Jonathan Spadafora knew things were bad when April 20, 2022, the high holy day of cannabis, failed to deliver the windfall Colorado’s marijuana retailers were used to. Across the state, dispensary sales fell around 25 percent compared with 4/20 the year before. But it wasn’t until this past May, when demand continued to plunge, that Spadafora, president of Veritas Fine Cannabis, realized the industry was in a free fall.

For the first time since licensed recreational weed sales began in Colorado in 2014, two years after legalization, the Centennial State’s cannabis sector is experiencing a prolonged downturn. Mid-2022 saw the fourth consecutive quarter of declining sales, a near reversal of the record-setting revenues the industry boasted during the early days of the pandemic. (The medical and retail sectors have experienced nearly identical downturns.) In response to waning demand, dispensaries that had stocked up for 4/20 found themselves stuck with excess inventory and slashed purchase orders to growers such as Veritas, which produces flower and pre-rolled joints for stores around the state. Even big companies are struggling; chains Buddy Boy and TweedLeaf shuttered seven stores each during the summer.

Spadafora believes a number of factors have contributed to cannabis’ tailspin. To start, the pandemic boom was likely a bubble driven by the fact that people were stuck at home—and often bored or stressed-out. “People weren’t in the office,” Spadafora says. “They were at home and had the ability to roll a joint and do their emails all day.” Then there were the stimulus checks, which helped fund the run on nugs as total sales reached their annual peak at $2.2 billion in 2021. Fast-forward to today, and people are worried about inflation, Spadafora notes. Plus, nine more states have legalized recreational weed during the past two years, putting a dent in Colorado’s cannabis tourism trade, says Truman Bradley of Denver-based Marijuana Industry Group, a cannabis trade association. New Mexico’s entrance into the market in 2021 has been especially painful, corresponding with a 40 to 50 percent drop in cannabis sales in Colorado’s southern border towns.

Graph illustration by Sean Parsons

Veritas, one of the state’s larger marijuana producers, couldn’t weather the downturn without downsizing: In June, the company decided to close one of its three cultivation facilities and lay off 33 staff members—nearly a quarter of its workforce. “It’s tough because these weren’t people who were making mistakes,” Spadafora says. “I think one thing that we’ve learned is Colorado is not a $2.2 billion market. It’s probably a $1.8 or $1.7 or $1.6 billion market.” Growers and sellers alike will simply have to hope the market bottoms out before their companies go up in smoke.