales somewhat lags the increases in previous years. However, in absolute terms, Colorado’s legal cannabis industry continues to generate solid annual sales growth.
For the legal cannabis industry (and cannabis investors), this has great significance for two reasons.
- After six years of full legalization, Colorado’s legal cannabis industry is showing no signs of reaching a plateau.
- These sales records are coming despite the fact that most cities/counties in Colorado continue to block legal cannabis sales.
Cannabis is not a niche market. Cannabis use is not limited to narrow demographics.
Cannabis use in Colorado continues to steadily grow for very simple reasons. Cannabis is better medicine. Cannabis is a better recreational drug.
Cannabis is safe. It has numerous medicinal and health-promoting qualities. It is used in hundreds of medicinal contexts and continues to increase in popularity. As a recreational drug, it’s a much safer, non-toxic option to dangerous legal drugs like alcohol and tobacco products.
All demographics are embracing cannabis use. In fact, in percentage terms, senior citizens comprise the fastest-growing consumer base for cannabis.
For these reasons, legal cannabis has nearly an unlimited growth profile as a consumer product – especially with aging populations.
Amazingly, the success of Colorado’s legal cannabis industry has come in spite of not because of the actions of local governments. Even in Year 6 of cannabis legalization in Colorado, roughly 60% of cities/counties continue to block legal cannabis sales in their jurisdictions.
This provides two avenues for continued revenue growth for Colorado’s legal cannabis industry.
a) A continuing increase in the popularity of cannabis among the general population
b) Increased access to legal cannabis as (gradually) the number of anti-cannabis counties in Colorado continues to diminish
b) Increased access to legal cannabis as (gradually) the number of anti-cannabis counties in Colorado continues to diminish
For cannabis investors eying Canada’s newer fully legal cannabis industry, the development of Colorado’s legal cannabis industry should be repeated in Canada.
In Alberta, the Canadian province whose cannabis industry most closely parallels Colorado’s rapid/successful growth, similar signs are apparent.
Alberta opened up over 300 retail locations in Year 1 of full legalization. This rapid increase in access to legal cannabis caused a strong change in consumer behavior.
The cannabis consumption rate in Alberta rose from 16% of the population to 20%. That’s a 25% increase in the number of consumers – in just one year.
More and more cannabis stores times more and more consumers. That’s not merely an equation for sales growth. It’s a formula for large-and-sustainable increases in cannabis sales.
Such success for the legal cannabis industry is not a given. The cannabis legalization horror stories from California and Ontario show that even the robust cannabis industry is not immune from gross political mismanagement.
However, as we see with Colorado, give the legal cannabis industry even a moderately fair regulatory framework and it will thrive.
It will thrive in the near term in states/provinces that do a decent job in cannabis legalization. It will thrive (eventually) even in the cannabis-challenged jurisdictions that have stumbled badly to date.
Strong sustainable growth in the legal cannabis industry is inevitable. This makes the current depression in cannabis stock prices an unsustainable aberration.
The market exists. The growth potential exists, even with moderately industry-friendly regulation.
In just North America, cannabis has the long-term potential to generate $100 billion per year as an alcohol substitute alone. Indeed, if cannabis had already been fully legalized across the U.S. and regulated as effectively as in Colorado, the U.S. legal cannabis industry could be a $100 billion per year industry today.
As the cannabis industry moves into a new decade, investors need to keep their eyes on the Prize.