New York Cannabis MSOs Are Ready To Go Recreational: Execs Share Their Plans
On Wednesday, New York became the 15th state to legalize recreational cannabis, after Gov. Andrew Cuomo signed the recently passed bill into law.
The legislation — which allows adults over 21 to possess small amounts of cannabis, cultivate up to six plants and buy marijuana from licensed retailers — will have immense consequences in the operational and financial outlooks of multistate operators with presence in the state.
“Without a doubt, New York City is the behemoth of the East Coast. We cannot underestimate the size of the adult-use cannabis market in the state,” said Jennifer Dooley, chief strategy officer at Green Thumb Industries (OTCQX:GTBIF).
Public Cannabis Companies Aim For New York Rec Market
Curaleaf (OTCQX:CURLF), Columbia Care (OTCQX:CCHWF), Cresco Labs (OTCQX:CRLBF), Vireo Health (OTCQX:VREOF) and Green Thumb Industries all tell Benzinga they plan to enter New York’s recreational market.
“Under the new legislation we will have the ability to cultivate, manufacture, distribute and dispense cannabis products for adult-use,” says Cresco Labs CEO and co-founder Charlie Bachtell.
The company holds one of the 10 vertically integrated licenses from New York's medical program, with four dispensaries in the state and a processing facility for manufactured products.
GTI’s Dooley says her company has a successful record of transitioning medical retail locations into adult-use stores, as it did in Illinois in 2020, Massachusetts in 2019 and Nevada in 2017.
GTI operates three retail locations in New York and holds a cultivation and processing license.
Albe Zakes, VP of corporate communications at Vireo Health, says the proposed recreational program will allow registered medical cannabis operators like Vireo to acquire additional recreational dispensary licenses while maintaining existing medical-only locations.
The company operates four dispensaries in the state and a 66,000-square-foot cultivation and processing facility.
“While the historic legislation passed today establishes the program’s framework, many of the details will be determined by the newly formed Office of Cannabis Management. Therefore, it is too early to discuss our exact go-to-market plans,” says Zakes.
The Future Of New York's Recreational Cannabis Market
The transition to adult-use in New York will ultimately take some time as regulators look to enact appropriate regulations, testing and consumer safety standards, says Patrik Jonsson, regional president of the northeast for Curaleaf.
Recreational sales could take up to 12 to 18 months to start, according to Adam Goers, SVP of corporate affairs at Columbia Care.
New York doesn't even have 500,000 square feet of cultivation built out, says Joe Caltabiano, CEO of Choice Consolidation Corp. and former President of Cresco.
"You need roughly 5 million square feet of cultivation to satisfy even a percentage of the demand of the first wave of adult-use consumers, and it will take 18 months to get these grows online and operational."
Based on estimates from the New York Medical Cannabis Industry Association, New York’s cannabis market size could grow to as much as $5 billion in sales by 2027, including both recreational and medical sales.
Cresco Labs’ Bachtell says it’s likely that New York will follow the trends of other states that have recently passed adult-use cannabis legislation.
“We expect that retail licenses will be issued on an incremental basis (vs. all at once) to ensure the roll out of a responsible, sustainable state cannabis market,” he tells Benzinga.
As more retail stores open over time, that demand will be met with additional supply and the market will grow accordingly, he says.
Curaleaf's Jonsson says the examples of Illinois and Massachusetts indicate that operators need to prepare for a large surge in demand.
The legal cannabis industry is expected to bring in thousands of jobs to New York, raise an estimated $650 million-plus in tax revenue and bring economic relief and opportunities to the communities most impacted by the war on drugs.
The Future Of New York's Medical Cannabis Market
Adult-use legalization could intuitively be read as a blow to the state’s medical market.
Yet that may not be the case, since the bill also expands New York's medical marijuana program with the introduction of smokable whole cannabis flower and the removal of qualifying conditions for patients.
"The New York medical program has been very slow-moving, primarily because the state’s program was one of the most restrictive in the country and made it difficult for the majority of people in New York to access it," says Caltabiano.
Typically, when a state’s medical market has not reached its full potential, the adult-use multiple will increase six to 10 times in the near term.
Columbia Care operates four medical marijuana dispensaries in the state and has a medical marijuana cultivation facility in Rochester.
“Patients will soon have access to the whole plant format they strongly prefer and physicians may now recommend medical cannabis for any condition they see fit,” says Columbia Care's Goers.
The new law allows for medical operators like Columbia Care to add four additional medical dispensary locations throughout the state.
“If other markets [like Pennsylvania and Florida] that went through this transition to whole flower are any judge, New York’s medical cannabis could double in the coming months,” he says.
Turning Point Brands (NYSE:TPB) expects sales of cannabis accessories to rise after New York legalization, says Louie Reformina, the company's chief business development officer.
The Read-Through For New Jersey's Weed Market
A recent analysis by Cantor Fitzgerald predicts that a fast-tracked legalization bill in New York could hinder growth possibilities of the recreational New Jersey market, which partly relies on neighboring states as sources of demand.
Nonetheless, companies with operations in both states remain bullish on their regional positioning.
“We remain optimistic that adult-use sales in New Jersey could start by the end of this year, and New York would start sometime in the first half of 2022,” says Curaleaf’s Jonsson.
The exec says Curaleaf is well-positioned in both markets, adding that New York legalization will help New Jersey’s program in the long run by helping to alleviate the initial demands on supply for the Garden State market.
New York legalization will not affect projected market share in New Jersey, says Choice Consolidation's Caltabiano. For this cannabis veteran, there’s enough business to go around.
"It’s a matter of supply. If customers can’t get the product in New York, they’ll go to New Jersey or Massachusetts. It’s all about the operators getting online and scaling," he says.
Columbia Care's Goers says the cannabis company has spent the last year expanding in New Jersey.
GTI's Dooley says the company likes the momentum in the tri-state cannabis market.
“New Jersey has a bit of a lead on New York, but it will all come down to how quickly the programs are built out. Execution is key.”
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