2022 marks the ten year anniversary of Colorado becoming the first state to legalize recreational cannabis. It’s hard to say if anyone truly grasped at the time just how influential this period in history would be at that time, unknowingly setting off a green wave in the United States and across the world – and it’s only continuing to build momentum.
Enough time has passed to where Colorado’s cannabis policies and their impact on Colorado’s consumers can be better understood. Recently legal states and new cannabiz owners often look to Colorado for insights into what works and what doesn’t work as they blaze their own trail towards legalization. We’ve learned a lot by looking back on 10 years of legal cannabis in the Rocky Mountain State.
Colorado Goes Green
Twelve years after legalizing medical marijuana, Colorado made cannabis history.
On November 6, 2012, Colorado voters passed Colorado Amendment 64 with 55.32% approval, effectively making Colorado the first state to legalize recreational cannabis. Adults 21 years and older were now able to possess, or gift another adult, up to one ounce of cannabis. This law also established a framework for state licensing and commercial regulation, giving Colorado residents and eligible visitors the chance to purchase legal cannabis in the United States for the first time ever.
Legal sales officially began in 2014, and cannabis has since developed into a multi-billion dollar industry, following Colorado’s lead.
Closing the Revenue Gap
Now, recreational cannabis sales serve as a huge source of tax revenue for the state of Colorado. Over $423 million was generated in tax revenues alone in 2021, totaling over $2 billion in total tax revenue and fees since legal sales started in 2014, helping Colorado accumulate revenue following the financially-devastating Great Recession.
Cannabis is also now a major source of employment in the state. According to a 2021 report, over 35,500 Coloradans actively work in the cannabis industry. The number of cannabis jobs in Colorado is second only to California.
Lessons for States and Business Owners
Despite the billions of dollars flowing into the industry, new and established businesses alike are consistently challenged by the competitive and quickly-evolving cannabis landscape in Colorado.
Ten years on, the number and size of mergers and acquisitions continue to grow. Smaller cannabis companies are being bought out by much larger companies, concentrating the number of key players in the state. Wana Brands was acquired by Canopy Growth for $297.5 million upfront in October 2021, possibly one of the state’s most notable deals, though Wana already had operations in other states and Canada before the acquisition.
The effect of this has yet to fully play out, but the last decade of legal cannabis in Colorado reveals some other lessons that other states and prospective cannabiz owners should pay heed to as they begin the journey to legalization.
Prioritize Equity in Cannabis
In Colorado, 83% of marijuana business owner licensees are white. Only 11% of Colorado’s cannabis businesses are owned by Black or Latino residents, despite 22% of the state’s population identifying as Black or Latino and 5% as Black.
In July 2021, a Cannabis Business Office was established in Colorado, providing an initial $4 million to primarily business owners of color and those in economically disadvantaged areas in Colorado. In some areas, like Denver, applicants say there’s much to be desired about Colorado’s social equity program.
As more and more states legalize cannabis at the recreational level, equity is seemingly a priority, but lawmakers and regulators must live up to what they promise and uphold the legislation voters said yes to. Policies should empower the communities previously left out or explicitly discriminated against during the prohibition era. Many states can do this by providing financial assistance to social equity applicants that haven’t benefited from intergenerational wealth.
Diversity Is Good
Diversity means more ideas, more innovation, and more representation: for both people in cannabis and the businesses themselves.
There is almost no consumer as diverse as the cannabis consumer. On average, both genders are equal consumers of cannabis. There are cannabis consumers in every demographic, from 21 years old up to 100. Seniors were the fastest-growing group of American cannabis consumers from 2015 to 2018.
Cannabis consumption is personal, and in many cases, for medicinal purposes. There’s almost no industry where diversity and a sense of representation matters more than cannabis, a plant that caters to all.
Develop Solid In-State Supply Chains
There’s no way around supply chain issues in newly-legal states due to federal prohibitions on interstate commerce. Many dispensaries were crippled by the fledgling supply chain in Colorado. Among the excitement of legalization, it’s easy to forget there’s an entirely new industry and therefore a new supply chain being added to an already operating economy.
Owning as much of your supply chain as you can will eliminate a great portion of supply chain issues. Vertically-integrated licenses have the most control over their personal supply chain and in some cases, act as a crucial part of the supply chain for other cannabis businesses, too.
From production to processing to transportation and onto dispensaries, launching a cannabis program requires lead time and immense coordination to be successful. Add the fact that cannabis is a federally illegal substance on top of it, and there’s plenty of opportunity for things to go awry.
States should look to ensure in-state production of cannabis can handle the influx of demand before sales officially begin. Operators should prioritize their vendor relationships and inventory management systems to mitigate early bumps in the legalization road.
The cannabis industry likes to talk about how harmless the cannabis plant is and while there are certainly less side effects than some other prescription medications, and no one has died of a cannabis overdose unlike alcohol which is the 3rd leading cause of preventable death in the US, pretending like there are no potential dangers associated with cannabis consumption is dangerous.
Recent studies have demonstrated that there have been some negative health effects associated with legalization in Colorado: especially related to psychosis, suicide, and rates of substance abuse. However, the cannabis industry hasn’t necessarily been choosing to only focus on the positive aspects.
The effects of cannabis have not been studied comprehensively because of cannabis’ illegal status. Ironically, federal lawmakers are hesitant to legalize cannabis at the federal level without further research. States that have legalized and incorporated cannabis into their healthcare questions are conducting promising studies about cannabis and its role in our health.
Imagine what we can learn from a national legalization.
Differentiation Has Never Been More Important
There are tens of thousands of cannabis businesses in the United States, and that won’t be stopping any time soon, especially as more and more states begin to roll out medical and legal cannabis programs.
Just as diversity is the key to targeting your company’s whole audience, brand differentiation is the key to being seen by that audience.
Right now, cannabis consumers are experimental. They’re willing to try new products all the time and have almost no brand loyalty, though that tide is beginning to change. Differentiating a small cannabis brand from the others is the only way to survive in this market, especially while federal restrictions prevent the use of many traditional marketing channels and business strategies.
Carving out a niche you can serve well, researching the rules surrounding marketing in your local jurisdiction, and honing your storytelling skills to deliver a succinct and meaningful message are three ways to set you lightyears ahead of established and emerging brands.
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