Business of Cannabis: New York – Live Updates

8:48am NY | The second Business of Cannabis: New York event, hosted by Prohibition Partners, is set to take place at the prestigious New York Academy of Medicine on 5th Avenue today, bringing together over 400 industry leaders to discuss the future of cannabis in North America. 

Stick with us here as Business of Cannabis will be live reporting the key insights from the event, covering everything from policy, investment, social equity, licensing and retail.

9:39am NY | The event kicked off with a brief statement from Prohibition Partners CEO Stephen Murphy, who welcomed guests to discuss the ‘future of New York cannabis policy, and therefore global cannabis policy’, adding that ‘it is that important’. 

This was mirrored by an opening keynote speech from Leafly’s CEO Yoko Miyashita, who said this event was taking place in a ‘special place and time’, during a year when so much has been promised, and some of those promises have been delivered’. 

She added that upcoming legislation would ‘almost certainly cement New York as a global cannabis capital’. 

However she warned that the biggest driver of expedience is to discourage the illicit markets, adding that we have seen a failure to do this in California, but it was ‘not too late to get this right and benefit from the lessons learned. 

“We want New York to be the first state to get social equity right”

10:15am NY | Opt Out Report Discussion with Leafly | The conversation began with Leafly’s Bruce Barcott asking the panel: “What’s up with New Jersey?”. 

NJ Cannabis Insider’s Jelani Gibson, the panel’s moderator, said that a key difference between New Jersey and New York is the ‘chain of command’. 

He argued that New York could have been in the same place as New Jersey if it wasn’t for investigative reporters who ‘were not afraid to get into the frey’, and the diversity of New York’s leaders, adding that New Jersey still had an ‘old boys club’ in power. 

Mr Gibson continued, that opting out isn’t just because of ‘reefer madness’, but some very culturally complicated issues, including the Asian American community comparing it to the opium wars. 

“New Jersey’s municipalities are the most influential players and applicants are having trouble navigating these municipalities.” 

Ms Miyashita suggested that ‘we are undermining the purpose of the legalisation when we allow opt-outs. 

In this vein, Mr Barcott added that in opt-out states ‘if you are an entrepreneur in the cannabis industry, you are playing local politics, more so than any other industry.’

10:56am NY | A Revolutionary $200m Fund | Next the focus turned to Governor Hochul’s much-vaunted $200m social equity fund. 

Insider Reporter Jeremy Berke began by questioning the motivation behind this fund, to which NYS Assembly Majority Leader Crystal Peoples-Stokes said: “Not because I smoke cannabis, because I don’t. It’s not for the people that use it, but for the people that have gone to jail”. 

She added that the fund was aimed at eliminating the opportunity to destroy the black and brown community in New York’. 

“Let’s be clear. There is going to be a priority for New Yorkers, there is going to be a priority for those who have been affected… It’s smart for us to invest the most in people who have lost the most to the war on drugs.”

Focusing on the upcoming rollout of dispensaries across the state, the Majority Leader explained that 150 small businesses will be able to go first, suggesting that ‘that’s not much to ask when we estimate 1500 will open across New York eventually.’ 

“Everyone else will have the opportunity, it just won’t be first. These sort of structural changes are the only thing that is going to make this industry work and create generational wealth.”

Next, Chair of the New York Cannabis Control Board Tremaine Wright said that ‘we are on target’ to open the first stores in 2022. 

“We are not opening ‘a store’, but there will be stores open by the end of the year. We will keep opening until 150 are open across the state.”

She pointed out that this fund will be used largely to address start-up costs and ‘create a pathway for people to get into this business’. 

“We are very clear that we wanted equity to be at the center of this legislation. We all know the harms, but what we were keen to address was access to capital and support services to access generational wealth.”

11:09am NY | ​​New York State: Regulatory Update | Next was a brief update from Axel Bernabe, Chief of Staff & Senior Policy Director at the Office for Cannabis Management (OCM), on the progress of regulations across New York State. 

He said that within the next few months, the OCM will have established an ‘equity driven’ supply chain, ‘supported by local farmers’, adding that great opportunities will be layered on top of this at a later date. 

Mr Bernabe said that the OCM will ‘soon’ be announcing the CAURD holders, though not all 150 of them. 

He then went on to explain the ‘two tier’ system that the OCM plans to roll out would be focused on creating a ‘truly competitive’ market, where ‘any brand has an equal opportunity to become the market makers’ regardless of the money they have to spend on shelf space. 

More importantly, he said that this system will ‘provide better access because it’s focused on smaller businesses’, making it ‘fair, diverse, innovative and safe’. 

11:35am NY | The Investors View: Biden Their Time? | The following session saw Merida Capital’s Founder Mitch Baruchowitz and Cannabis Now’s CEO Eugenio Garcia discuss whether President Biden’s recent political action has made any difference in attracting investors. 

Mr Baruchowitz started by saying that the proliferation and maturity of New York’s illicit market is going to make legalisation ‘incredibly challenging.’

However, he added that it had been ‘fairly thoughtful’ about trying to replicate the ease of access which is available in the illicit market and build a similar framework. 

He challenged comments made in the previous panel that the industry was a ‘baby’, suggesting this may have been the case in 2013, but is now developed to the point where the president is talking about it. 

To this point, Mr Garcia suggested that from his experience, opinions on whether President Biden’s recent cannabis announcement was the beggining of Federal Legalisation, or ‘toothless bullshit’. 

In response, Mr Baruchowitz said that while it was ‘great’ the President was talking about this, as it helps to reduce stigmatization and make it easier for the industry to move forward, ‘actions speak louder than words’, leading him to ask, ‘why now and not two years ago?’

12:30pm NY | New Capital of Cannabis | The conversation remained on the topic of investment in the following panel, which sought to explore New York’s role within global cannabis investment.

Forbes journalist Iris Dorbian began by asking whether the panel agreed with projections that New York’s adult use market could be worth up to $10bn a year. 

The panel largely agreed that these figures were either realistically achievable, or even too low, but it will take time to get there. 

Artemis Growth’s Will Meuke said its New York’s ‘birthright’ to be the largest market in the US, and that it had an ‘incredible pull as a cannabis tourism hub’. 

Back to the question of how New York can avoid the mistakes seen in other states, particularly California, taxation was raised as a key issue. 

Mr Meuke said: “California set a really terrible paradigm with taxes. Legal operators can’t make money, they are sending huge amounts of money across state lines.” 

He added that the best way to tackle the legacy market was to offer incentives, like tax abates. 

Highlands Venture Partners Tahira Rehmatullah said that because the legacy market was so widespread and consumers were now so comfortable with it, ‘consumers will therefore be very price sensitive’. 

“There is a balance you need to strike not only with the operators, but with the consumers. People are so comfortable with the illicit market now, it’s going to be very tough to roll back.”

Responding to a question about how the medical cannabis market would interact with the upcoming recreational market in New York, Pelorus Equity Group’s Rob Sechrist says he believes the ‘medical cannabis market is a false flag to get recreational started’. 

“Real medical research is being done at a federal level. The state medical market is not a real medical market, the true medical benefits are only done by the DEA.”

Mr Meuke went as far as saying the US ‘has basically failed on the medical front’, and that MSO’s have failed to deliver on their promises to support the medical market. 

He added that while the ‘entrepreneurial spirit’ was necessary for cannabis businesses searching for funding, these businesses ‘need some help’, and that needed to go beyond purely private equity. 

“The capital pool is really tiny, and we need to find ways to expand that.”

To the point of banking hurdles, Mr Sechrist argued that the problem was not as pronounced as some thought, stating that according to his research 16% of banks were currently operating in the industry, but the problem was on the ‘custodial side’, and the the inability to use credit cards to buy cannabis meant you could not ‘create cash build in the sector.’ 

13:19pm NY | Profiling the Modern Cannabis Consumer | The next panel began by suggesting that only now that cannabis prohibition was abating, can we truly begin to understand the cannabis consumers. 

As to what the current cannabis consumer looks like, Dutchie’s Anne Forkutza suggested that there was a distinction between the legacy customers, who buy higher THC strains and pre rolled joints, and the ‘wellness consumers’ who focus on performance from low THC and high CBD products. 

Ayr Wellness’ Jeff Finnerty added that it was incredibly hard to pin down because the market ‘literally changes month by month’, suggesting that the entire market had grown 3% in around 6 months according to his research. 

Andreas Nuemann of Jushi said that following a drive in consumer data gathering systems his business installed over the pandemic, he found that there cannabis consumers were largely ‘an older demographic’, as younger consumers favoured the cheaper illicit market. 

He continued that in terms of branding, it’s currently very difficult, but that ‘branding is coming’. 

“It’s going to be huge, we’re creating the brands of the future, but right now it’s just about price.”

13:46pm NY | The Technology & Innovations That Make Cannabis Tick: What Next? | The panel were asked to make some bold predictions about when tech giants such as Amazon will enter the market, and what the next game-changing technologies will be for the cannabis industry. 

Truelieve’s Nilyum Jhala said that Amazon was largely already in the space, with many cannabis businesses platforms already being built on Amazon Web Services. 

He suggested that ‘it was only a matter of time’ before Amazon and other tech giants fully jumped into the industry, but if they didn’t do this soon they would be unlikely to be industry leaders. 

To that point, Ms Miyashita said that currently players such as Leafly will have to act as gateways for the bigger players to come in, and that they will ‘definitely want to do so’, adding that seeing them as competition ‘sets us up poorly. 

As for her prediction of what the next game-changing technology in cannabis will, she suggested it would focus on bringing all the local businesses operating within local regulation together somehow. 

Treez’ John Yang predicted that ‘self service will be a huge game changer’, adding that he believed this would come into play over the next three years. 

Mr Jhala concluded that the biggest game changer will be the enablement of multistate commerce, which will bring so much opportunity for efficiency across the board. He added that the ‘creation of loyalty programmes’ will also be incredibly important. 

14:53pm NY | No Patients Left Behind? | The afternoon session started with a focus on the US medical cannabis industry, which a previous panel referred to as a ‘false flag to get recreational started’. 

Physician & Cannabis Specialist Dr Peter Grinspoon MD, said he believed ‘it is and it isn’t, adding that over 90% Americans support access for medical use. 

“Who would have thought it would be this that America agreed on?,” he said. 

Asked whether he believed it was right to have a separate medical and recreational sectors, Dr Grinspoon said this was an ‘artefact of the politics’ of cannabis, and an ‘artificial dichotomy’. 

He added that in his opinion as a physician ‘it doesn’t really matter as long as ‘critical protections’ remain in place for medical patients, but it ‘doesn’t necessarily make sense to have two separate industries. 

These included patients not paying 20% tax on cannabis, companies being allowed to provide discounts for medical patients and seniors, and having a higher probability of access than recreational patients. 

To wrap up Dr Grinspoon said that what really needed to happen was the education of doctors, adding that many bud tenders are currently giving medical advice in where there is a knowledge gap. 

“This is a hangover from the war on drugs. Consultations with doctors are real opportunities for harm reduction with cannabis use.” 

15:36pm NY | High society: Cannabis in Fine Dining, Fashion, and Real Estate in NYC | At the opposite end of the spectrum to medical cannabis, a later panel placed the spotlight on cannabis’ place in the luxury hospitality, retail and experiential industries. 

The conversation repeatedly referenced the diversity and creative nature of New York as a city, and questioned what impact this will have on the cannabis industry. 

Fork Knife’s Jordan Andino, says that the legalisation of cannabis in New York is an opportunity for chefs and creatives to ‘present and consume cannabis in ways that have never been seen before’. 

“I’m excited about the ability to cook and infuse cannabis without just pouring some oil on top of a meal and enabling people to get as high as they want based on consumption. Now that it’s legal I’ll be able to go into people’s homes, feed people and dose people in a way that is more on the refined dining side.”

The Tenaka Group’s Mike Wilson said he believed the real opportunity in New York was in retail, with pop-up stores providing a huge opportunity due to the number of vacant stores and sky high real estate prices. 

“Its New York, it’s retail, let’s be real, this is where the bar is set.”

Matthew Mazzucca, former creative director at Barneys New York, said that bringing cannabis into the luxury retail market could pose some issues as there is ‘a bit of pretence’ to charging thousands of dollars for luxury rolling papers. 

He suggested this would likely isolate some of the legacy cannabis market. However, when luxury stores did take on cannabis sales, it was important to offer an in depth educational ‘concierge piece’ to hold the hand of customers throughout the experience, many of whom would likely be first time users. 

Furthermore, he said that this education piece wasn’t necessarily around staff educating customers, but on shop owners educating staff. Enabling brand representatives to come and support sales on the shop floor can help solve this issue, he suggested. 

16:30pm NY | Building an Ethical Industry | With New York placing such an emphasis on creating an ethical cannabis market, the next panel asked how this ambitious goal looked to be going. 

Vicente Sederberg’s Marc Ross set the tone, stating: “There is an ethical responsibility we have in this space to bring along people from the legacy market and redistribute wealth.”

Subversive Capital’s Michael Auerbach mirrored this by stating if a company is not doing this, “it does not belong in the cannabis industry.”

Mr Auerbach said that so far he believed ‘social equity has been an abject failure, in all industries. 

“For the most part the beneficiaries of most of these industries have been white men. What I like about NY is that it’s telling these white men that they’re not the first in line. The only true social equity programme is the end of prohibition at the federal level.

“The people within this industry are not inherently ethical people because it is a grey industry.”

Politico’s Mona Zhang then asked the panel whether they believed efforts to keep big business out of the industry was preventing these small businesses from accessing much needed capital. 

The Happy Munkey’s Vladimir Bautista said he didn’t think this was an issue, stating that New York is the financial capital of the world, and there is a ‘lot of private money here willing to back social equity’.  

“I don’t think that is necessarily relevant to New York. I’m pretty sure if anyone is able to get a licence, they will be able to get capital.” 

On the point of capital, Mr Auerbach said while he thought the states $200m fund was ‘exactly the right model’, but warned that he was ‘not bullish they will be able to raise’ the full amount of money and that these 150 companies were going to run into a capital shortage. 

Michael, this is exactly the right model. I’m a little concerned about this one as there is $50 million allocated, I don’t know what’s happening with the other $150 million. I’m not very bullish they will be able to raise this $150m. I think we’re going to run into a capital shortage for the first 150 companies. 

Moving on to the considerable environmental concerns surrounding the cannabis industry, Mr Ross said he believed if and when federal legislation came, a lot of companies would face large fines. 

“You’ve got operators out there clearly with non-compliant operations. If the Federal EPA doesn’t get involved soon, we’re going to see some really significant penalties on cannabis companies.” 

17:12pm NY | Equity & Justice in the New York Cannabis Space | This focus on creating an equitable industry continued in the following two closing sessions. 

Firstly, CJ Wallace, founder of Frank White & Think BIG encouraged those in attendance to ‘not be afraid to talk openly about cannabis’, adding that ‘Black culture is cannabis culture, and cannabis culture is Black culture’. 

This led on to the event’s final session, focusing on the intrinsically-linked association between cannabis, hip-hop and New York. 

Visual Artist, Filmmaker, and Founder of B Noble, Fab 5 Freddy, explained that cannabis was also integral to his life growing up, but also synonymous with the hip-hop scene throughout New York. 

He went on to recall the ‘false narratives’ that were created by the Nixon administration, aimed at enabling minority communities to be ‘tormented’ and ‘disproportionately policed’. 

Hip Hop and other counter cultural music, he argued, helped to ‘refute this narrative, and all these lies we were bombarded with’ by talking openly about cannabis use. 

On this note, Mr Wallace recalls the opposition he came up against from his grandmother when telling her about his ambitions to break into cannabis, which he says was due to ‘all the propaganda’. 

“Once people get the research and education, it’s hard to dispute facts. It was a fun journey getting to educate her.”

The conversation then turned to cannabis business, specifically how to brand cannabis. 

Fab 5 Freddy said he believed branding was in its infancy, and that cannabis brands were ‘fighting 80 plus years of propaganda with branding and telling those stories’. 

Mr Wallace said this included telling people: “You’re not alone, we were lied to as well”.

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