https://www.politico.com/news/magazine/2024/06/09/colorado-weed-market-00157118
Regulatory burdens, an oversaturated market and increasing competition from nearby states have all landed major blows, leaving other states with newer marijuana markets scrambling to avoid the same mistakes.
I believe my berg in New Mexico is oversaturated with weed stores.
For years, Colorado’s marijuana market minted successful local entrepreneurs who bootstrapped small businesses into national brands. The market drew aspiring cannabis professionals from across the country, whether ambitious college grads with a business idea or investors looking to get in on the green rush.
In 2020, the market soared to $2.2 billion. But just three years later, sales had plummeted to $1.5 billion, leading to layoffs, closures and downsizing. The market downturn has spelled trouble for state finances too: Colorado took in just $282 million in cannabis tax revenues in the last fiscal year, down more than 30 percent from two years earlier.
But more than any other factor, Colorado’s market has been sapped by the rapid spread of legalization across the country. Neighbors New Mexico and Arizona are among the 24 states with their own adult-use legal marijuana markets, wreaking havoc on the business plans of dispensaries on Colorado’s southern border. Tourists who once flooded the state for the opportunity to legally experience Rocky Mountain highs have largely disappeared as the novelty has worn off. Even Texans aren’t driving north to buy weed anymore, satisfied with the proliferation of intoxicating hemp products in their own state.
Legalization of marijuana does not equate to a license to print money apparently.
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Same with liquor and gambling. There are three casinos in Detroit, and an armload of on-line casino and sports book apps. I’m sure the state makes out on it’s skim, but the operators?
I remember when Merv Griffin bought an Atlantic City casino from a now prominent “thought leader” and lost his shirt.
Steve
No and the illegal market is taking a lot of profits also. But I invested in IIPR (Warehouse Reit) earlier last year and have done well. I picked it up when it’s dividend was at 11.2 percent.
The New York City publication THE CITY and reporter Rosalind Adams deserve a round of applause for their in-depth reporting in State Cannabis Officials Repeatedly Raised Alarms to Hochul’s Team Over Private Equity Loan Deal, Internal Emails Show. The headline undersells many of the findings in this article, which covers a wildly-botched public-private partnership for New York out in front nationally in launching large-scale cannabis distribution, to benefit both growers and neighborhoods harmed by racially-based cannabis policing.
Details include New York State guaranteeing a private equity firm a 15% return on loans to cannabis entrepreneurs and the agency in charge of finding store sites and renovating them apparently being scammed. Reading between the lines, and the article’s sightings are consistent with this assumption, the newbie businessmen signed or were otherwise responsible for overpriced leases, leading them to borrow more than should have been necessary, and it appears on poor terms too (which should not have been the result if the state was subsidizing the lending; you’d instead expect reasonably prices loans extended too casually/generously, with high default rates). So it looks as if the private equity firm at the center of this story, Chicago Atlantic, was squeezing everyone every way it could.
This reporting still has some gaps given that THE CITY worked from over 500 e-mails, supplemented by interviews. Given the lack of a mention FOIL (New York’s FOIA) suggests they came from a whistleblower. For instance, there are big questions of agency. Who negotiated and reviewed the terribly one-sided deal with Chicago Atlantic? Who was in charge of cannabis-store siting and fix-up at New York’s Dormitory Authority, into whose lap this part of the initiative fell? The Dormitory Authority, one of the two key agencies leading this initiative (the other was the newly-formed Office of Cannabis Management) looks to have been wholly on board with the classic private equity looting scheme of pulling profits out of a deal via overpricing the real estate, here the renovations and the leases (the entrepreneurs were expected to get a turnkey situation as far as the stores were concerned; it isn’t clear whether this scheme was intended to be a franchise-like operation, with the state providing other support, like free retail store software licenses).
Hopefully THE CITY reporter Rosalind Adams will dig further and deeper to reveal the rot and corruption.
Below is a link to her THE CITY article:
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Business as usual in Shiny-land. The officials making the scandalously one sided deals either receive large “donations” now, or a cush seat on the company’s Board later.
Steve