New York has become the epicenter of the legal cannabis industry, with the national trend of legalization, and the opening of the state’s first licensed retail dispensary serving the demand for cannabis. But with the number of dispensaries and growing, the need for a regulated market space that would serve the needs of the industry has become an issue.
New York is getting ready to legalize cannabis, but the supply issues are a major concern. With New York state’s legal cannabis industry set to launch at the end of 2018, the city is already in a state of upheaval.
Gabriel Gross 31. May 5 min read
With New York and New Jersey allowing adult-use marijuana, local marijuana suppliers must step up their efforts or risk not being able to meet the increased demand.
On both sides of the New York-New Jersey border, plans are in full swing as local cannabis providers look to set up their facilities to meet the expected tidal wave of demand for recreational cannabis in the coming years. In New York State, an abandoned prison complex will be turned into a farm, and 40 miles away, on the New Jersey border, Merck is converting a former industrial complex into a cannabis supercenter. While this activity seems normal after such legislative changes, as entrepreneurs and pharmaceutical companies join the ranks of cannabis enthusiasts, a closer look reveals that these states are struggling to meet the demand for medical marijuana, even without adding recreational use to the equation. Existing and new service providers have much to do in the coming years to meet all local needs. The New York metropolitan area alone is the most populous region in the United States, with more than 20 million people, or about 6 percent of the total population. The success of the recreational and medical cannabis market could contribute up to $4.5 billion to the local economy over the next two years. That is, whether the requirements can be met. With the medicinal cannabis sector limited to products such as oils and tinctures (dried whole flowers are not allowed under the current system), only about 150,000 patients are registered out of a possible 13.5 million, meaning demand has been modest so far. The situation is expected to change dramatically once recreational use is legalized, with experts predicting a boom in demand and sales. The neighboring state of New Jersey has long faced a product shortage, as lobbyists and politicians have claimed in the past that patient demand for dried cannabis flowers and oil-based products is hard to meet. The problem became even more acute after the outbreak of the pandemic, when demand increased exponentially across the country. The encouraging news is that the supply of flowers and petroleum products in New Jersey has doubled since last March. Despite some relief, dispensary owners say they still often sell the most popular strains, and the president of the New Jersey Cannabis Trade Association agrees that there is very little inventory. Not all states face this dilemma: More established markets like Oregon suffer from oversupply. Unfortunately, they cannot help states like New Jersey by reselling excess product, which is still considered one of the biggest challenges for this growing industry. Under federal law, cannabis is still illegal in the United States, making it a federal crime to transport cannabis products across state lines. All produce sold in the state must be grown and produced locally or imported from abroad under strict licensing agreements. These federal laws are often seen as a major problem for individual states that are slowly moving into the medical or personal marijuana industry. Farming is a time-consuming process, and products must be refined and improved before they hit the shelves. In New Jersey, home growing is not possible because the law does not allow it, and in New York, a person can grow up to 6 plants for personal use. Green Thumb Industries is one of many multi-state operators (MSOs) currently operating in both New York and New Jersey, trying to ride the wave of a growing industry in both states. Ben Covler, founder and CEO, has said in the past that the company would be foolish not to invest in its own products to address shortages. Green Thumb is currently awaiting final approval to move into the building of the former men’s prison in Warwick, New York, which is quickly becoming a hub for cannabis cultivation in the region. Why a concentrator, you may ask? The former Warwick Correctional Centre is already home to rival Green Thumb Industries, as Citiva has already set up shop there and UrbanXtracts has opened a cannabis testing lab and CBD extraction facility there. The irony of the site being used for a prison that was very successful during the war on drugs is not lost on the residents of Warwick. Another area where New York City is asking for help is the burgeoning industrial hemp industry. If established farmers want to go into medicine, they can support the coming wave of demand, since CBD oil can be extracted from hemp (although THC is not as abundant). Established farms, lower operating costs and lower environmental impact may mean this is a viable option for some farmers. The two states will continue to review industry rules in the coming months. Social justice is expected to govern all legislation in New York and New Jersey related to the cannabis industry, as the states seek to ensure that demographic groups that have suffered the most from past criminal justice injustices can benefit from an influx of tax revenue. Balance is important for the industry, because while the big companies should certainly be able to market something for themselves, it should never become a monopoly, and new entrants are important for diversity. There are currently about 10 medical marijuana licenses in New York City, but there is an urgent need for new businesses as current providers struggle to meet demand. As personal use increases, more providers will be needed to support care. Although New Jersey has doubled drug production this year, expansion of the program in the state has also been hampered by technical problems, legal challenges and the fact that the 12 established providers are not spending as much money as some would like. This, of course, has led to inventories, queues in stores (exacerbated by the Covid 19 rule), buying caps for customers and a shortage of certain varieties that are best for patients. Before legal adult recreational use can be expanded, dispensaries must prove that they can provide sufficient product for both medical and non-medical customers, and some do not believe that dispensaries, although their numbers have tripled recently, are capable of doing so. Production had to be started up urgently, not only in the hope that supply would meet demand, but also because a greater influx of produce into the market (i.e. flowers) would lead to a general fall in prices. In New Jersey, because of the shortage, patients pay between $350 and $450 an ounce for a blush, which is much higher than in other states where the market is more developed. However, there seems to be good news on the way, with reports that both states are starting to have good harvests, and some dispensaries are starting to lift restrictions on buying flowers for their customers. The growers, aware of the growing demand, are now planting in large quantities. The hope is that, over time, patients will have easier access to the right species and new enthusiasts will no longer have to meet dealers in backyards, but will go to a registered specialist in the clinic. It is hoped that existing and new suppliers will be able to meet the increasing demand for easily available high quality grass. Only time can give us certainty.