Colorado Sees Sharp Decline in Number of Medical Marijuana Businesses

The number of medical marijuana dispensaries in Colorado has declined 40 percent in the past several years, The Denver Post reports. The industry faces challenges from the federal government, as well as shrinking profit margins.

At the end of 2010, the year medical marijuana was legalized in the state, there were 1,131 medical marijuana businesses. Currently there are 675. There are more than 108,000 registered medical marijuana patients in Colorado, about the same number as in 2010.

The number of big dispensaries, which serve more than 500 patients, has held steady, while mid-size businesses serving 300 to 500 patients have increased. Many small dispensaries, in contrast, have closed.

Some of the businesses that were located near schools closed after they received warning letters from the state’s U.S. Attorney, stating they could face prosecution if they did not move. Others closed because of federal rules that do not allow marijuana businesses to get bank loans, or take common tax deductions, the article notes.

Profit margins have shrunk as the price of marijuana has plunged. An eighth of an ounce of marijuana often sold for $50 in 2010 in dispensaries. Today it sells for half that amount, according to Jill Lamoureux, a former dispensary owner.

“We’re seeing the maturity of an industry,” Robert Frichtel, who runs a consulting company called the Medical Marijuana Business Exchange, told the newspaper. “At a fast pace, we’re seeing something that was brand-new now coming into the early stages of a new business cycle.”

Successful medical marijuana businesses have large growing facilities, he noted. “One of the things that’s very clear is the more successful your grow operation is, the better positioned you are to serve your patients.”