How the 'Napa Valley of Cannabis' Dried Up

Summary

The Journal: How the 'Napa Valley of Cannabis' Dried Up

Released: April 18, 2025
Host: The Wall Street Journal & Gimlet
Presenters: Kate Linebaugh, Ryan Knutson, Jessica Mendoza

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1. Introduction: Pueblo's Cannabis Dream

The podcast episode begins in Pueblo County, Colorado, a region once brimming with promise for the burgeoning legal marijuana industry. Hosted by Jessica Mendoza, the narrative centers around Pueblo's ambitious journey to become the "Napa Valley of cannabis," a vision that ultimately faced significant challenges and setbacks.

2. Early Days: A Promising Start

Karen Randall, a Pueblo resident, provides firsthand insight into the area's initial enthusiasm for legalized marijuana. She recalls how Pueblo aimed to transform itself by leveraging the newly legalized cannabis market to revitalize its struggling economy.

Karen Randall [00:22]: “Pueblo was a place full of hardworking blue collar workers who just couldn't catch a break. They had been this huge steel town. They were shedding those jobs for years.”

3. The Boom: Rapid Growth and High Hopes

Following Colorado's legalization of recreational weed in 2014, Pueblo rapidly positioned itself as a central hub for cannabis businesses. The community saw an influx of entrepreneurs and consumers, leading to significant economic optimism.

Julie Wernau and Karen Randall toured Pueblo, noting the proliferation of cannabis greenhouses and dispensaries. The excitement was palpable, with reported sales soaring.

Karen Randall [04:22]: “Leading up to the first day of marijuana sales, people literally like, packed up everything they owned, got in their vehicles, and just drove to Colorado with no plans.”

During this period, establishments like Sticky Icky's dispensary thrived, with daily sales peaking at approximately $20,000, contributing substantial tax revenue to the county.

Daniel Swick [06:48]: “There's a lot of strains that are actually have really humorous names to them. Very funny names.”

4. The Bust: Oversaturation and High Taxes

However, the rapid expansion soon led to oversaturation. By 2021, the number of cannabis businesses in Pueblo surged to over 200, far exceeding the local demand. This saturation, coupled with high taxation, strained the sustainability of these enterprises.

Karen Randall [08:21]: “The number of cannabis businesses that flooded into this city and the surrounding county were pretty outsized for the demand.”

Colorado imposed a complex tax structure on marijuana products, including a 15% sales tax, a 15% excise tax at the state level, an additional 5% excise and 6% sales tax at the county level, and another 10% excise tax for businesses within the city of Pueblo alone.

Karen Randall [09:22]: “Colorado levies a 15% marijuana sales tax and a 15% excise tax on marijuana, and then Pueblo county tax on another 5% excise tax and a 6% sales tax. And then if you have a cannabis business that's in the city of Pueblo, you're going to pay an additional 10% excise tax, which is one of the highest in the state.”

5. The Black Market and Competition

The high tax burdens made legal cannabis products significantly more expensive than their black market counterparts. Consequently, illegal marijuana sales not only persisted but intensified, undermining the legitimate businesses and contributing to law enforcement challenges.

Karen Randall [10:27]: “If you're not paying for, you know, sales tax, excise tax, marijuana sales tax, county tax, city tax, state tax, you can charge way less than the legal competition.”

Moreover, as other states began legalizing marijuana, Pueblo faced increased competition, further diminishing its market share and exacerbating the decline of local businesses like Sticky Icky's.

6. Social Consequences: Crime and Homelessness

The decline of the cannabis industry had broader social ramifications. An influx of individuals moving to Pueblo for cannabis-related opportunities, many with criminal backgrounds, led to a rise in homelessness and crime rates. Law enforcement struggled to manage the burgeoning issues, with a notable increase in unattended encampments.

Ryan Masterson [15:10]: “They came to Pueblo because... they wanted to land in Denver, I wanted to land in Boulder, I wanted to land in Aspen... realized quickly that they couldn't afford it and where could they look to a place to come, and Pueblo would end up being a good landing spot for them.”

7. The Economic Fallout

As businesses shuttered and tax revenues declined, Pueblo faced significant economic strain. The initial promise of job creation and increased tourism gave way to economic instability, leaving the city grappling with diminished financial resources to address emerging social issues.

Karen Randall [11:58]: “The profitability has dropped dramatically for the businesses. So only, like, a quarter of these businesses are even profitable.”

8. Current Status and Future Outlook

Today, Pueblo hosts approximately 45 cannabis businesses, a stark contrast to its peak. While some establishments like Sticky Icky's remain operational, they operate on a much smaller scale with reduced customer bases. The local economic development corporation has shifted focus away from cannabis, emphasizing traditional industries in hopes of stabilizing the economy.

Karen Randall [17:44]: “These are the guys whose job it is to sort of sell Pueblo to businesses and help create a better economic picture. And what they told me essentially is that they're kind of leaving marijuana behind...”

9. Lessons Learned

Karen Randall reflects on Pueblo’s experience, emphasizing that while the venture into legalized cannabis did not unfold as anticipated, it offers valuable lessons for other communities embarking on similar paths. The key takeaway is not to dismiss legalization outright but to approach it with informed strategies to avoid Pueblo's pitfalls.

Karen Randall [18:35]: “I think there's a lot of lessons to be learned from a place like Pueblo that was first when it came to legalizing marijuana...”

Jessica Mendoza [19:01]: “So it isn't that Pueblo is an example of why this is not going to work. It's more of a it's not going to work this way.”

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Conclusion

Pueblo County's ambitious embrace of the legal cannabis industry serves as a cautionary tale about the complexities of rapid economic transformation. Oversaturation, high taxation, competition, and unintended social consequences highlight the importance of strategic planning and realistic expectations. As more states consider legalization, Pueblo's experience underscores the necessity of learning from past endeavors to foster sustainable and beneficial outcomes.

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Notable Contributors:

• Jessica Mendoza: Host and reporter
• Karen Randall: Local Pueblo resident and cannabis business owner
• Julie Wernau: WSJ colleague and reporter
• Daniel Swick: Manager at Sticky Icky's dispensary
• Ryan Masterson: Local police department officer

Production Team: Katherine Brewer, Pia Ghidkari, Carlos Garcia, Rachel Humphries, Sophie Codner, Ryan Knudson, Matt Kwong, Kate Linebaugh, Colin McNulty, Annie Minoff, Laura Morris, Enrique Perez de la Rosa, Sarah Platt, Allen Rodriguez Espinoza, Heather Rogers, Pierce Singhi, Jeevika Verma, Lisa Wang, Katherine Whalen, Tatiana Zemis, Trina Menino.

Music: so Wylie, Blue Dot Sessions

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For more episodes and exclusive content, visit The Journal's Spotify Page and the Wall Street Journal.

Transcript

[Julie Wernau]

So this is Pueblo county, and this is where all the pot stuff started. And this whole area was filled with pot stuff.

[Jessica Mendoza]

Karen Randall lives in Pueblo, Colorado, one of the first cities in the country to develop a legal marijuana industry.

[Julie Wernau]

We're in cannabis country here. I'll show you the greenhouses over there. You can see.

[Jessica Mendoza]

Karen took our colleague Julie Wernau on a tour of Pueblo late last year. As they drove around, they spotted signs of the cannabis industry everywhere.

[Karen Randall]

I mean, that looks like a giant, sort of like industrial warehouse sized building.

[Julie Wernau]

Yeah, exactly.

[Karen Randall]

I guess I'm just surprised how packed together it all is.

[Julie Wernau]

And you can smell, like. Smell it. Can you smell the pot? Oh, yeah, yeah, right.

[Jessica Mendoza]

That signature smell was hard to miss. And yet many of the marijuana greenhouses and dispensaries that Julie saw seem to be shuttered.

[Karen Randall]

Well, it looks like a lot of abandoned businesses. You see anything in there? Looks empty, right?

[Julie Wernau]

Yeah. So this is a big pot place. Yeah, a lot of these have closed. Right here is a dispensary. So this is the second one you've seen.

[Karen Randall]

It's not like I'm not seeing a.

[Julie Wernau]

Big, full parking lot. No, I never see cars there.

[Jessica Mendoza]

Pueblo was a city that dreamed of being a marijuana hotspot, and it went all in on Colorado's growing, legalized pot industry. Julie went there to see how it was faring.

[Karen Randall]

A decade later, Pueblo was a place that was on track to be what they said was the Napa Valley of cannabis. And then everything went wrong. When I showed up there, it was definitely not that. This was a place full of failed businesses.

[Jessica Mendoza]

So what would you say happened to Pueblo?

[Karen Randall]

The message I got from people in the town, and this is on both sides. These are people who are in the marijuana business and people who are against the marijuana business is this is not what we signed up for. This is not working out the way that I was promised.

[Jessica Mendoza]

Welcome to the Journal, our show about money, business, and power. I'm Jessica mendoza. It's Friday, April 18th. Coming up on the show, how one Colorado town's cannabis dreams went up in smoke.

[N/A]

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[Jessica Mendoza]

Pueblo is a city two hours south of Denver with a population of just over 100,000 people. When recreational weed became legal in Colorado in 2014, Pueblo saw an opportunity to establish itself at the center of the cannabis boom.

[Karen Randall]

Pueblo did a really good job of convincing the rest of the country that they were the destination for weed.

[Jessica Mendoza]

The county commissioner at the time called it the Napa Valley of cannabis advocates like him. Imagine Pueblo would draw marijuana lovers from around the country. Why was this so important to Pueblo?

[Karen Randall]

Pueblo was a place full of hardworking blue collar workers who just couldn't catch a break. They had been this huge steel town. They were shedding those jobs for years.

[Daniel Swick]

They.

[Karen Randall]

There was a local slaughterhouse that also closed up shop. And so they just kept trying to get back on their feet and were struggling. And this new industry sort of showed up in America and said, you know, we can help you with that. And they were going to be among the first. And so it was a lot of excitement around that.

[Jessica Mendoza]

The idea was that embracing the legal cannabis industry could bring new jobs, tourism, and tax revenue to Pueblo. And at first, it seemed like that's exactly what was going to happen.

[Karen Randall]

Leading up to the first day of marijuana sales, people literally like, packed up everything they owned, got in their vehicles, and just drove to Colorado with no plans.

[Jessica Mendoza]

This is people from all over the country.

[Karen Randall]

People from all over the country.

[Jessica Mendoza]

One local newspaper reported that the day after legalization, 50 people were camped out in front of one of the first weed shops in Pueblo, waiting for the doors to open. And in the first month of legalization, the two licensed shops in Pueblo county rang up a combined $1 million in sales. That amounted to $56,000 in taxes for the county. Pueblo couldn't get more shops licensed fast enough.

[Karen Randall]

People are comparing it to. They're saying it's the New Amsterdam. One does have a cannabis business there. Told me, you know, that there was so much demand to get one of these licenses that people would, like, rush to the steps of the county building and try to get there first so that they would get the best spot. You know, one of the places had like, girl Scouts selling cookies in the parking lot. There were food trucks. I mean, it really was like a huge expansion, exciting moment for the city and the county.

[Jessica Mendoza]

One local joint that sprung up during that exciting moment was called sticky icky's. In 2016, the owner set up shop on a popular route from the city to a local lake, which brought a lot of business in the summertime.

[Karen Randall]

There's like a doorbell that goes off when you walk.

[Julie Wernau]

Hello.

[Karen Randall]

I'm looking for Daniel. Daniel Swick was the manager there, and he, you know, welcomed us in.

[Daniel Swick]

This is the first point of entry. Once we know that their IDs are verified and not expired or underaged, then they're able to go to the. To the fun part.

[Karen Randall]

And then you sort of are let into this beautiful back room.

[Daniel Swick]

Okay, I guess we'll go where all the customers would first start.

[Karen Randall]

You've got lit glass shelves and a display board with sort of, you know, different levels of cannabis that you can buy.

[Daniel Swick]

There's three shelves from top to bottom. The very top shelf we call our platinum. The middle shelf is our gold shelf.

[Karen Randall]

Okay. Bottom shelf, A one stink saw.

[Daniel Swick]

There's a lot of strains that are actually have really humorous names to them. Very funny names.

[Jessica Mendoza]

By 2017, Sticky Icky's was riding Pueblo's cannabis high. At one point, its daily sales rang up to about $20,000. But that boom didn't last long, and soon things started looking sticky for businesses like Sticky Icky's.

[Karen Randall]

Things really started to kind of go downhill shortly after the pandemic around 2021, when you actually go and look up all the licensees, the marijuana licensees in that area, you can see that boom and bust. You know, there's a point at which you have just hundreds of businesses, and then it starts to drop off dramatically.

[Jessica Mendoza]

For one thing, competition was fierce.

[Karen Randall]

The number of cannabis businesses that flooded into this city and the surrounding county were pretty outsized for the demand. You had a situation where it's a city that has, like seven to 10 Starbucks maybe. That's a pretty good indicator usually of, you know, how. How many of these businesses there should be. And they had, you know, more than 200 cannabis businesses at one point. Wow. And so, inevitably, you know, some of those folks didn't have enough demand. They were going to fail.

[Jessica Mendoza]

The 200 shops faced a lot of competition from each other, and it didn't help that the taxes on marijuana products were so high.

[Karen Randall]

Colorado levies a 15% marijuana sales tax and a 15% excise tax on marijuana, and then Pueblo county tax on another 5% excise tax and a 6% sales tax. And then if you have a cannabis business that's in the city of Pueblo, you're going to pay an additional 10% excise tax, which is one of the highest in the state.

[Jessica Mendoza]

I mean, I can see why businesses didn't love that.

[Karen Randall]

There was definitely, you know, some lobbying on behalf of some of the Local businesses saying, you know, these. These taxes are. Are too high, and that's why all these businesses are failing. And if you, you know, were to remove this tax, then we would actually be able to thrive and we would be able to compete.

[Jessica Mendoza]

And some sellers were skipping the license process and going through the black market instead.

[Karen Randall]

One of the unexpected things for Pueblo was that everybody sort of thought, well, if we legalize this stuff, the illegal stuff will go away, right? I mean, why would they bother? Not only did that not happen, but the law enforcement there said that it actually got worse.

[Jessica Mendoza]

And.

[Karen Randall]

And one of the reasons was that when there's all this legal marijuana around, it's a little bit easier for the illegal marijuana to hide.

[Jessica Mendoza]

Why was there so much illegal dealing?

[Karen Randall]

Well, what people didn't anticipate is that if you are in the illegal marijuana market, you can charge less. I mean, it's a really simple economic argument, right? If you're not paying for, you know, sales tax, excise tax, marijuana sales tax, county tax, city tax, state tax, you can charge way less than the legal competition. And so they continued to thrive under the legal regime.

[Jessica Mendoza]

At the same time, this was around 20, 20, other states started legalizing marijuana, creating even more competition. What did that mean for businesses like Sticky Icky's?

[Karen Randall]

They told me that for a long time, you know, they were pulling in something like $20,000 a day in sales, right? And since then, you know, it's plummeted to about $2,500 a day in sales. They've also shed some employees. And so one of the things that happened is Sticky Icky's owner, in the time that I was talking to him, decided to pull out his stake in that enterpr. He had another business he'd started in New Mexico. And in New Mexico, he said the taxes were about half what they were in Colorado.

[Jessica Mendoza]

As the marijuana industry in Pueblo has struggled, the county's tax revenue has plunged. Dispensaries have closed down, going from more than 200 businesses in 2017 to just 45.

[Karen Randall]

The profitability has dropped dramatically for the businesses. So only, like, a quarter of these businesses are even profitable. So the trends are not going in the right direction.

[Jessica Mendoza]

And as Julie spent more time in Pueblo, she heard from residents who felt strongly that the failure of the marijuana industry was hurting their town. That's next.

[N/A]

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[Jessica Mendoza]

Pueblo's marijuana business boomed and quickly went bust. Now local law enforcement, along with some city officials and residents, say the experiment wasn't worth it. One of the lingering problems has to do with the people who came to Pueblo from out of town, drawn by the industry's promise. While some did start their own shops, that wasn't the case for everyone.

[Karen Randall]

Generally, what was happening is there were a lot of people who had some kind of, you know, criminal record, something that was making it difficult for them to find a job. And they also loved cannabis. And so when they heard about how there was going to be all these jobs, you know, they sort of imagined themselves working in the marijuana fields or at a dispensary and that this would be this kind of golden age where they'd be able to find something to support their families.

[Jessica Mendoza]

But even as the cannabis industry took a nosedive in Pueblo, a lot of the newcomers stuck around. Crime and homelessness started to rise, and some residents that Julie talked to blamed marijuana. Local police told Julie that before legalization, there were only about 15 unhoused people in Pueblo, and they knew all their names. Now that population has grown to more than 500. Julie went on a ride along with Ryan Masterson, who's with the local police department. He said that unhoused people he's spoken to have told him that they came to Pueblo for the marijuana.

[Karen Randall]

Did they ever tell you their story, like, where are they from? Why are they here?

[Ryan Masterson]

Sometimes. Sometimes someone from South Dakota come in. Why are you here in Pueblo of all places? And it was a very typical story of, well, I wanted to land in Denver, I wanted to land in Boulder, I wanted to land in Aspen, the places you really think of when you think of Colorado, and then realized quickly that they couldn't afford it and where could they look to a place to come, and Pueblo would end up being a good landing spot for them.

[Karen Randall]

There are people who, you know, eyewitness coming through sort of on a cannabis journey. And some of that led to problems, you know, where law enforcement were having to show up to large encampments for all kinds of issues that they don't know anymore. You know, did this. Did this stem from marijuana? Is it fentanyl now? Is it meth? What's going on? It just. It just kind of became this messy soup that nobody can really, really sift through anymore.

[Jessica Mendoza]

Whether there's a distinct connection between homelessness and cannabis legalization is still being debated. Regardless, city officials say the tax revenue they're bringing in for marijuana isn't enough to meet the costs of some of the new problems. They blame on the industry, and social organizations trying to address these issues are feeling the strain.

[Karen Randall]

There's definitely a couple of long standing organizations there, but to give you a sense, the executive director that I spoke to at one of the only organizations that really can provide like, shelter for families, she said that she grew just so overworked and burned out from the situation that she. She left. She left not only the organization, but she left Pueblo altogether.

[Jessica Mendoza]

There are still some weed shops in Pueblo, though many of them are working with fewer employees and slower business.

[Karen Randall]

You know, Sticky Icky's is still there. It's still open. It has a couple other owners. I know there was some talk of selling. They have, you know, significantly fewer customers than, you know, they did in the past. But they sort of feel like the longer they hang on, the fewer competitors they have. And one of the things they have going for them is that they were among the first. And so they snatched some customers who know about them stop by, you know, regularly.

[Jessica Mendoza]

What would it take at this point for Pueblo to have a strong economy or even a stable economy?

[Karen Randall]

Well, I talked to the local economic development corporation. You know, these are the guys whose job it is to sort of sell Pueblo to businesses and help create a better economic picture. And what they told me essentially is that they're kind of leaving marijuana behind, that they're focusing on their legacy kinds of industries, growing those, supporting those, and that they just don't see recreational marijuana as a part of the economic picture for Pueblo.

[Jessica Mendoza]

Pueblo was one of the first communities to go all in when Colorado led the legalization of recreational marijuana. Now, 24 states around the country have done the same. What's your takeaway from your reporting on Pueblo?

[Karen Randall]

I think there's a lot of lessons to be learned from a place like Pueblo that was first when it came to legalizing marijuana. You know, we have communities that are just starting now with this experiment. And so if we want that to go well, we really need to look to the communities that have been there and say, what could we do differently?

[Jessica Mendoza]

So it isn't that Pueblo is an example of why this is not going to work. It's more of a it's not going to work this way.

[Karen Randall]

Exactly. It hasn't really worked out for Pueblo. Does that mean that it won't work out down the line for somewhere else? Not necessarily. This is really early days still for this industry.

[Jessica Mendoza]

Yeah.

[Karen Randall]

There's a lot of things that need to still be worked out and I'm not sure. I'm not sure we have the answers.

[Jessica Mendoza]

That's all for today. Friday, April 18 the Journal is a co production of Spotify and the Wall Street Journal. The show's made by Katherine Brewer, Pia Ghidkari, Carlos Garcia, Rachel Humphries, Sophie Codner, Ryan Knudson, Matt Kwong, Kate Linebaugh, Colin McNulty, Annie Minoff, Laura Morris, Enrique Perez de la Rosa, Sarah Platt, Allen Rodriguez Espinoza, Heather Rogers, Pierce Singhi, Jeevika Verma, Lisa Wang, Katherine Whalen, Tatiana Zemis and me, Jessica Mendoza with help from Trina Menino. Our engineers are Griffin Tanner, Nathan Singapak and Peter Leonard. Our theme music is by so Wylie. Additional music this week from Katherine Anderson, Emma Munger, Bobby Lord, Nathan Singapok, Peter Leonard, so Wylie and Blue Dot Sessions. Fact checking by Mary Mathis and Kate Gallagher. Thanks for listening. See you on Monday.