New York’s nearly $1.5 billion cannabis market 🚀

NY, NY
Insights from New York’s nearly $1.5 billion cannabis market 🗽

What happened: New York’s Cannabis Control Board (CCB) met on Thursday morning in Harlem. The CCB approved a total of 1,605 adult-use cannabis licenses in the state, but thousands of applicants are still waiting for review. 

At the same time, the CCB finds itself considering a slowdown in approvals to avoid saturating the market — a major turnaround from a year ago, when the biggest issue was that not enough stores were open.

The big takeaway: New York’s adult-use market hit $1.46 billion in total sales as of April. 

For comparison, Michigan recently hit $10 billion after about five years, while California hit $5.1 billion by the end of 2023. 

While New York is still catching up, it’s a far cry from the state’s tumultuous rollout, as lawsuits and illicit market competition jammed up the industry’s gears. New York crossed the $1 billion mark earlier this year.

What they’re saying: “We have been patiently waiting for a year and a half,” said Beck Hickey, interrupting Chair Tremaine Wright’s opening statement. 

“We need answers which is why we're not holding our comments until the end. We want our applications reviewed immediately. We want the entire list reviewed.”

And: “We have seen a fairly consistent downward trend. With each passing month, average revenues are declining,” Office of Cannabis Management (OCM) Director of Policy John Kagia said. 

“Stores, when they first open, generally make less money. But even when we look at stores based on when they open, we are finding that stores that have been open longer are seeing revenue decline as competition increases.”

(The CCB oversees the OCM, which is New York’s chief cannabis regulatory agency). 

Let’s get into the numbers: The CCB has approved 1,605 adult-use licenses so far, including 93 that received the green light during the April 24 meeting. The most recently approved licenses include two cultivation, seven distribution, 34 retail (of which one was conditional),16 microbusiness, and 35 processing, of which 27 are Type 3 branding licenses.

The Type 3 Processor license allows established companies outside of New York to enter the market through branding deals with existing in-state producers. 

OCM COO Patrick McKeage explained that there are potentially hundreds of new licenses coming down the pike before the agency even begins to consider applicants from the December 2023 queue. These include over 400 applicants from the November 2023 cohort that have yet to review a final determination. There are also about 180 applicants with provisional license status, which means they have  tentative approval, but still need to secure a location.

Meanwhile, sales continue to grow in the state overall, but the market has hit a point where the average amount of sales per store are starting to drop.

4/20 itself was not as big of a sales holiday as it has been in the past, which Kagia said could have been the result of it falling on Easter Sunday this year.

“It was quite clear that the run up to 4/20 was phenomenally busy,” he said. That is reflected in sales data we’ve reported from Lit Alerts, which showed that 4/18 and 4/19 had higher overall sales volume than the day itself.

Sales almost reached $140 million for March, and April is on track to break the monthly sales record, according to Kagia. In total, the state is on the precipice of hitting $1.5 billion in retail sales, and 2025 is on track to hit $1 billion in sales for the year.

Regionally, Long Island has the strongest sales per shop, pulling in  $21 million in March. That amount was split between just seven shops. Queens and Brooklyn have similar sized populations of about 2.3 million and 2.6 million to Long Island's 2.9 million. Queens and Brooklyn also have 33 and 35 stores, respectively that made $2.5 and $3.7 million in sales.

Staten Island, Central NY, the Capital District and Mohawk Valley regions saw the greatest drop in sales per store, but losses were generally seen among all older stores across the state.

The bottom line: With so many applicants waiting for review or approval and hundreds of licensees still working toward opening for business, New York's cannabis market is still very much in flux.

New openings show no signs of slowing, and yet the market is starting to show some signs of market maturation, such as the slight drop in total sales between the fourth quarter of last year and the first quarter of this year. That drop, which is the first quarter-to-quarter drop New York has seen since adult-use launched, would be unsurprising in older markets where consumers tend to spend less in January after splurging in November and December.

This means that aspiring operators that do receive their license will be entering a market that looks quite different from when they first applied in December, 2023.

A bonus chart: Older dispensaries ceded market share to newer ones. 

-ZH

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Read more from Politico’s deep dive into the fight over legal hemp in Texas. 

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And more:

Canadian cannabis firm Christina Lake raised $2.5 million through a non-brokered private placement. 

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