The Garden State’s adult-use program signifies a maturing industry and the incredible untapped potential in Northeastern states
It’s just four months after the opening of adult-use sales in New Jersey and already sales are high. So is demand for product and real estate, as conditional licensees are scouring the state for viable locations so they can join the fray.
State-licensed cannabis retailers have generated more than $200 million in sales since launching with just 13 retail stores on April 20, according to analysts at BDSA. That’s roughly half of what California, with more than four times the population and a well-established cannabis culture, brought in during its first quarter of adult-use sale (just more than $405 million).
“It’s still early in New Jersey, but it’s going well,” says Adam Goers, the senior vice president of corporate affairs for Columbia Care, a multi-state operator that owns two Cannabist retail stores in New Jersey. “You’ve got to start somewhere, but I think we all recognize where we’re heading.”
Now, with the state having issued more than 300 conditional licenses, new stores and grows should be coming online soon, likely bringing prices down but driving sales even higher.
“It’s the beginning of a new marketplace and we have a lot of opportunity here, from the multi-state operators, which are going to be doing very well, to the individual local applicants,” says Shaya Brodchandel, CEO of Harmony Dispensary, one of the state’s 10 medical marijuana licensees. “It screams ‘opportunity, opportunity, opportunity.’”
New Jersey’s relative blockbuster launch is not just indicative of a healthy state market, but points to a maturing, albeit fractured, U.S. market, where lawmakers, businesses and consumers have a better understanding of how these programs should be structured before retail sales begin.
“I think one of the greatest opportunities we have in New Jersey is how successful we’ve been with our social equity program,” says Tahir Johnson, a New Jersey native and director of social equity and inclusion for the U.S. Cannabis Council and the Marijuana Policy Project.
Johnson and longtime friend and fellow social equity applicant John Dockery both hold conditional retail licenses and plan on opening Simply Pure retail stores in the fall, through a licensing agreement with the Black-owned, Colorado-based brand.
He says New Jersey has an effective social equity program that will result in a more diverse market than other states because it gives priority access to social equity applicants, followed by minority-owned, women-owned and veteran-owned businesses.
Goers echoes Johnson’s statement, adding that the state not only succeeded in creating a diverse industry but one where social equity businesses will legitimately be able to compete, due to the cap on cultivation licenses until February 2023.
“New Jersey has approached this a little bit different than other states by having a big number of licenses, but also having it semi-limited in nature,” Goers says. “They can increase cultivation licenses even further if demand requires, but certainly Jersey is trying to make sure that there’s an equitable market to get the program off right.”
The cap on cultivation licenses may only be temporary, but it will definitely allow the state’s 2019 crop of applicants who had to wait two years before getting approved — like Ken VandeVrede, the CEO and founder of Hillview — a chance to build out operations and transition into recreational sales before the hundreds of newcomers can open their doors.
“Our application scored No. 1 in 2019, and then we were sitting here; it’s August 2022 and my plants are just getting in the ground,” says VandeVrede. “We are currently building out our 150,000-square-foot facility, which will house our first phase of 30,000 square feet of canopy.”
As of June 8, according to the Cannabis Regulatory Commission, 22% of the 148 awarded conditional licenses went to minority-owned businesses and 53% of the licenses were marked as “not diversely owned”; women-owned and minority-women-owned businesses each accounted for 12% of the remaining awarded licenses. As of August, the Cannabis Regulatory Commission has received approximately 1,200 applications and has awarded 308 conditional licenses; however, the agency did not provide an updated breakdown of ownership.
All Licensed Up and Nowhere to Go
The Garden State became home to one of the most diverse cannabis markets in the world by prioritizing social equity applicants, keeping application fees reasonably low — less than $1,000 to apply and licensing fees top out at $50,000 — and by allowing applicants the ability to apply before securing a location. However, even with reduced financial barriers and priority access, many applicants are failing to find property in the most densely populated state in the country.
“The big barrier in Jersey is real estate,” says Jennifer Cabrera, an attorney at Vicente Sederberg who specializes in cannabis licensing and regulations in New York and New Jersey. “It’s all on a municipal level because the state doesn’t have any zoning restrictions. So some towns are very open and make it easy and others have really overdone it with the zoning.”
Matte Namer, CEO of Cannabeta Realty Group, has been working with several applicants looking to move forward in the licensing process, but eligible locations are becoming increasingly rare, in part because about 70% of municipalities have opted out of adult-use cannabis sales. Zoning restrictions further compound the issue, especially for cultivators who need space on industrial land, Namer says.
“Six months ago, it was a lot easier to find a dispensary location than it is today,” Namer says. “Whereas six months ago, it was hard to find a cultivation space. Today, it’s still hard.”
Johnson says the two retail locations for Simply Pure were obtained early on and partially due to his industry connections, but other social equity applicants may not get the chance to open at all.
“It was done with the intention of lowering barriers to entry,” Johnson says. “But people weren’t required to have real estate and sale approval prior to applying for the licenses and I think it’s coming back to hurt some folks.”
While social equity applicants may be having a tough time securing locations, the state’s legacy medical operators are dominating the industry. According to Hoodie Analytics, two companies, Curaleaf and Verano, account for nearly 60% of total distribution points, which accounts for both the number of products sold and the number of stores selling those products, in New Jersey’s cannabis market.
Other legacy medical operators, including some of the largest multi-state operators in the country, are also having success in the Garden State.
“(New Jersey) is exceeding every expectation, to the point where Rochelle Park is the No. 1 store in the company,” says Mike Conway, Ascend Wellness regional vice president of New Jersey.
Ascend has 21 cannabis stores spread across Illinois, Massachusetts, Michigan, New Jersey and Ohio. And unlike new retailers just entering the market, which are limited to just one location, legacy medical operators can have up to three locations.
“We expect that when Fort Lee opens up, we will have the No. 1 and No. 2 stores in the company operating just 15 minutes away from each other,” Conway says.
Most of the 10 legacy medical businesses transitioning to the recreational program are multi-state operators that purchased licenses from the original operators. Brodchandel and Harmony Dispensary are the exception, having operated in the state since medical sales began in 2011. Brodchandel says he watched New Jersey do “a complete 180” from being one of the strictest programs in the country to where it is today.
“It’s been a very interesting and exciting time for us. … The state is in its infancy in terms of the adult-use market and it’s going to explode,” he says. “Our universe is New Jersey, and we don’t want to get lost in the shuffle.”