Colorado’s cannabis industry hasn’t fallen short of record breaking, even three years after the first recreational sale. In fact, the industry continues to grow, surpassing the previous revenue records each year.

In the month of March, Colorado hit another record for the highest amount of revenue collected from licensed cannabis retailers, according to the publicly available state sales tax data, at $131.7 million. The Colorado Department of Revenue announced that they collected a hefty $22.9 million in tax revenue during the month of March alone.

Denver, the state’s Capital, is the most populated city in Colorado, home to a whopping 5,540,545 people in the 2016 consensus, according to the U.S. Census Bureau. Naturally, this means that Denver has the highest concentration of cannabis retailers in the state, hosting roughly 400 of the 698 licensed businesses in Colorado.

Cannabis Retailers Compete

With such a large concentration of licensed cannabis retailers in the city, what does this mean for competition? For some of the larger brands, it doesn’t mean much. To smaller business owners, it is becoming much harder to compete with the established brands, and many owners find themselves selling their licensed businesses.

MJBizDaily interviewed the owner of cannabis dispensary 3D Cannabis Center, who went from worldwide media attention for the state’s first legal recreational sale in 2014, to selling her once widely recognized business for $2 million because of the fierce competition.

Many smaller “mom and pop” dispensaries have started to see a decline in sales, even though the state continually hits record high sales numbers. The smaller businesses are especially hurting with the rapid growth, as the prices for licensing, application fees, utilities and rent continue to rise.

Overcoming Obstacles

Another hurdle for competition among the industry is the limited advertising ability for cannabis brands due to the strict state laws. Alas, that has not hindered ads through outlets such as print magazines, radio stations and events, which target a large portion of the Denver population – millennials. Larger companies usually pay to have their brand front and center on a full page ad, or on the front cover of magazines, while smaller brands may only to be able to afford a quarter page ad, if any at all.

Some smaller companies may not have the supply or resources to be able to offer discount coupons, aimed at bringing in more business. You will often see larger brands offering product discounts such as 15% off for first time customers, making it extremely hard for smaller companies to compete if they cannot offer discounted products.

Many companies have now come up with a reward system for customers, marketing directly to their phones or email addresses. Businesses have to come up with extremely creative ways to market their products, because there is a good chance another competitor sits just a few blocks away.

Denver has seen so much growth in cannabis business that they have put a moratorium on new store fronts and cultivation centers, in hopes that they can slow down the competitive industry, and focus on responsible growth.

New cannabis laws and regulations are stacking up in Colorado, making it difficult for the industry to operate. While regulations are effective, many businesses are suffering.

In 2012, Colorado was the first state in America to allow adult use of cannabis consumption through Amendment 64. Since the Amendment was adopted, cannabis laws and regulations for adult use in Colorado have continually become more strict, almost aiming for a failure of the industry as a whole.

Cannabis laws change constantly, sometimes overnight, and some business owners cannot keep up. When adult use was enacted, dispensaries did not have the harsh regulations like they do today. In fact, there were minimal limitations on how much product you could purchase at once as a consumer, which type of pesticides you could use to cultivate, and who store owners could receive their supply from.

Not So Wild West

Since Amendment 64 passed with such a short timeframe to enact the encompassed cannabis laws, there weren’t many limitations set forth that hindered a successful business. If you are new to the cannabis industry, you may not be familiar with the “Wild West” days from 2012 that ultimately gave small business owners a large chance for success, setting forth their own unique standards.

Since the success of recreational legalization, the Marijuana Enforcement Division (MED) has continually come up with harsh, almost unrealistic expectations for compliance within the industry. One of the regulations, enacted with HB 1284, is that business owners must track every plant in their possession from seed to sale, and report those numbers daily through a software system known as METRC.  If businesses do not track every seed and sale through METRC and confirm each night before closing, they could risk having to shut down their entire business.

That said, many of the POS systems used in retail stores to track the cannabis sales have a track record for crashing, which does not allow for business owners and managers to be able to track the sales if they choose to allow them while their systems are down. This sets businesses up for failure either way – whether they choose to allow sales or halt sales until the system is restored, which can cause a huge monetary loss depending on the time of day.

Cannabis Laws Hurt Small Business

As for applying for or owning a cannabis business license, the process has become so extensive (and expensive) that most small business owners cannot afford to continue renewing their licenses and are forced to sell their stores or go out of business. Currently, licensing fees can run upwards of $15,000, depending on how many licenses are being applied for and in which city. This does not even include the price of rent, which can be quadruple the base price of rent in Denver, specifically to cannabis businesses. The rent increase includes cultivation facilities and infused product manufacturers (MIPS) as well.

Additionally, these locations now cannot be within 1,000 feet of a school, daycare facility or rehabilitation center, and in some cities, another cannabis business. To date, since these new cannabis laws have been enacted, there have been about 50 cannabis businesses that have received a letter from the MED to close their doors due to being too close to one of the “off limits” facilities. In addition to the strict location laws, the State of Colorado has more recently adopted very strict pesticide laws for cultivation centers.

When the State updates their regulations, it is uncertain whether or not they will alert the public, or give you any timeline as to when these new cannabis laws will be enforced. If the MED randomly audits your facility and detects any “off limits” pesticide particles in the air, even if they have been discarded due to new regulations, they will issue a violation, destroy every plant in the facility, and cause the business owner an exorbitant loss of product.

New Laws, New World

Most recently, Green Man Cannabis was forced to destroy every plant in their facility as the MED found “residual particles” of illegal pesticides in their air system – pesticides that were legal to use shortly before the incident had occurred. The rules enacted by the MED seem to be aimed at daunting the success of cannabis in Colorado – but as we remain compliant and law-abiding, their restrictions cannot stop the ongoing success of this industry.