Colorado Cannabis Infused Products Market

CannaBlog by Peter Prevot, Senior Business Consultant with Bridge West LLC CPAs & Advisors to the Cannabis & Hemp Industries

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Throughout 2020, the Colorado cannabis market has continued to grow.  Total sales for the year will exceed $2 billion, up from $1.75 billion.  Included in those numbers are edible cannabis products and other concentrates made from extracted THC oil, like hash, vaporizer cartridges, waxes, and shatter.  How much of this new and emerging industry is comprised of these forms of marijuana versus traditional smokable flower?

In the United States, the legal cannabis market is expected to be $35 billion by 2014.  When the illicit market is added to that number, the U.S. total cannabis market exceeds $100 billion and that is about the same size as the domestic beer industry. A recent study developed for the Marijuana Enforcement Division of the Colorado Department of Revenue by MPG Consulting and the University of Colorado Leeds School of Business takes a comprehensive look at the status of the industry in Colorado through 2019.

One certain trend is that legal cannabis leads to lower prices for consumers. The price per gram of flower has declined from $14 per gram to under $5 since legalization in 2014.  Likewise, the prices of concentrated products have fallen from $17 to $12 per gram over the same period.

Another trend noted in this report, called the “2019 Regulated Marijuana Market Update,” is the popularity of edibles and other concentrates. In 2014, 75% of all Colorado cannabis sales was from smokable flower.  By 2019, half of all cannabis sales was from extracted products.  This trend is the same for adult use and medical marijuana.

Over the last five years, concentrates have exploded in both markets.  This could be a result of the increased potency and more diverse delivery methods vs. smokable flower.  As more States allow both medical and adult use marijuana, what does this mean for the legal cannabis market?

Currently, most edibles and concentrated products are made from THC oil extracted from what is called shake or trim, a byproduct of the harvesting and packaging process of smokable flower. As the trend toward concentrates continues, it is likely that some cultivators will convert more of their crop into different forms of extracted THC oil.  This could lead to higher flower prices due to supply fluctuations. Some popular concentrates, such as rosin, are already being produced from freshly harvested buds instead of trim.

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Rosin production is based on a simple principle: apply heat and extremely high pressure on the plant material to extract its resin. The resulting product is typically intended to be consumed via inhalation and is translucent, sappy, and full of flavor. Rosin has gained in popularity over the past several years because it is a solventless technique, as the production process does not involve the use of any chemicals, i.e. butane, propane, CO2. When made properly, rosin retains a remarkably high percentage of marijuana’s valuable terpenes that account for aroma and flavor. Rosin made from freshly harvested whole flower will also retain the marijuana plants full cannabinoid profile, not just the THC.  Since the extraction process is more labor intensive and the resulting oil yields tend be lower than other extraction techniques, rosin can typically command a higher retail price when compared to other extracts.   In the Denver area, the current retail prices for rosin range from $50 to $100 per gram, depending on the quality and strain.

If you have any questions about the cannabis infused products market or discuss how these market trends could impact your business, please contact Peter Prevot, Senior Business Consultant with Bridge West LLC, at 225-571-7617 or pprevot@bridgewestcpas.com.

If you would like to learn about Bridge West’s expertise in the cannabis industries, or to schedule a consultation with a member of the Bridge West team, please contact us.