As more states legalize cannabis, the pioneers who launched the first state-legal cannabis sectors in the country may soon see their profits drop due to increasing competition. Colorado, for instance, has had a fantastic run so far. Its recreational cannabis industry has raked in nearly $10 billion dollars and filled the state’s coffers with billions of dollars in cannabis taxes. However, now that next door neighbor New Mexico has legalized recreational marijuana, some cannabis operators in Colorado fear their profit margins will start thinning once New Mexico launches its cannabis industry in 2022.
Colorado launched recreational cannabis sales in 2014, and since then, the state’s cannabis industry has been on fire. Not only has it earned business owners and the state billions of dollars, but it has also helped boost tourism numbers through “cannabis tourism.” Folks from around the country come to Colorado to sample the state’s cannabis products, and some dispensaries in border towns and cities such as Trinidad have come to rely a great deal on out-of-state visitors.
Were their home states to legalize cannabis, these visitors would have no reason to come all the way to Colorado. According to The Other Place is Greener Dispensary general manager Michael Evans, up to 65% of their customers are from out of state with 45% coming from Texas and 20% from New Mexico. When New Mexico launches its cannabis market, he says, his dispensary will be cut off at Raton Pass as customers wouldn’t have to drive all the way to border towns in Colorado for recreational cannabis. They could just get some at a location much closer to home.
Since cannabis business are extremely limited in where they can advertise or sell their products, losing such a large percentage of their clientele would be devastating. In Colorado, for instance, businesses in the cannabis space cannot sell their products at restaurants or clubs. Additionally, cities and municipalities are allowed to ban social consumption of cannabis, and in some cases, they can even forbid dispensaries from operating in their jurisdictions.
New Mexico, on the other hand, allows both indoor and outdoor “cannabis consumption areas,” and people will also be able to consume cannabis in designated casinos, hotels, tobacco stores and cigar bars. For most New Mexico residents who would like to consume cannabis, staying at home would be the much better option.
According to Evans, Colorado businesses that rely heavily on out-of-state visitors will have to offer those consumers incentives to keep them coming. This is the only way they will be able to maintain their sales as more states launch their own cannabis programs.
Cannabis companies such as Gage Growth Corp. (CSE: GAGE) (d.b.a. Gage Cannabis) in different parts of the country have generally learned to be resilient in the face of the challenges they face, so sector players in Colorado will likely find new ways to thrive despite losing a sizeable fraction of their clientele visiting from out of state.
NOTE TO INVESTORS: The latest news and updates relating to Gage Growth Corp. (CSE: GAGE) (d.b.a. Gage Cannabis) are available in the company’s newsroom at https://cnw.fm/GAGE
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