New Jersey’s Cannabis Market Faces Plateau in Sales Amid Regulatory Challenges

LOS ANGELES– Despite the growth of New Jersey’s adult-use cannabis market during the first quarter of 2023, the state’s overall sales figures have hit a nine-month plateau due to ongoing regulatory developments and the slow approval of new license applications. Licensed dispensaries reported approximately $145 million in adult-use sales and roughly $34.5 million in medical sales in the first three months of the year, according to data released by the New Jersey Cannabis Regulatory Commission (CRC) on June 21.

While adult-use sales experienced an 8.7% growth from the previous quarter, medical sales dipped by 31%, resulting in an overall market decrease of 1.7%. The decline in medical sales follows a significant drop of approximately $15 million in the first quarter of 2023 compared to the fourth quarter of 2022. Despite this, the adult-use market continues to expand.

The sales figures indicate a stagnant trend since the initial boost from the launch of adult-use retail on April 21, 2022. The overall sales for the third quarter of 2022 ($178 million), fourth quarter of 2022 ($182 million), and first quarter of 2023 ($179 million) have shown no substantial growth over the past nine months, primarily due to challenges in the medical cannabis sector.

The decline in medical sales coincides with a decrease in the number of patients participating in New Jersey’s medical cannabis program. Since reaching a peak of approximately 129,000 patients in May 2022, the number of patients has decreased by over 24,000. This decline has contributed to the dip in medical sales during the first quarter of 2023.

Criticism has been directed at the CRC’s handling of the adult-use program’s rollout and the slow approval of new license applications. Lawmakers have accused state regulators of impeding industry growth through excessive red tape and delays in approving licenses for new market entrants. The concerns were raised during a Senate Judiciary Committee hearing on June 23, where state lawmakers expressed frustration with the regulatory process.

CRC Executive Director Jeff Brown and CRC Chairwoman Dianna Houenou defended the commission’s oversight of the industry during the hearing, emphasizing the need to assess the demands of the patient community and adult-use consumers in the state and adjust regulations accordingly.

Currently, there are 783 pending license applications out of the 2,084 applications submitted to the CRC since 2021. Retail operations account for over 1,000 of the applications, but as of June 26, there are only 33 adult-use dispensaries open in the state. The majority of these dispensaries are operated by existing medical licensees with multistate footprints. Only three of the 33 retailers are new to the adult-use program and do not have a grandfathered connection to the medical cannabis program.

Despite the challenges, the adult-use cannabis market in New Jersey has generated significant tax revenue. The state has collected over $29.5 million from the 6.625% sales tax on cannabis sales. Additionally, the Social Equity Excise Fee (SEEF), which collects $1.52 per ounce of cannabis sold by cultivators, contributed over $459,000 in tax revenue in the first quarter of 2023. The SEEF revenue is intended to support communities most affected by the war on drugs.

Diversity and equity in the industry remain concerns, with board member Charles Barker expressing discontent about the lack of diversity among licensees. Diversely owned businesses make up around 70% of the adult-use license applications, but they have yet to benefit significantly from the market. Challenges at the local level, including ordinances and zoning approvals, contribute to the delays faced by equity operators.

While New Jersey’s cannabis regulations at the state level are considered clear and comprehensive, the local level complexities and capital raises necessary for successful operations remain significant hurdles for equity operators. Achieving a balance between regulatory speed and inclusive licensing is a challenge faced by regulators in emerging state markets, often resulting in criticism from various stakeholders.

The evolving cannabis landscape in New Jersey and the challenges faced by regulators will be topics of discussion at the upcoming Cannabis Conference, a leading event for plant-touching businesses, taking place at the Paris Las Vegas Hotel & Casino.