Colorado Kush Rush Continues: Marijuana Store Survey 10 Months On

Tyler Durden's picture

In June, ConvergEx's Nick Colas sized up the legal recreational marijuana market in Colorado by surveying several storeowners and their employees. Today he offers an update after circling back with these sources to get a grasp on the business 10 months into its legal tenure. On the whole, Colas notes that the marijuana business continues to be robust: stores are still seeing about 100-300 customers a day, who are still spending $50 to $100 per transaction. With stable pricing at about $40-$50 for an eighth ounce, and $300-$400 for an ounce, we estimate the 200 state-licensed marijuana stores in Colorado have raked in $252 million from January 1st through September; factoring the newly licensed 46 stores as of October 1st, we estimate revenue for 2014 totaling $355 million. Why should the rest of us care? Between excise and retail taxes, marijuana businesses in Colorado should generate upwards of $100 million in taxes for the year; the state alone should reap $35.5 million from the 10% sales tax. This Colorado experiment is growing into a mature market that offers a handsome stream of revenue to both businesses and the state. Sure, there are a few headwinds like any startup industry endures, but this continues to be a fascinating case study of a new – and quite profitable – business.


Via ConvergEx's Nick Colas,

Note from Nick: It’s not often that you get to witness a new industry take shape, so we are paying close attention to the legalization of marijuana in states like Colorado.  Today Jessica updates her first note on the topic with fresh channel checks and shows the industry is growing in a number of novel ways.
As I was listening to the radio on my way to work this week, the hosts highlighted a new study that found September is the second “fattest” month of the year behind December: dieters gain an average of 2 pounds in September and 4 lbs. in December. One such reason provided by the hosts was early buying of Halloween candy and the propensity to sneak into the secret stash stowed away for October 31st. Seems a little early, but month aside, it’s hard to deny fall as the “fattest” season, and Halloween certainly kicks off the subsequent couple months of treats and feasting.
In the spirit of All Hallows’ Eve now that it’s just around the corner, how does a dark chocolate bar with Oreo crumbles and vanilla bone candies sound? While considered a largely child’s holiday, this “Graveyard bar” will certainly not be available for the pillowcases of trick-or-treaters, at least I’d hope not. This is just one cannabis infused product being offered this month in a recreational marijuana store in none other than Colorado. And if you’re more of a Casper the friendly ghost type, they’re offering a Candy Corn bar as well.
All “treats” aside, these cannabis infused edibles represent unique product offerings that differentiates the budding business of recreational marijuana from the illegal black market.
In June, soon after sales of recreational marijuana were legalized in the state of Colorado, we interviewed several stores to ascertain this newly legal market. We recently circled back to our contacts and found that while smokeables remain most popular, edibles are another growing and important part of their product mix, and one that is hard to come by from dealers on the street. A few points here:

Some stores buy edibles from vendors, and others make baked goods in-house. The benefit of buying from vendors is that they are tested for potency. With the increased scrutiny and impending new regulations on edibles, it’s the safer and easier route.


Products span from chocolate, cookies, and chews, to elixirs, chill pills, and concentrates. Our contacts noted brownies as most popular, of course, with gummies close behind.


One trend gaining swift traction, also according to our contacts, is the use of vaporizers. These typically come in the form of vape pens that are used with wax, oil, or dry flowers for example—mostly odorless, they provide a more discreet means of experiencing the effects of cannabis.

While interest in edibles and vaporizers continues to develop in Colorado, how is the recreational marijuana business faring as a whole since legalization took effect on January 1st? Our surveys of storeowners and employees demonstrate that this novel business is growing into a mature industry.

Pricing has remained stable since our interviews in June at about $40-$50 for an 1/8 ounce, and $300-$400 for an ounce (plus tax). The consumer base and their spending habits have also remained steady: stores still report seeing between 100 to 300 customers per day, who spend $50-$100 dollars per visit on average. And of course, each shop continues to sell top shelf and connoisseur products which helps support their price premiums over the black market—the average street price for high quality marijuana in Colorado on the crowdsourcing site,, stands at $238. Evidently, business has not dissipated since the flurry of excitement regarding legalization last January.


Recreational marijuana stores were able to maintain stable and high pricing, in part, due to the 9-month period in which they were afforded exclusive state licenses. This grandfathering period expired this week, and 46 state-licenses were granted to marijuana stores in addition to the 200 already in business. These new entrants will create pricing pressure, so marijuana businesses will need to adjust to a more competitive marketplace.


Some survey respondents are looking to expand, with one receiving a second license to open a new store this week, and others entertaining additional grow facilities. Regulations, however, continue to contain expansion efforts by many of the marijuana stores we interviewed.


The general consensus among our contacts is that business is steady or rising from when sales of recreational marijuana were first legalized. While lines may not be out the door as they were in January, storeowners and their employees reported improved efficiency in processes and better flow. It seems these stores are hitting their stride.


We size the recreational marijuana market in Colorado at $252 million from January 1st through September. To reach this number, we factored in the 200 licensed recreational marijuana stores during that time period, the reported number of average customers and transaction sizes from our survey respondents, and the fact that most stores are open 7 days a week. When accounting for the 46 recreational shops granted licenses this week, we estimate revenues will total $355 million in 2014.


These estimates may seem steep, but let’s work our way backwards from some public figures. The Colorado Department of Revenue reported collecting $2.97 million in taxes on recreational cannabis sales in July. The state taxes these sales at a rate of 10%, so this would suggest $29.7 million in revenue for the month of July. If sales are as consistent as our survey respondents suggest, simple math would add up to $356 million in revenue for the year. And this calculation does not factor in the 46 new shops now in business for the remaining quarter.

No doubt recreational marijuana dispensaries are raking in the proceeds, but where are they putting all the cash? In most other businesses, one would not hesitate to hazard “A bank”. Yet under the Federal government’s Controlled Substances Act, manufacturing, distributing, or dispensing marijuana remains illegal. Thus, a bank servicing a dispensary knowingly could be charged with money laundering, conspiring to distribute marijuana, or acting as an accessory, to name a few charges. These criminal penalties prompt hefty fines and years of prison time. Given the legalization of medical marijuana in 23 states and the District of Columbia, and legalization of recreational marijuana in Colorado and Washington, how is the industry addressing this important issue?

In short, the lack of bank services to marijuana dispensaries continues to act as a strong headwind for the marijuana industry, despite attempts towards solutions by the government. The Justice Department responded last year by sending a memo to all U.S. attorneys that identified eight guidelines for which prosecutions of marijuana offenses in states where sales of cannabis are legal should follow. Some of these “Federal law enforcement priorities” include preventing sales to minors, revenue from going to criminals, diversion of the drug to states where it is not legal, and drugged driving or “adverse public health consequences”. (Please find the other priorities in the link at the end of this note).


Despite the existence of a set of standards, they prove largely meaningless in real-world conditions: “This memorandum is not intended to, does not, and may not be relied upon to create any rights, substantive or procedural, enforceable at law by any party in any matter civil or criminal. It applies prospectively to the exercise of prosecutorial discretion in future cases and does not provide defendants or subjects enforcement action with a basis for reconsideration of any pending civil action or criminal prosecution.” This memo leaves banks in precarious relationships, whereby they serve dispensaries at their own peril. More questions were created than answered, in addition to more ground for prosecution and burdensome compliance implications.


The Financial Crimes Enforcement Network (FinCEN) also gave some guidelines that mandated banks to file a Suspicious Activity Report (SAR) if a customer violates any of its “red flags”. These red flags include interstate activity, criminal records, efforts to mask involvement in the cannabis business, or a failure to provide sufficient documentation (other red flags are in the link following this note). By identifying these violations, banks can classify dispensaries as “marijuana limited” or “marijuana priority”. “Marijuana priority” are those who have violated one of the eight priorities listed by the DOJ.


In August, the Director of FinCEN noted an inflow of 502 SARs identified as “Marijuana Limited” and 123 SARs as “Marijuana Priority”. Overall, “there are currently 105 individual financial institutions from states in more than one third of the country engaged in banking relationships.” With that said, 475 SARs were marked with “Marijuana Termination”.  In other words, many banks are distancing themselves from servicing marijuana businesses.


Given this information and our survey work, we know that some banks and credit unions are providing their services to marijuana-related businesses. Respondents to our survey said there are local banks and credit unions that offer accounts to dispensaries. However, other interviewees mentioned the caveat that this relationship does not last long…or until the bank figures out it is servicing a dispensary. Many contacts were unable to even broach the subject given its touchy nature.


Consequently, a weighty share of dispensaries is forced to hold stacks of cash in safes, putting storeowners, and employees at heightened risk for robberies. Accounts of theft have included both the stealing of cash and cannabis. Therefore, survey respondents emphasized the significant security used at shops to protect the cash and cannabis, including safes and video surveillance. We were not able to interview one store we called because the employee who answered couldn’t be on the phone as he watched the door. Every shop is always on high alert. 

On a lighter and societal level, legalization of recreational marijuana has broadened consumer demographics. The typical customer does not fit the young burnout stereotype you may have seen in Dazed and Confused, or dozing off in the back of your former high school classroom for that matter. In fact, one store employee stated emphatically: “We have no average customer.”

While this was a clever response from a marketing angle, it touches upon a broader theme: legal recreational marijuana businesses in Colorado have attracted a base of consumers who most likely wouldn’t have ventured into the black market prior to legalization.


Survey respondents said the age of customers spanned from 21 all the way to one’s 90s, with some stores citing concentration among those in their 20s to 40s. Legalization opened up a whole new base of those purchasing the drug, and our contacts said these individuals come from all walks of life and from all over the world. One employee even described some customers who are middle-aged men as “a kid in a candy store”—hence the Halloween themed edibles.


And for stores that only sold medical marijuana prior to legalization of its recreational counterpart, they have received a new batch of customers and means to diversify their business.

In terms of fiscal policy, sales of recreational marijuana have generated a generous revenue stream to the government by way of taxes. Retail taxes add up to 12.9%, while a 15% excise tax is applied at the wholesale level. In fact, the first $40 million collected by the excise tax is devoted to the Colorado state school construction fund on an annual basis. Given these sales and excise taxes and our revenue estimates, we believe tax revenue could total just shy of $100 million through year-end.
This tax revenue estimate may seem steep, but remember, the Colorado Department of Revenue reported the state collected $2.97 million in taxes at the 10% rate for July. Again, steady sales and simple math suggests total sales taxes for this year totaling $35.6 million. If we parse our revenue estimate to just factoring in the 10% sales tax to the state, we get about $35.5 million for the year as well. When accounting for recreational marijuana’s contribution of $5.2 million in sales and excise taxes (less the contribution of sales taxes from medical marijuana), tax revenue adds to $62 million—a bit under our estimate, but not too far off the mark.
Overall, the people we spoke to working at recreational marijuana stores in Colorado felt they were on the “cutting edge”. We zeroed in on the Colorado market because it is more developed than Washington’s, but both are on the brink of a promising growth industry in its preliminary stages. Come November 4th, other states will vote to legalize marijuana for either medical or recreational uses as well, including Alaska, the District of Columbia, Florida, Guam, and Oregon. Thus far, recreational marijuana stores in Colorado have proved lucrative investments. Even still, we’ll have to stay tuned to see how regulatory hurtles are overcome and how the marketplace expands and welcomes new competition—we’ll keep you posted.
I’ll sum up using the words of our contacts spoken on at least two occasions: “We’re just really happy it’s legalized here in Colorado”. That’s all well and good, but just keep an eye on the scale this fall with all those themed edible marijuana treats.

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TeamDepends's picture

We will not rest until meth is also legal!!! Teeth are over-rated.

schoolsout's picture

Nick "Colas"  


Tee hee...

Zhuge Liang's picture

Selling weed now passes for economic development.  Pathetic.

juangrande's picture

Why pathetic? It's just another consumer product.

CrazyCooter's picture

Proactive crowd control ... the elites banned it, imprisoned millions, and only consider backing up on that vector because things are going down hill very fast.

Best to keep the masses at home, on EBT, and stoned out of their gourds.



juangrande's picture

Better herb than mother's/brother's/ sister's little helper!

847328_3527's picture

It’s probably a lot cheaper to keep the Sheeples passive if they simply lace the drinking water with a cocktail of Xanax, lithium and oxycodone.

Four chan's picture

the problem is not bringing in the stuff... ...but what to do with all the fucking cash!

The9thDoctor's picture

This is why I support marijuana legalization
(10 seconds)

Jafo's picture

That is a problem that a lot of other businesses wish they had.

Skateboarder's picture

The people like the stuff anyway. It's like a win-win situation.


cynicalskeptic's picture

Too expensive.  They've got the masses paying for their own SOMA.


Notice how Oxy was made SOOOOO available at the time that Heroin was hard to get (what with the Taliban wiping out Poppy felds).  Now, after the US has been in Afghanistan for over a decade, there's been a crackdown on prescription writing - and a massive increase in heroin use as former Oxy users look for an alternative.     Get 'em hooked on nice 'legal' prescriptions - then cut bck the supply and fore users over to Heroin - gotta make sure there are users for the massive increase in supply.

Beowulf55's picture

Not sure where this guy buys his pot.  My recent trip last week to my medical marijuana provider had 1/8's selling between $15 and $25 bucks.  Gram concentrates sold between $35 and $50.  Ounce bags of smoke sold between $95 and $165.  And prices have come down since last year.  Found Denver cheaper than Colorado Springs.  Competition is driving the price down.  Just as a functioning capitalist system should do. I predict that half the stores now will be out of business next year or the prices will be cut in half.

If he is paying the prices stated in this article he is getting ripped off.....

PT's picture

Does this mean that people are going to stop growing their own?

TheHound73's picture

The law passed by the people of Colorado provided for growing up to 10 plants per household, tax free, in any enclosed locked area.

zerophilo's picture

Yeah, Cooter, you've been pissing that meme about Marijuana out of your twat for a while now, it's always been the same: you actually think marijuana makes one less aware, incapable, and literally unable to leave the home or have any purpose in life. It's really getting old, because it's entirely inaccurate.

Have you ever smoked weed? There's not one, single thing bad about it. Need I say nontoxic, cures cancer, and medicinal for hundreds of ailments? Shit, I could even go so far as to say that it encourages spiritual and emotional growth by breaking down barriers. And you still couldn't disprove me, because it would be true. Go ahead, I challenge you to disprove me.

I'd say marijuana is a great igniter for radical change.

Hate to beat a dead horse, but hell, have some fucking honor about the basic facts and grow up.


adr's picture

Actually yes. Been around stoners who all think they are intellectually superior after taking a bong hit. When everyone is stoned, they all think they are more aware and capable, just like a drunk. The only person who can see the folly in their thinking is the person who isn't stoned. I watched many people succumb to the effects of Marijuana in college. Guys who started out as great students who ended up dropping out after pot went from a recreational habit to a near hourly need. Wasting a $40k a year education.

Marijuana has many medical benefits that can be realized without getting high. To say someone smokes weed to cure an illness they don't have is dishonest. Like a guy swilling Bud Light because he says he likes the taste. My cousin fucked up his life forever because at 13 getting high became priority #1. He can't hold a job, is failing every class, and has a record for multiple B&E after trying to steal stuff to pay for pot. His brain is so fried it is like talking to a stupid dog.

Spiritual growth comes from honest introspection, not through mind altering substances. The basic facts are Marijuana has benefits, but so does alcohol. In moderation both can be good for you, the problem is most people are not using them for the health benefits. However like you they will cite the health benefits as justification for the simple fact they just want to get high.

Oldwood's picture

I recently visited some friends in Colorado a few weeks back and of course we had to try it out. Its been thirty years for me but I was a pretty heavy user in the day, dabbled in dealing and the whole bit. Absolutely everyone who is a regular user thinks they have reached some elevated level of understanding or "clear".

We sat around a fire late at night, high in the mountains, I took one hit of the bong, and was set back on my heals. This shit was a bonafide drug. No buzz, no calming high. Simply blasted out of my mind (which maybe just doesn't take all that much these days). Eventually we attempted some conversation that was frequently interrupted by laughter and silence, but did all agree we had all reached some new high of understanding, especially of the rotational qualities of the heavens.

In the morning we awoke to the same old fucked up world we had escaped briefly the night before. The one positive I realized was that I didn't smell like a shit fire from smoking a lid to get short toke of the bong was all it took.

Legalize the shit...I don't care. Just don't blow it up my ass like it is some great path to utopia. Its dope. If you want to be high, go for it. Just don't come knocking on my door looking for help or anything else. Make your delusional world and live in it. Its hope and change we can believe in, just ask the choomer-in-chief.

juangrande's picture

Pot smokers are more creative than drunks, but your allegories are valid. But you can say that about  any addictive substance/ behavior. Prohibition is not the answer. Adjusting consciousness is.

Oldwood's picture

Isn't that why people do drugs and adjust their consciousness?

847328_3527's picture

I have zero first hand experience smoking it myself but I remember vividly a fairly good high school friend who smoked weed at a so-called “pot party” and jumped out the 3rd story window thinking he was pretty invulnerable. Luckily it was only 3 stories (about 30 feet) but landed him in the hospital for a month and screwed up his high school graduation timing badly.


Any hint of an interest I might have had before that disappeared pretty quickly after hearing about his ‘experience.’


And BTW, jailing non-violent pot smokers needs very serious re-thinking, esp when we should be saving space for violent criminals.


Oldwood's picture

He would probably have made it if he had just taken a couple more hits and flapped his wings harder.

El Vaquero's picture

Yup, I remember a frat guy when I was at college who decided to get drunk, do some stupid shit, and fall face first into some concrete, and wound up in a coma for several months.  Do you drink?  Alcohol can fuck you up, but it is legal.

juangrande's picture

Anything could have been in that joint. PCP perhaps?

Oldwood's picture

Obviously we need better regulation of drugs. 

Beowulf55's picture

...well you friend is a dumb ass.........probably hopped up on alcohol.

Bangin7GramRocks's picture

Your friend smoked PCP dipshit. The only way somewhere would jump out a window on weed would be to get to a Taco Bell. Are we still having these discussions? Really? How about you worry about the war on Christmas and let the adults worry about what we put in our bodies. Mmmmkkkkk!

El Vaquero's picture

I've seen too many people get fucked up on things that people claim are just fine and I've seen people come out and do just fine on things that were supposed to fuck them up.  Meth and heroin?  Sure, don't touch that shit.  The people that I've known who were fourthcoming about their use of that shit and got off of it either did it once and only once, or they have some very fucked stories.  Weed?  Yeah, I've known far too many people who made a habit of smoking it for a while, then went on to do something.  I've only tried it once personally, and I didn't like it, but I've known quite a few people that did like it, did use it a lot, and they're just fine. 


And if you have cancer, and weed mellows you or kills your pain or whatever, I don't see a difference between wanting to get high and a medical use.  It's not some all-curing substance, but fuck, can't getting high have its own medical uses? 


(Full disclosure - I think it should be 100% legal, period.  Otherwise, we go down the path of kicking down doors because somebody might want to get high.  With guns in the hands of paranoid trigger happy government agents who are taught that everything is a threat.)

sm0k4's picture

BS. Your brother just can't handle his addiction problem. Plain and simple. I have been smoking marijuana since I was 15 or 16. I graduated college, have a nice engineering job, and still get high. I just didn't make it priority #1 like your brother and friends. Sure, I've seen people do the same thing, but you can't blame a harmless plant. Those people just have addiction problems and should have sought help. Pot doesn't make people stupid or fry your brain either, they accomplish that feat on their own, or have other drug addictions. Its not marijuana's fault. Blaming a plant because people are weak and can't handle themselves is silly to me. Everyone looooooves telling others what is right and just, as if they are the moral police. Everything you describe is a problem of the individual and has nothing to do with pot. If pot fried your brain, how did I manage to smoke for 17ish years and still furthering my career? By your judgement I should be drooling on the couch watching cartoons. Proves yet again that is is all in the individual.

Marijuana is the only thing that levels me out and calms me down. When I am agitated or high strung, it slows down my thought process so I can think more clearly. I have one strain with lots of CBD and CBN that is great before bed. If I am having trouble sleeping I hit that a couple times and I am sleeping within 30 minutes. This is what it does for me, for others it could be totally different. An ex I had back in college just fell asleep if she smoked a few hits no matter the strain. It has a totally different effect for everyone. Smoke enough potent weed and will be sort of euphoric and altering. The only drawback I get from pot is munchies. 

Bendromeda Strain's picture

Are you a vampire? Obviously, when you look in the mirror, you see nothing. Let us parse just two sentences from your infinite EZ-Bake wisdom:

Plain and simple. I have been smoking marijuana since I was 15 or 16.

Followed (after some inane dissembling) by:

Marijuana is the only thing that levels me out and calms me down. When I am agitated or high strung, it slows down my thought process so I can think more clearly.

You don't even realize it, do you? Maybe that condition you are supposedly remedying is related to the first quote. Your claimed success in life might merely be an example of high functioning mediocrity. What if you might have been truly exemplary? Nope - dope wins again...

McCormick No. 9's picture

This article has left me dazed... and confused.

But seriously, how does THC (marijuanna psychoactive ingredient) work? As it turns out, THC binds to receptors in the brain that otherwise are only active IN THE MOTHER's WOMB! After birth, these receptors are mostly inactive.

So, apparently, weed gives us that warm, safe feeling we don't consciously remember of being in the womb.

I'm personally not a weed smoker, but to each his own. The criminalization of hemp is a tragedy. I think hemp is a wonder plant and that it's psychoactive proerties are the least of what it has to offer us.

I just wonder how much radical change has been instigated by fetuses.

cheech_wizard's picture

Nothing worse than an evangalist... whether it be television, climate change, and now marijuana...



Yes_Questions's picture



it is so much more than a consumer product.



juangrande's picture

The plant is likely the most useful to humans on the planet. But, in bud form, it's mostly a consumer product, with the medical exception, of course. 

zerophilo's picture

Yeah why pathetic? Your opinions incite such intellectual fervor!

Zhuge Liang's picture

I have no problem with pot. But this, like gambling, is being sold as a positive economic development. If you want pot, grow it. But a strong culture cannot be built on growing weed and building casinos.

The9thDoctor's picture

So what do YOU consider as positive economic development?

Clampit's picture

I'm guessing anything taxable ... it's the anti-corporate drug, so I get the vitrol among those who consider themsleves "management."

NoPension's picture

Right up there with State controlled casinos and the lottery.

80 years of " this is bad, so it's illegal" and then the state figures out how to collect a buck, and it's ok now.

Prostitution is next. With state inspectors going around checking on the goods, ( for our well being, of course)

I predict, in 10 years or so at this rate, you will be able to go to a state sponsored outlet, get high, get laid and gamble to your hearts content.

And,oh yeah, NO SMOKING or no Big Gulps. Bad for your health, don't ya know.

juangrande's picture

"Warm smell of colitas rising up thru the air"    Eagles

Fixed it. Why the downarrows?

auntiesocial's picture

wake me up when Cali is recreational. 

Yes_Questions's picture



meth is legal, from a pharma-Cyst


and anyway, so what if the workers in the Prison Industrial Complex face layoffs as the owners of those companies face steep revenue declines.   




they're government workers by proxy, we hate them, right?!??!