New Jersey Medical Cannabis Sales Fading Quicker Than Adult-Use Sales Grow

Although New Jersey’s adult-use cannabis market continued to grow during the first quarter of 2023, the state’s overall sales figures have exhibited a nine-month plateau as regulators continue to build out the program with new licensees.

Licensed dispensaries recorded nearly $145 million in adult-use sales and roughly $34.5 million in medical sales in the first three months of this year, according to figures released June 21 by the New Jersey Cannabis Regulatory Commission (CRC).

While the adult-use sales figure grew 8.7% from the previous quarter, medical sales dipped 31%, resulting in an overall market decrease of 1.7%.

“We did see a significant drop in this last quarter,” CRC Executive Director Jeff Brown said during the commission’s board meeting last week. “Previously, they’ve remained pretty strong, but we did see about a $15 million decrease in medicinal sales from Q1 2023 versus Q4 2022. Nonetheless, the [adult-use] market continues to grow.”

Brown’s comments come as overall sales figures remain stagnant following an initial boost from an adult-use retail launch on April 21, 2022. Overall sales for the third quarter of 2022 ($178 million), fourth quarter of 2022 ($182 million), and first quarter of this year ($179 million) represent a nine-month flatline in growth amid the fallout of medical participation.

The recent medical sales dip—from $50 million in Q4 to $34.5 million in Q1—comes as New Jersey’s medical cannabis program’s patient numbers have decreased more than 24,000 since a peak of roughly 129,000 patients in May 2022.

Two days after Brown announced the first-quarter sales figures, state lawmakers criticized the commission’s rollout of the adult-use program during a Senate Judiciary Committee hearing on June 23, saying state regulators have been slow to approve license applications for new market entrants and have hindered industry growth with red tape, the New Jersey Monitor reported.

Legislators also scolded the commission’s handling of Curaleaf’s licensing renewals in April, when board members voted to put five of the multistate cannabis operator’s permits on hold only to conditionally reinstate those licenses four days later.

RELATED: Curaleaf’s New Jersey Licenses Renewed With Conditional Approval During Emergency Meeting

Brown and CRC Chairwoman Dianna Houenou defended the CRC’s oversight of the industry during the hearing, according to the Monitor.

“The role of the commission, especially as a new agency standing up this industry, we inherently need to assess and understand what the demands are across the state for our patient community and our adult-use consumers, and then provide regulations and opportunities accordingly,” Houenou said.

Among the 2,084 license applications submitted to the CRC since 2021, there were 783 that remained pending as of June 13, according to the commission.

Despite more than 1,000 of the submitted applications being for retail operations, there are only 33 adult-use dispensaries open in the state as of June 26, with the majority of these facilities operated by existing medical licensees with multistate footprints, according to the New Jersey Office of Information Technology.

Just three of the 33 retailers—Nova Farms in Woodbury, Earth & Ivy in New Brunswick, and Union Chill in Lambertville—are new to the adult-use program without a grandfathered connection to the medical cannabis program.

These retailers have provided millions of dollars in tax revenue to New Jersey, including more than $29.5 million from the state’s 6.625% sales tax.

In addition, the CRC reported last week that more than $459,000 in tax money was collected from the Social Equity Excise Fee (SEEF) in the first quarter of 2023. Revenue from SEEF, collected at $1.52 per ounce of cannabis sold by cultivators, is earmarked for disbursement to communities most impacted by the drug war.

While state regulators have continually said their focus is on providing an equitable and inclusive adult-use marketplace, CRC board member Charles Barker expressed his discontent in March for the lack of diversity among licensees, saying that the board’s intent to prioritize those most harmed by the drug war had yet to be reflected in its awardees. In the meantime, larger companies have had an extension on their first-mover advantage from medical to adult-use operations.

Diversely owned businesses make up roughly 70% of the adult-use license applications submitted to the CRC, yet those businesses have yet to reap the retail rewards of a roughly $600 million annual market.

But much of the “red tape” to becoming an operational adult-use cannabis business in New Jersey derives from the local level, where myriad ordinances and zoning approvals often cause delay. Plus, navigating the capital raises necessary to run a successful business is one of the largest hurdles for many equity operators.

At the state level, New Jersey is a “fairly reasonable” place to do business as it relates to cannabis regulations that are clear, extensive and cover various ownership issues, Jennifer Cabrera, a New York-based partner at cannabis law firm Vicente LLP, told Cannabis Business Times earlier this year. She called the adult-use program welcoming for new market entrants.

Still, balancing act for cannabis regulators in any emerging state market often comes down to rollout speed and licensing inclusion—but the two rarely align in a manner that avoids criticism from all stakeholders involved.

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