The New York state cannabis market is projected to be one of the biggest in the world, with some industry estimates forecasting sales to surpass $2 billion within just a few years. But the state’s recreational industry is just starting to get off the ground, with multiple players eyeing how to break in and make money.

The city’s first state-sanctioned adult-use dispensary opened in December, and its second – but first social-equity licensed store – just opened this week. Meanwhile, smoke shops are popping up on seemingly every corner, and medical marijuana dispensaries are holding on to prime real estate as both await what they hope will be their turn in the licensing process.

This month, Green Market Report joined forces with our sister publication Crain’s New York to take a closer look at the rollout:

• New York’s Cannabis Market Faces Uphill Climb as Adult-Use Sales Begin
• Potency Tax Could be a Major Buzzkill for Sanctioned Cannabis Retailers
• As Rec Sales Start, Medical Marijuana Firms Left Warming the Bench

We also asked some of the various stakeholders to share their thoughts on where the rollout is – and where they think it should go. Contributors include:

• Dasheeda Dawson, Cannabis NYC
• Kristina Lopez Adduci, House of Puff, and Vladimir Bautista, Happy Munkey (also available in Spanish here.)
• David N. Feldman, Skip Intro Advisors
• Mitzi Keating, Citrin Cooperman

This package really is just a snapshot of an evolving market and industry – one that we’ll be keeping a close eye on in the weeks and months to come.

Thanks to Telisha Bryan, managing editor of Crain’s New York, and her team for helping us create this package for you, and to Buck Ennis for capturing the industry in pictures.

The post The Road to New York’s Potentially Massive Cannabis Market appeared first on Green Market Report.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

One of the most controversial aspects of New York’s new recreational cannabis market is its tax system, which some have worried will undermine licensed businesses by driving consumers to cheaper underground dealers.

A white paper published in December by a pair of New York tax attorneys, just weeks before the formal start of recreational marijuana sales on Dec. 29, warned of that very possibility. It predicted—and was proven accurate after sales launched—that a legal eighth of cannabis flower in New York with 30% THC would cost about $75.

Prices at Housing Works—the first state-sanctioned cannabis retailer in the five boroughs—proved to be not far below that, with prices fluctuating because taxes are based on THC potency. According to the nonprofit’s online menu, an eighth of cannabis flower ranges in price and potency from 19% THC for $40 to 27% for $60. With the 13% excise tax added, out-the-door prices would be between $45 and $68, respectively.

But if customers remain price-sensitive, as data from other mature recreational marijuana markets suggest, then they’ll broadly be willing to pay only as much as 10% to 15% above prices on the unregulated market, according to the paper, authored by attorneys Jason Klimek and James Mann.

By contrast, unlicensed street vendors in New York City last month were peddling cannabis eighths for between $10 and $45, Green Market Report found.

Combine that with overall lax enforcement to date against the underground market, and the situation has the potential to undercut state-licensed retailers—particularly smaller and less-capitalized businesses—before they can truly get off the ground, Klimek and Mann asserted.

Charles King, the CEO of Housing Works, said in early January that he doesn’t think the situation is that dire, and companies such as his will be able to survive as long as they stick to a solid retail business plan and tap the immense tourism market.

“I think people know that you’re paying for quality, you’re paying for the taxes and all the rest of what goes with the regulated, licensed market,” King said.

Still, there will have to be more of a focus on enforcement against illicit competition by state authorities, King said.

It’s a big undertaking, as many illicit operators already have brand recognition by offering legally produced but illegally shipped cannabis from California and Oregon, such as the famed SoCal brand Jungle Boys. That’s one brand name New York City resident Joe Lustberg, managing partner at Upwise Capital, said he ran into recently at a smoke shop.

“For some cannabis operator who’s competing with the smoke shop next door [that is] able to sell California eighths for $30 [and] that’s better weed than what they’re selling at Housing Works, it’s tough,” Lustberg said.

The tax structure also might be altered by the Legislature, because making the system more business-friendly is a top priority of industry interests in Albany, including for the Cannabis Association of New York.

“I do feel confident that the state is very much aware of the issue with the potency tax and, at the very least, open to reform,” said Brittany Carbone, a board member of CANY and a cannabis farmer upstate. “It’s been well proven that more reasonable tax structures actually result in higher rates of purchase in legal dispensaries, which results in a net positive win for the state, in terms of tax revenues.”

Even if the tax structure doesn’t change, cannabis attorney Lauren Rudick said, the THC-based potency tax will probably encourage the creation and sale of a more diverse range of cannabinoid products that don’t rely only on THC to please consumers. And that could be just what the burgeoning industry needs: more product variety.

By the Numbers:

$68

Highest price, with taxes added, for an eighth of cannabis with 27% THC sold at Housing Works

$10

Lowest price for an eight of cannabis bought on the street

The post Potency Tax Could be a Major Buzzkill for Sanctioned Cannabis Retailers appeared first on Green Market Report.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

When New York gave the sale and use of medical marijuana the green light, officially permitting it in 2014, the firms that vied for a spot as one of the state’s 10 vertically licensed operators envisioned the true golden ticket to be early entry into the eventual recreational cannabis retail market.

That expectation was amplified when the state passed the Marijuana Regulation and Taxation Act in 2021. Investment dollars poured in, and medical licenses traded at high valuations on the secondary market, bolstered by the idea that those who bought in early would be able to capitalize on both adult-use and medical retail sales, cultivation and manufacturing.

However, under draft regulations released in November, those companies will have to wait at least three years from the official launch date of adult-use sales just to apply for a recreational retail permit. Final rules have yet to be published.

“They were hit with a bait and switch by the state regulators,” said Tom Adams, principal analyst and CEO of Global Go. “You know, ‘Come to our state and help apply your expertise and your capital to building out this incredibly limited medical-­only market that you’re clearly not going to make any money at anywhere in New York.’”

So the multistate operators came.

The proposed rules, however, also established a two-tier system that prohibits growers and manufacturers from participating on the retail side—and vice versa. That means those same players who helped establish the medical cannabis industry “got sort of the back of the hand from regulators” and now must accept that they cannot implement the business models they’ve used in other states, Adams said.

Those who invested in medical operations in New York early on expected, if not “the first bite at the apple … at least a first bite at the same time as the other licensees for some of these retail adult-use licenses,” said Brandon Kurtzman, a partner at cannabis law firm Vicente Sederberg.

Both Adams and Kurtzman said the pivot now is to develop product brands through the cultivation and manufacturing side to sell to retailers and social consumption lounges.

Boxed in

The $138.9 million write-down Toronto-­based RIV Capital took after its acquisition of New York’s Etain, one of the 10 local medical cannabis license holders, illustrates the conundrum. RIV Capital agreed to pay $212 million in cash and $35 million in stock for the small, women-led medical cannabis company.

But instead of being able to capitalize on its existing business structure, Etain has been forced into a single channel. With heavy investment already sunk into cultivation, the company appears to be boxed into being a grower—the less lucrative side of the cannabis business.

The price paid for Etain was so troubling to RIV Capital’s largest shareholder, JW Asset Management, that the firm asked for a special meeting of shareholders to replace five of the seven directors on RIV’s board.

In New York, Adams said, having a brand on store shelves “is probably more valuable than anything else” an operator can do, as there is not much real brand dominance yet among the plethora of cannabis companies out there.

Despite the firms seemingly being last in line, nothing is completely set in stone.

“It’ll be very interesting to see what happens with these draft regulations, see what the comments look like and if there’s going to be any compromise between what they put out [and] what [medical operators] are looking for in this market,” Kurtzman noted.

“The goal here is to provide access to consumers,” he added. “I think you do that by allowing new licensees but also allowing the existing licensees to participate, because that’s more or less what you told them they were going to be able to do in the law.”

The post As Rec Sales Start, Medical Marijuana Firms Left Warming the Bench appeared first on Green Market Report.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

The New York state cannabis market is projected to be one of the biggest in the world, with some industry estimates forecasting sales to surpass $2 billion within just a few years. But the slow rollout and uncertain regulations—after all, the rules are still in draft form—leave many wondering if a large chunk of sales will continue going to unlicensed dealers.

On top of that, the state’s unclear timeline for when licenses will be issued and storefronts will be fully operational as well as concerns about how much consumers will be willing to spend once potency and excise taxes are baked in, among other hurdles, have given some stakeholders pause about how successful smaller players will be in the market.

“This is a very optimistic time, but the business owner in me is very stressed out every single day on how I’m actually going to make this work,” said Brittany Carbone, a board member of the Cannabis Association of New York and the CEO of Tricolla Farms, near Ithaca. “There could be thousands of millionaires rather than a few billionaires created through the New York market, and the first step is getting more people licensed.”

Cultivation licenses were the first to be issued, but they were restricted to existing hemp farmers who could convert to growing marijuana to supply product rich in THC, the chemical that provides users with the sensation of being high, when the adult-use market launched.

There’s a long way to go, however. As of early January, the New York Office of Cannabis Management had awarded 354 conditional licenses, made up of 279 growers, 39 processors and 36 retailers, on top of the 10 registered organizations, or ROs, that are allowed to sell medical cannabis.

That includes 26 new adult-use retail licenses for four of New York City’s boroughs and Long Island. (Brooklyn was one of five regions where licensing has been delayed by litigation.) Each of those licensees can open three stores.

In addition, Manhattan, Queens, the Bronx, Brooklyn and Staten Island are already home to eight medical dispensaries, including three in Brooklyn.

It’s not clear when authorities will grant more permits; 903 applications were filed for the first round of retail licenses alone last year, so timing is a major question mark.

Not only that, but the sheer price difference between the first legal retailer in New York thus far Manhattan’s — Housing Works — and the enormous number of unlicensed dealers have some fearing that many companies won’t survive.

“It is an uphill battle, but again, it’s always an uphill battle when you don’t have massive capital, no matter what industry you’re in. But when you throw in the illicit market side, it makes it even harder,” attorney Jason Klimek, a member of the New York Bar Association’s cannabis law section, said when asked how he thinks the market—which is centered on small mom-and-pop businesses—will perform.

The most immediate obstacle for many New York cannabis hopefuls is getting licensed and operational, but the timeline on that front is painfully unclear.

The state has no limit on the number of business permits it will award—in theory—but regulators have been painstakingly slow on that front, particularly for retailers. The first round, which is so far only partially completed, will award 175 retail permits, including 150 for “justice-involved” individuals and an additional 25 for nonprofits.

The longer those retailers have to wait, the closer they’ll get to the three-year deadline, at the end of 2025, when the 10 multistate operator ROs will be allowed to fully enter the recreational cannabis side of the market. For now those behemoths are relegated to wholesaling cannabis products to licensed adult-use firms.

Most industry observers agree that the 10 will likely start dominating quickly because they’ve got an edge that no other retailer will have: vertical integration, their own in-house supply chains and branded product lines.

All the other retailers are prohibited from building such infrastructure or even having their own brands—another complaint of some license hopefuls.

“That is not good, because the only way we can level the playing field is for the smaller players like myself … to be able to support each other and be able to have each others’ products. The way the regulations are set up, I don’t think we could do that,” said Vladimir Bautista, CEO of New York City–based cannabis lifestyle brand Happy Munkey, one of the contenders for a retail license.

There’s even more uncertainty about the licensing rollout because of ongoing litigation that has held up at least 18 retail licenses thus far and has the potential to delay the permitting even more.

The post New York’s Cannabis Market Faces Uphill Climb as Adult-Use Sales Begin appeared first on Green Market Report.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

by Dasheeda Dawson, Cannabis NYC

It took nearly a century to suppress the legacy of cannabis in American agriculture and medicine. Just a decade ago, as a Brooklyn native who grew up during the height of cannabis criminalization, I could not have imagined buying an eighth of weed legally in New York City.

Despite the history, on March 31, 2021, the Marijuana Regulation and Taxation Act, championed by Assembly Majority Leader Crystal Peoples-Stokes, state Sen. Liz Krueger and the StartSMART Coalition, became the country’s landmark equity-centered law to intentionally hold government accountable for restoring and repairing communities disproportionately impacted by the overpolicing and disinvestment of the prohibition era.

I never expected the damage from decades of harsh laws and entrenched negative stigmas to disappear overnight. However, some have criticized the state’s timing, peddling the narrative that it is moving too slowly.

Analyzing the adult-use markets legalized prior to New York’s, every state had a lag period between legalization and launch, more often giving first access to already licensed medical operators, which further exacerbated inequities in the industry. In 2016 California and Massachusetts legalized adult use, and both opened the market for sales in 2018. In 2020 New Jersey legalized cannabis, and the state opened the market for first sales in 2022.

Providing 300-plus licenses to justice-involved individuals, small-business owners and farmers, the New York state Office of Cannabis Management should be commended for rapidly building a seed-to-shelf supply chain in less than two years, culminating with the first dispensary opening in December 2022.

New York is also taking an unprecedented approach to support previously existing, unlicensed cannabis entrepreneurs, often referred to as “legacy operators,” transition into the legal industry. Though others demonized the legacy market, New York has embraced the underground culture and its credibility.

The state’s conditional adult-use retail dispensary license and Cannabis Compliance Training and Mentorship Program mark the start of intentional inclusion in New York’s market. The nonprofit CAURD licensing opportunity also demonstrates an extraordinary model that supports sustainable funding to organizations that have served marginalized communities, provides opportunities to those same communities for retail workforce development and contributes to state cannabis tax revenue, 40% of which goes back to the communities disproportionately impacted by criminalization.

Amid these groundbreaking advancements for the state, New York City is contending with the proliferation of visible, unlicensed smoke shops, a common trend experienced during the lag period in other markets. From my experience in legalization efforts across the country, an industry grounded in restorative justice requires a three-pronged approach to enforcement:

1. Facilitating the transition of preexisting legacy operators into the legal market through intentional programming and resources;
2. Bringing unlicensed businesses that have received warnings into compliance through rehabilitative engagement; and,
3. Using civil enforcement actions to disrupt unregulated activities that pose a risk to public health and safety.

Mayor Eric Adams launched Cannabis NYC to support New Yorkers starting or growing a legal cannabis-related business. As an emerging multibillion-dollar industry, cannabis will contribute significantly to the city’s economic recovery and can address the past wrongs that disproportionately affected Black and brown communities.

Cannabis NYC is on a mission to make our city the global leader in cannabis industry excellence in education and equity across business, science and culture. To accomplish this, MRTA’s intent must be protected, and efforts to repair social, economic, environmental and human injuries caused by prohibition must not be derailed by stigma and misinformation.

Cannabis NYC is actively creating an interagency hub of free resources and services for all New Yorkers, kicking off with a five-borough informational tour, in collaboration with the New York City Housing Authority and the Mayor’s Office of Equity. We are partnering with industry pioneers and institutions to support citywide public education initiatives, workforce training and curriculum development. The NYC Cannabis Policy Advisory Commission will include a diverse group of local and global experts, including racial justice, economic development and health equity leaders tasked with publishing an annual policy report. This is just the beginning.

Cannabis is a plant with agricultural, industrial, nutritional, medical and spiritual utilities that will have global impact, from health to hospitality to housing. Armed with the right alignment of community advocacy, business innovation and government leadership, at the state and local level, New York is poised to become a model of cannabis excellence for the world.

Dasheeda Dawson is founding director of Cannabis NYC.

The post Your Take: NY’s Cannabis Market Isn’t Moving Too Slowly — It’s on a Mission appeared first on Green Market Report.

This story was written in partnership with Crain’s New York, the trusted voice of the New York business community. 

To read this post in Spanish, click here.

by Kristina Lopez Adduci, House of Puff, and Vladimir Bautista, Happy Munkey

As dispensaries begin to open and New York makes meaningful progress to launch its adult-use cannabis industry, one demographic that cannot be overlooked is the Latino community. We must address language barriers, cultural incompetence and the damage done by prohibition.

This is not an easy feat, but if we overcome this, Hispanic New Yorkers stand to be a key population to help our state’s legal industry achieve its true potential and fulfill the vision set out by the Marijuana Regulation and Taxation Act. Here’s why New York must do more to make legal cannabis accessible to its Latino population.

Prohibition was harmful to Latinos.

The racist undertones of anti-cannabis movements, such as the War on Drugs, adversely affected Latinos, and reversing those impacts must be a priority in the legal industry. It is commonly known that the now derogatory term “marijuana,” along with the first wave of prohibition in Texas, was created because of anti-Mexican sentiments and the plant’s association with migrants crossing the border.

For the Latino community, the War on Drugs not only perpetuated racist stereotypes, but it was also a driver of mass deportations and increased hostilities toward Hispanic migrant populations. Latino women were more likely to be arrested or have their children taken away in connection to cannabis use and possession. Prohibition also sparked the creation of the Drug Enforcement Administration, an agency responsible for the criminalization and incarceration of Latinos in the United States and in South America. This deepened the negative and discriminatory stereotypes about Spanish-speaking Americans and cannabis, especially in major cities with large Hispanic populations like New York City.

Latinos have an influential presence in New York.

New York state has the fourth-largest Latino population in the U.S., tallying almost 4 million of us. In New York City, we make up more than a quarter of the population, being outnumbered only by Caucasians. Due to our growing presence, Latinos will play an increasingly large role in the state’s culture, innovation, politics and key industries. This influence will undoubtedly continue in New York’s emerging cannabis industry. We have been leaders in legalization efforts in the state and trailblazers in the wider industry. We also represent a large portion of the legacy community and a significant consumer profile.

Latino culture and cannabis culture are closely related. We must ensure that this connective tissue remains as we transition into a legal market.

Latinos are becoming fierce cannabis advocates and consumers.

The Latino population is the youngest ethnic group in the U.S. Additionally, Hispanic culture has historically recognized the medicinal benefits of the plant. Attitudes are still shifting within our community. Though it is common for elder-generation Latinos to perpetuate negative stigmas around cannabis consumption, overall, our community not only consumes cannabis but fiercely advocates for it. According to a 2019 report by Ad Age, Hispanics are 30% more likely than the average cannabis consumer to belong to a group that actively promotes legalizing cannabis. The study also found that Latinos are 42% more likely than the average American to be cannabis campaigners. Cannabis campaigners are characterized as people who don’t necessarily consume cannabis, but who are informed about cannabis issues and actively support legalization.

New York must tap this enthusiasm to effectively incorporate our community into the cannabis industry. This means more cannabis education and restorative justice efforts in Latino neighborhoods, more programming and advertising in Spanish, and culturally competent “budtenders” and staff at dispensaries.

To most effectively address these barriers, an increase in Latino operators and dispensary owners is also key. That would grant us the social and economic equity benefits of the new legal industry and repair the lingering damage done to our communities by the War on Drugs.

Latinos will be a decisive demographic in the long-term success of the state’s legal industry. From Latino trailblazers paving the way within the community to Latino consumers and stakeholders posing an influence from the outside, we will uplift the cannabis sector for the long term. For the sake of social equity and the health of the industry, New York must activate our community in the rollout of its adult-use program.

Kristina Lopez Adduci is the founder and CEO of House of Puff, a cannabis accessories brand with a focus on education and destigmatization. Vladimir Bautista is CEO and co-founder of cannabis lifestyle brand Happy Munkey and a conditional adult-use retail dispensary license applicant.

The post Your Take: New York’s Legal Cannabis Industry Must be Accessible to the Latino Community appeared first on Green Market Report.