Growth Strategies / Marijuana

Size of Colorado's Marijuana Market? Try 130 Metric Tons.

4 min read
This story originally appeared on CNBC

Six months into Colorado's great experiment in legal marijuana, the state is starting to get a handle on just how big the market is.

It's pretty big.

Size of Colorado pot demand? Try 130 metric tons

"This study finds total marijuana demand to be much larger than previously thought," according to a report released Wednesday by the Colorado Department of Revenue, Marijuana Enforcement Division.

Here's a breakdown of the numbers:

  • 485,000 Colorado residents use marijuana monthly, or about 9 percent of the population. This group includes medical marijuana users as well as retail buyers and those buying pot illegally.
  • 686,000 residents use it at least once a year, but only 16 percent of them are medical marijuana patients.
  • 184,000 residents under age 21 reported using marijuana in the past year—either legal medical pot or illegal, street product.
  • 130.3 metric tons of marijuana, legal or otherwise, are expected to be sold in Colorado this year. That breaks down to approximately 37 million "eighths" if it were all bought in bud form, or around 300 million joints. However, a growing proportion of sales are in edibles and oils.
  • Of those 130.3 metric tons, the state believes 77 tons will be sold through legal channels this year, mostly medical (55 tons). That means the remaining 53 metric tons will still be sold illegally.
  • The vast majority of pot is being purchased by Colorado residents. Only about 9 tons is expected to be purchased by out-of-state visitors, representing 7 percent of total demand. Still, visitor purchases account for 44 percent of sales in metro areas and 90 percent of sales in popular ski areas like Breckenridge and Telluride.
  • Heavy users account for most of the demand. The top 22 percent of users account for nearly 70 percent of the pot sold. The report said daily heavy users in Colorado consume on average 1.6 grams a day, or perhaps the equivalent of three to four joints, depending on size.

How much higher, so to speak, is demand by local Coloradans than expected? The state said the figure is 31 percent higher than its own recent assessment, and more than twice the prediction of a study by the Colorado Center for Law and Policy.

Colorado also has been surprised by the emerging popularity of other forms of marijuana consumption, such edibles. Another finding: when compared to Washington state, which opened its first retail medical marijuana stores this week, Colorado's overall consumption is lower due to its smaller population. On a per-capita basis, however, Coloradans use slightly more.

Read More: Cramer is giddy about this overseas marijuana stock

Despite strong demand, however, Colorado is not collecting nearly as much in marijuana taxes as originally estimated.

"Conversions from medical consumption to retail consumption is relatively low," the report said.

One big reason is the vast price difference. Medical users have to pay a registration fee, but that is more than offset by the low 2.9 percent tax they pay for pot, compared with taxes of at least 28 percent on retail marijuana.

"Government tax revenue would increase if medical marijuana patients converted to the retail market in large numbers," the state said. "However, this is unlikely to happen until retail prices decline significantly."

Read More: Marijuana in Ameirca: The Colorado pot rush

The high prices customers are paying at retail stores is taking a toll.

"Producers and retailers will need to decide how much of a markup will be feasible to maximize profits and offer a product to market at a competitive price," the report concludes, adding that the markups will affect "consumer acceptance ... and ultimately, the amount of tax revenue collected by state and local governments."

By Javier Hasse
From retailers to growers, producers, and suppliers, there’s a seemingly never-ending list of startup opportunities in this emerging market. In Start Your Own Cannabis Business, marijuana, biotech, and entrepreneurship reporter Javier Hasse introduces forward-thinking entrepreneurs like you to the industry and shares hard-earned tips and success stories from pioneers and visionaries in the marijuana industry.
Learn More

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