Colorado Market Projections 2014-2020

Colorado Market Projections 2014-2020

According to New Frontier Data & Arcview Market Research, cannabis sales for Colorado in 2016 are expected to total $1.2 billion, of which $739 million will be in adult use sales and $438 in medical cannabis sales. By 2020 sales are projected to grow to slightly over $2 billion, driven by strong growth in adult use sales. Adult use sales are projected to grow at a 16% CAGR while medical sales will grow at a 10% CAGR between 2016 to 2020.

The volume of flower sold in the adult use market grew by 64% between 2014 and 2015, while the revenues from flower sales grew by 46% over the same period. Sales revenues are growing at a slower rate than product volume sales due to the rapid increase in the number of producers, which has created a significantly more competitive environment for producers in the state. Furthermore, the size of producers has increased significantly over the past three years – when the market first launched, a 20,000 sq. ft. cultivation facility was considered large, whereas now there are producers building facilities in excess of 200,000 sq. ft. in the state. These larger producers can capitalize on economies of scale and operational efficiencies which enable them to offer their products at lower prices than smaller, less efficient operators.

In the coming year, we expect the downward pressure on prices to continue, even as adult use demand continues to soar. In this highly competitive environment, operators who are focused on optimizing the efficiency of their operations, or specializing in highly differentiated products that are less exposed to competitive pricing pressure will be best positioned for success.