New York’s legal cannabis market could see annual sales top $6bn within two years, according to new analysis from Whitney Economics.
In a new whitepaper, published by the leading cannabis business consultancy, Whitney Economics reports that the state’s cannabis market has already hit a ‘critical mass’ of almost $1bn in annual sales.
This is despite just 15% of cannabis users in New York stating that they buy from the state’s 205 legal dispensaries.
As such, in two years time, it estimates that the market could sustain between 1600-1700 legal retail stores, accounting for annualized sales of $3.3bn.
However, this is dependent on the state effectively tackling the prevalence of illicit cannabis retailers, with the report stressing that these operators undercut legal operations on price and accessibility, diverting potential revenue and weakening tax revenues earmarked for social programs and community reinvestment.
Furthermore, local laws that restrict the establishment of retail dispensaries are significant barriers to the cannabis program’s success.
Unlike the state-wide proximity protection buffer of 1,000 to 2,000 feet, which helps maintain profitability as the market grows, local restrictions can stifle industry development. It is advised that any waivers for proximity rules should only be considered once about 1,000 dispensaries are operational statewide.
The program aims to balance supply and demand to prevent market crashes, and while the market is currently stable, managing this expansion without overwhelming the industry will be crucial for Governor Hochul and the Office of Cannabis Management (OCM).
Other states, such as California and Colorado, have suffered price collapses due to an oversaturation of cultivation and retail licenses, while those with more measured rollouts have avoided such pitfalls.
A price crash would have immediate negative effects, including a decline in New York State tax revenue, which funds initiatives for communities affected by the war on drugs and enforcement against illegal stores.
Two years ago, a slow rollout created a surplus that threatened farmers; now, the rapid opening of too many stores risks oversaturation and public health concerns.
The full report can be read here.
This topic and more will be discussed in detail at Business of Cannabis: New York on November 12 at the New York Academy of Medicine. Grab your tickets now.
