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New Jersey prepares to launch recreational cannabis market

New Jersey prepares to launch recreational cannabis market

New Jersey recreational cannabis sales to start soon

New Jersey’s recreational cannabis market is gearing up to launch within weeks and is poised to become one of the largest on the East Coast with annual sales projected to top $2 billion within a few years.

The state is positioned to beat rival New York to the punch and to match, if not exceed, Massachusetts in annual adult-use sales.

But, like most new markets, industry officials are concerned about whether supply will be adequate to meet demand – at least in the early stages.

New Jersey’s adult-use market – approved by voters in November 2020 – is expected to launch with only a handful or so of the state’s existing medical cannabis operators.

The start of recreational marijuana sales also comes as social equity applicants are struggling to develop their business know-how, raise funds and secure real estate.

Existing medical marijuana operators might get as much as an 18-month head start on some new cannabis businesses, an industry expert said.

Missed deadline

The recreational marijuana law implementing the voter initiative called for sales to begin by Feb. 22, 2022, but the state ignored that deadline, saying it was too early.

Gov. Phil Murphy then hinted in late February that the market could launch “within weeks,” and state regulators indicated recently that they were nearly finished reviewing applications by five current MMJ operators.

Industry officials say that the state’s Cannabis Regulatory Commission could take up and approve those applications at its March 24 meeting, but it’s unclear how quickly sales would then be allowed to begin.

“We could have only five operators trying to meet the initial demand of the entire state,” said Rob DiPisa, co-chair of the cannabis law practice at Cole Schotz in New Jersey.

“It’s almost naive to think we aren’t going to run into some issues.”

While that’s been the case in other new adult-use markets as well, the New Jersey recreational marijuana law included provisions intended to prevent negative fallout for the state’s roughly 120,000 MMJ patients.

MJBizDaily projects that New Jersey recreational marijuana sales will ramp up from $625 million to $775 million in 2022 to more than $2 billion a year by 2025 or 2026.

Medical marijuana sales, meanwhile, are expected to peak by 2023 and then begin declining, as has been the trend in most adult-use states.

New Jersey legal cannabis delays have cannabis growers worried

New Jersey legal cannabis delays have cannabis growers worried

New Jersey cannabis growers worried about delays

Like many of New Jersey’s residents who voted to legalize weed for adult consumers, the state’s largest growers say they’ve been eager for the market to open.

In fact, they say they’re bursting at the seams with marijuana — and now, they’re worried they’ll have to take drastic measures if things don’t speed up.

“I hate to say this, but we may have to start destroying product, and we may have to start potentially letting people go because part of the anticipation is you ramp up your staffing, as well,” said James Leventis, an executive for Verano New Jersey, which has a cultivation and processing facility in Readington Township and three stores in Elizabeth, Lawrence Township and Neptune.

“You’re hired for a job with the idea that this market will develop,” said Leventis, the company’s vice president of Compliance & Government Affairs. “I’m very concerned we will continue to see these delays. It’s looking very stark right now.”

Just like any other organic material, cannabis starts to decompose after time. Even after it’s properly stored, after six months weed can get stale, loose its aroma and potency. In worst-case scenarios, the pot can get moldy.

For months, Verano along with fellow New Jersey Cannabis Trade Association members have been pressuring the state to allow them to sell to the public. The strategy has increased over the last month.

So what’s the hold up?

In no uncertain terms, the state agency created to govern the nascent cannabis industry — the Cannabis Regulatory Commission — has said these same companies demanding to open have yet to comply with stipulations in the marijuana law.

“The law has been in place since Feb. 22, 2021,” said Jeff Brown, the CRC’s executive director at last week’s public meeting. “It has noted clearly that alternative treatment centers [like Verano] need three things: municipal approval, relevant necessary supply to be able to serve their patient base, and operational capacity to continue to serve and even expand access.”

New Jersey Cannabis Regulatory Commission explains how cannabis licensing process will work

New Jersey Cannabis Regulatory Commission explains how cannabis licensing process will work

The new jersey cannabis regulatory commission explained the licensing process

The state’s Cannabis Regulatory Commission (CRC) will begin accepting applications for recreational cannabis businesses beginning on Dec. 15.

At today’s New Jersey State League of Municipalities Conference in Atlantic City, the chair and executive director of the CRC  discussed application and licensing rules and processes, including the types of businesses that will initially receive priority review of applications.

Before a packed conference room at the Atlantic City Convention Center, Dianna Houenou, CRC chair, said two types of recreational cannabis licenses will be given: conditional and annual. 

“The annual license is the bread and butter of what we typically think of when someone is applying for a license. It gives business owners the authority to operate the cannabis operation year round,” Houenou said.

The newer conditional license delivers more of a provisional approval from the CRC. This is a license the commission can issue to applicants even if they haven’t identified a property and still have to work with a municipality in order to get necessary approvals and processes in place.

“The conditional license is meant to give applicants extra time to get all of their ducks in a row. … They then have 120 days to meet the additional requirements for the annual license,” Houenou commented.

Whether conditional or annual, the types of cannabis licenses are classified into six operational groups: cultivation, manufacturing, wholesale, distribution, retail and delivery services. Additionally, testing labs also have to be licensed by the CRC.

Within these groups, businesses can have additional designations, which are more of a description of ownership and size of operations. 

According to Houenou, they are: microbusinesses (smaller operations, constrained by statute with respect to size, the amount of products handled, and the number of employees); social equity businesses (owned by people who have lived in economically disadvantaged areas or who have past convictions for cannabis offenses); diversely-owned businesses (minority-owned, woman-owned, or disabled veteran-owned businesses certified by the New Jersey Department of Treasury); and impact zone businesses (municipalities with a large population, high unemployment rate, or high numbers of crime or arrests for marijuana). 

The CRC will be giving priority review to conditional applications as well as social equity businesses, diverse and impact zone businesses.

Houenou explains: “If you look across the country, historically you can see how the need for property control has posed a barrier for a number of applicants looking to operate [a cannabis] business. … We decided to lessen that burden as much as we could. So, we are prioritizing conditional license applications ahead of annual license applications.”

According to Jeff Brown, CRC executive director, the commission is not limiting the licenses it is granting at the state level, although it has the authority to do so. For now, he says, the goal is to let the market grow and develop.

New Jersey Regulators Ban Nearly All Edible Cannabis Products

New Jersey Regulators Ban Nearly All Edible Cannabis Products

New Jersey regulators ban cannabis edibles

Nearly a year after passing a constitutional amendment to legalize cannabis, New Jersey has yet to open a single retail cannabis store. While the industry has yet to take off, that isn’t stopping regulators from preemptively banning one of the most popular cannabis products.

When it comes to the cannabis products that consumers want, flower remains king. Vaporizer pens and concentrates for dabbing have been slowly catching up with flower as consumers seek a quicker way to get the desired effects of cannabis without burning the plant itself.

However, cannabis edibles have also been gaining popularity. Avoiding the need for any sort of inhalation at all, edibles are great for consumers who don’t want to vape or smoke, but still want the effects of cannabis.

Cannabis beverages have seen the greatest growth since the beginning of 2020, when cannabis sales skyrocketed across the country due to the COVID-19 pandemic. Cannabis capsule products have also grown noticeably in popularity, showing that consumers are seeking a way to consume cannabis without, well, consuming traditional cannabis.

With such growth in the edible cannabis market, it would seem obvious to any potential industry that is about to open that edibles will be a high-demand product. Higher demand means higher profits, which is what any state is seeking when legalizing cannabis.

Unless you’re New Jersey.

Ban on almost all cannabis edibles

Despite having no functional legal cannabis industry to base their decision, regulators in charge of New Jersey’s recreational cannabis have decided to ban all forms of edible cannabis products except for lozenges. This means traditional products consumers would likely be familiar with — cookies, brownies, gummies, beverages — are all prohibited.

The reasoning behind the ban is the same used by many states when they first legalize; the children. Concern over edible products that might appeal to children is a consistent issue in the legal cannabis industry.

While other states passed new regulations requiring child-proof packaging and prohibiting edibles from being designed in a manner that would be appealing to kids (i.e. gummy bears, star-shaped cookies, etc.), New Jersey has decided to take a much more restrictive approach.

According to the new set of regulations passed by New Jersey cannabis regulators, “ingestible forms of cannabis… shall only include syrups, pills, tablets, capsules, and chewable forms.”

A growing and thriving grey market

Just because regulators are dragging their feet in getting a functional legal cannabis industry up and running doesn’t mean that the people aren’t already taking advantage of the new law. Seemingly taking a tip from the Washington D.C. playbook, New Jersey has begun to develop a thriving grey market industry.

While there is nowhere to legally buy or sell cannabis directly, there’s a workaround. Similar to how D.C.’s grey market operates, New Jersey currently has a gift/donation system in place to skirt the current regulations.

In this grey market, a consumer may find a delivery service online. One the website one might see several different cannabis products, or “packages” as they might be called. However that isn’t technically what the consumer is buying.

Instead, the cannabis product is simply a “gift” that is included with the purchase of another item on the website. This might be a sweatshirt, a t-shirt, or even something as small as a sticker. The price of the sticker may be around $40, which conveniently is the same price as an eighth of cannabis.

Within a couple hours, a delivery driver will be at the door with the sticker and the included gift, and bam you just “bought” legal cannabis in New Jersey. But just like D.C.’s grey market, the grey market in New Jersey is completely unregulated.

Although a legal cannabis company has to follow strict regulations on manufacturing and packaging, an unregulated market like that which is blooming in New Jersey has no such restrictions. So while regulators may think they are making progress by banning various forms of edible cannabis products, these new rules will be all but ignored by those operating in the grey market already.

In other words, the new regulations can’t possibly have any sort of impact until there is an actual legal industry to enforce them. As regulators take their time getting the legal cannabis industry up and operational in New Jersey, the grey market will continue to thrive only making it more complicated to get legitimate businesses licensed and running.

If you are interested in learning more about the New Jersey cannabis industry, need assistance with licensing, planning and implementation of your business plan, Greener Consulting Group can help you stay on top of the latest regulatory changes, fees and best practices for getting ahead of the competition when the industry takes off.