Colorado's pot market getting new competition
Sep. 30, 2014
DENVER (AP) — Colorado's new marijuana industry is in for a brand new element Wednesday — competition.
The state gave medical marijuana dispensaries and growers a nine-month exclusive on the new recreational pot business, fearing an unmanageable explosion of new businesses.
The grandfathering period expires Wednesday, meaning pot shops and growers who weren't in business before voters approved recreational pot in 2012 are just now able to enter the market.
"There's going to a price war coming. It's inevitable," predicted Toni Fox, a marijuana grower and owner of a Denver pot shop. Fox has received a license for a second shop opening Wednesday in Salida.
Colorado is issuing licenses for 46 more pot shops, in addition to about 200 already in place. Colorado is also licensing 37 more growing facilities and 13 new product manufacturers who make marijuana-infused products.
The expansion means pot prices for consumers could soon drop. Recreational marijuana in Colorado currently wholesales for about $1,800 to $2,500 a pound, depending on quality. The addition of new growers starting Wednesday could push the price below $1,000 a pound once those plants mature.
Until now, Colorado's pot prices have been steep — with customers paying up to $400 an ounce before taxes — because of production caps tied to the pre-existing medical marijuana market. Colorado regulators feared an unmanageable proliferation of new pot shops and growers. Now, the market is for the first time getting bigger.
"Allowing for new entrants into the market will better facilitate a free-market determination of price," Andrew Freedman, director of marijuana coordination for Gov. John Hickenlooper, said in a statement.
But some warn Colorado needs to watch for overproduction, which could give growers an incentive to sell pot illegally, either out of state or to people under 21.
"We need to produce in Colorado what's being legally consumed, and no more," said Mike Elliott, head of the Marijuana Industry Group.
Also Wednesday, Colorado's pot industry sees the end of the state's so-called "70/30 Rule," which stipulated that pot shops had to grow 70 percent of what they sold. The rule was instituted in 2010, to address concerns that medical marijuana shops were acquiring marijuana from the black market. The rule was extended into the recreational market for the first few months, also to reduce volatility.
The end of the "70/30 Rule" means pot retailers don't necessarily have to grow anything they're selling. For now, though, retailers say they'll wait and see how the market changes before considering letting others grow their inventory.
"There's still an efficiency that exists when you do it all," said Chris Woods, owner of two dispensaries in Boulder and the recipient of a new retail license.
Woods plans to be one of 21 shops planning to open in Aurora, a Denver suburb which is allowing marijuana sales of any kind for the first time Wednesday. Colorado's third-largest city did not allow medical marijuana sales, and the grandfathering period meant no stores could open there until Oct. 1.
The industry expansion happens the same day a raft of new marijuana regulations take effect. Many of the changes have already been adopted by producers, so it's doubtful consumers will notice many of them. But the new regulations include:
—Requiring edible marijuana products to be easier for consumers to divide into "servings" of 10 milligrams of THC, pot's active ingredient.
—New packaging requirements for products that can't easily be divided or perforated, such as liquids or granolas.
—Requiring edible marijuana products to undergo testing for common food contaminants such as E. coli and salmonella.
—A requirement that marijuana producers show they're legally selling 85 percent of their product before getting permission to add plants.
—Lower licensing fees for growers and retailers, as the pot-regulating agency adjusts how much it needs to oversee the industry
Kristen Wyatt can be reached at http://www.twitter.com/APkristenwyatt