A recently released industry report warns that New Jersey’s limited number of legal, licensed, and regulated cannabis dispensaries could hamper the state’s ability to reduce the illicit cannabis market.
Of the 14 U.S. states with legalized adult markets, New Jersey — with a population of 9.2 million — had the fewest stores per capita, with 0.3 dispensaries per 100,000 residents, according to a study carried out in partnership between the consumption of cannabis and the site of education Leafly.com and the research firm Whitney Economics.
Although the state launched recreational cannabis sales in April, illegal street vendors still control more than 80% of the market, according to researchers. As of July 1, the 26 legal adult and medical cannabis stores licensed and operating in New Jersey captured less than 20% of legal sales, according to the report.
By contrast, Montana and New Mexico, which also launched recreational sales this year, have significantly more stores, allowing them to control a greater share of total demand.
According to the report, Montana has 39 stores per 100,000 people and captures 78% of sales, while New Mexico’s six stores per 100,000 people handle 75% of total demand.
After examining a variety of data on sales, population, and adult use from states where recreational cannabis retail markets are legalized, the researchers found a strong correlation between legal cannabis stores per capita and uptake. of the legal market. According to the study, states with more legal, licensed and regulated stores have had more success in shutting down illegal cannabis vendors, while those with fewer dispensaries tend to have the most street vendors.
Shaya Brodchandel, President of the New Jersey Cannabis Trade Association, said: “The promise of legalizing cannabis was that it would allow those who had operated for years in an illicit market system to be part of an exciting, growing and legal industry. State regulators prioritize those who want to move to the legal market and generate taxes for the state, while strictly enforcing and shutting down those who continue to operate illegally.
Brodchandel, who is also the CEO of Dispensary of Harmony added: “While I would like to see things move faster from a regulatory perspective, I also have to recognize that it takes time to create a new market in the right way.”
Prior to the official launch of the New Jersey Recreational Market, 71% of municipalities opted out of permitting the sale, cultivation, manufacture and distribution of cannabis. This left few legal options for adult consumers and ultimately created “an economic protection zone allowing illegal street vendors to continue in business,” the report said.
By banning cannabis businesses, local authorities are indirectly encouraging adult consumers to purchase illegal products, endangering public health by allowing untested products to circulate, and supporting illegal sales to local teenagers, according to the report. It also inhibits local job creation and limits tax revenue opportunities, while continuing a losing war on drugs.
Some officials believe that these opt-out decisions should be reconsidered. After watching nearby Rochelle Park collect 2% local tax revenue from every sale at the thriving Ascend dispensary, Paramus Mayor Richard LaBarbiera wondered why his borough wasn’t doing the same.
The Democratic mayor said he thinks it’s ‘a wasted fiscal opportunity for Paramus’ and ‘reckless and inappropriate’ for officials to turn down ‘this kind of windfall and not pass on some of those gains to taxpayers “.
But in August, the Republican-majority borough council filed a mayoral proposal to amend Paramus’ existing medical cannabis ordinance to include recreational retail.
Location, location, locations
Meanwhile, other parts of New Jersey are struggling to figure out how best to integrate new businesses into their communities.
Citing public concerns, Hoboken City Council has taken steps to limit the number of recreational cannabis businesses allowed in the city, as well as the locations where these establishments can locate. Changes signed into law in April include a cap of six dispensaries citywide, no more than three per neighborhood, and no cannabis businesses within 600 feet of a school or early learning center.
Along with high start-up costs and access to capital, location is one of the biggest challenges entrepreneurs face when establishing themselves in New Jersey’s emerging cannabis industry.
For Maxwell Thompson and Lauren Jordan Chang Thompson, finding a suitable location to open their proposed Blue Violets LLC dispensary was not easy and took five months to find a property.
The married couple from Weehawken recently obtained all necessary local approvals from the city of Hoboken to open a micro-business on Washington Street and are currently pursuing a license with the New Jersey Cannabis Regulatory Commission.
“The biggest challenges were first finding the property and then going through local council approvals,” said Chang Thompson, who added that the process, so far, had taken almost 10 months.
“As small business owners, we have tried to do everything we can on our own so that we have as much savings as possible to invest in our store when we finally get our license from the state,” said Chang Thompson. , a registered nurse. “It’s hard for us to pay rent on a space for so long without being able to open, but we did the math and thought if all goes well we could manage it a bit. But there’s been a lot delays, so we had to be very careful with our expenses, both for the store and for our personal lives. It’s still money for us, so we’ve had to postpone a lot of things for now.
“On top of that, we were intimidated by a vocal anti-cannabis minority for most of the local approval process,” she said. “We weren’t really prepared for this, but we managed. It helped that the majority of people in our town were supportive.
Maxwell Thompson thinks there are several ways to make the whole process smoother for candidates. “At the state level, more transparency from the CRC about exactly where applications are in the review process would be helpful. In the submission portal today, an applicant’s status will simply say “Submitted” and will never change with a real progress tracker. Knowing what documents are being reviewed and what remains would be helpful in better estimating timelines,” said Thompson, an attorney.
“At the local level, municipalities may need to do a better job of protecting their local industries when they launch them. Rule changes, unclear instructions and political complacency have all led to the calamity of our situation, and we’ve heard it’s the same in many other cities as well,” he said.
To date, the CRC has issued nearly 1,700 conditional cannabis licenses, including more than 900 to potential dispensaries. After receiving a conditional permit, applicants have 120 days to find a location and obtain municipal approval before moving to a standard annual permit.
At its Oct. 27 meeting, the board approved 297 conditional licenses, as well as the first 18 annual adult-use cannabis commercial licenses — 10 of which were applications for conversion to annual licenses and eight applications for annual licenses.
CRC President Dianna Houenou described the approvals as “a special milestone for the commission and for New Jersey’s new legalized industry” and part of their ongoing efforts to establish “a good foundation.”
On his monthly show with WNYC on Oct. 31, Gov. Phil Murphy said he thought the administration and regulators were working hard to establish the market, but admitted it was taking “longer than any of them.” between us would like it”.
“But they’re doing a really good job with things like conditional licensing…to people [who] are predominantly women, minorities and veterans,” the governor said.
Murphy went on to say, “I don’t want an industry where it’s just the big guys. They can be part of it, of course, but I want everyone, especially the people who are so hard hit by the war on drugs.
Currently, eight out-of-state entities own and operate the 20 dispensaries licensed to sell adult-use cannabis in New Jersey.
A key aspect of the state’s cannabis law is that at least 70% of tax revenue generated from recreational sales be invested in impact zones, which are communities with high unemployment rates, higher than average cannabis crime and arrests.
Following a recommendation from the CRC and approval from the Treasury Department, a portion of these funds are being allocated to the New Jersey Business Action Center to establish a Cannabis Training Academy for those looking to break into the industry. The 10-week program, which is expected to roll out in the first half of 2023, will provide free technical assistance, training and mentorship to applicants seeking recreational cannabis licenses.
The proposed program includes modules designed to help participants decide if a cannabis business is right for them and will include developing a business plan as well as a Legacy to Legal course.
Some program resources will be targeted to “specially designated categories,” which include social equity enterprises, multi-ownership enterprises, microenterprises and impact zone enterprises, according to the NJBAC.