On Wednesday, New York became the 15th state to legalize recreational cannabis after Governor Andrew Cuomo signed the recently passed law.
Legislation that allows adults over the age of 21 to own small quantities of cannabis, grow up to six plants, and purchase marijuana from licensed retailers will have immense consequences for the operational and financial prospects of multi-state operators with a presence in the state.
“Without a doubt, New York City is the East Coast giant. We can’t underestimate the size of the adult cannabis market in the state, ”said Jennifer Dooley, chief strategy officer at Green Thumb Industries (OTCQX: GTBIF).
Public cannabis companies are targeting the New York Rec market
Curaleaf (OTCQX: CURLF), Columbia Care (OTCQX: CCHWF), Cresco Labs (OTCQX: CRLBF), Vireo health (OTCQX: VREOF) and Green Thumb Industries announce to Benzinga that they plan to enter the New York recreational market.
“Under the new legislation, we can grow, manufacture, distribute and sell adult cannabis products,” said Charlie Bachtell, CEO and co-founder of Cresco Labs.
The company owns one of 10 vertically integrated licenses from the New York Medical Program with four state pharmacies and one processing facility for manufactured products.
According to GTI’s Dooley, her company has successfully converted medical retail locations into adult stores, as it did in Illinois in 2020, Massachusetts in 2019, and Nevada in 2017.
GTI operates three retail locations in New York and has a cultivation and processing license.
Albe Zakes, vice president of corporate communications at Vireo Health, says the proposed recreational program will allow registered medical cannabis operators such as Vireo to acquire additional recreational pharmacy licenses while maintaining existing locations for medical use only.
The company operates four pharmacies across the state and a 66,000 square foot cultivation and processing facility.
The story goes on
“While the historic legislation passed today sets the framework for the program, many details will be set by the newly formed Office of Cannabis Management. So it’s too early to discuss our exact go-to-market plans, ”says Zakes.
Related link: Options traders believe Tilray stocks may rebound after legalization in New York
The future of New York’s recreational cannabis market
The transition to adult use in New York will ultimately take time as regulators try to put appropriate regulations, tests and standards in place for consumer safety, says Patrik Jonsson, regional president for Northeast Curaleaf.
It can take up to 12 to 18 months for recreational sales to begin, according to Adam Goers, SVP for corporate affairs at Columbia Care.
New York doesn’t even have 500,000 square feet of acreage, says Joe Caltabiano, CEO of Choice Consolidation Corp. and former CEO of Cresco.
“You need roughly 5 million square feet of cultivation to meet even a percentage of the first wave of adult consumer demand, and it will take 18 months to get them online and operational.”
The New York Medical Cannabis Industry Association estimates that the New York cannabis market could grow up to $ 5 billion in size by 2027, including recreational and medicinal sales.
According to Bachtell of Cresco Labs, New York is likely to follow the trends of other states that recently passed adult cannabis law.
“We expect retail licenses to be issued gradually (versus all of them at the same time) to ensure the establishment of a responsible, sustainable government cannabis market,” he told 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 Illinois and Massachusetts examples suggest operators need to prepare for a sharp surge in demand.
The legal cannabis industry is expected to bring thousands of jobs to New York, generate an estimated tax revenue of more than $ 650 million, and provide economic relief and opportunity to communities hardest hit by the war on drugs.
The future of the New York medical cannabis market
Adult legalization could intuitively be taken as a blow to the state’s medical market.
This may not be the case, however, as the law also expands New York’s medical marijuana program to introduce smokable whole cannabis flowers and remove the requirements for patients.
“The New York medical program has been very slow, largely because the state program was one of the most restrictive in the country and made it difficult for the majority of people in New York to access,” says Caltabiano.
If a state’s medical market has not reached its full potential, the multiples of adult usage will typically increase six to ten times in the near future.
Columbia Care operates four medical marijuana dispensaries in the state and has a medical marijuana grow facility in Rochester.
“Patients will soon have access to the entire plant format they strongly prefer, and doctors can now recommend medicinal cannabis for any condition they see fit,” says Columbia Care’s Goers.
The new law allows medical operators like Columbia Care to add four additional medical pharmacy locations across the state.
“When other markets [like Pennsylvania and Florida] Any judge, New York’s medical cannabis could double in the coming months, ”he says.
Turning point marks (NYSE: TPB) expects sales of cannabis accessories to increase after legalization in New York, said Louie Reformina, the company’s chief business development officer.
Reading through for New Jersey’s weed market
A recent analysis by Cantor Fitzgerald predicts that a swift legalization law in New York could hinder growth in New Jersey’s recreational market, which is based in part on neighboring states as sources of demand.
Nevertheless, companies with branches in both countries remain optimistic about their regional positioning.
“We remain optimistic that adult sales in New Jersey could begin late this year and New York will begin sometime in the first half of 2022,” said Jonsson of Curaleaf.
The executive says Curaleaf is well positioned in both markets, adding that legalization in New York will support New Jersey’s program in the long term by helping to reduce the initial requirements for supplying the Garden State market.
According to Caltabiano of Choice Consolidation, the legalization in New York will have no impact on the projected market share in New Jersey. There are enough shops for this cannabis veteran to get around.
“It’s a matter of supply. If customers can’t get the product in New York, they go to New Jersey or Massachusetts. It’s just about the operators going online and scaling up,” he says.
Columbia Care’s Goers said the cannabis company spent the last year expanding in New Jersey.
According to GTI’s Dooley, the company likes the momentum in the three-state cannabis market.
“New Jersey has a certain lead over New York, but it will all depend on how quickly the programs are set up. Execution is key. “
Photo by William Fortunato from Pexels.
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