Green projections

The business will undoubtedly look different as adult-use takes hold

Gabrielle Saulsbery//January 11, 2021//

Green projections

The business will undoubtedly look different as adult-use takes hold

Gabrielle Saulsbery//January 11, 2021//

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Young leaves of cannabis plant. Top view. Nature background.

Gov. Phil Murphy is expected to sign the New Jersey Cannabis Regulatory, Enforcement Assistance and Marketplace Modernization Act during the week of Jan. 11, but industry representatives believe adult use sales are months away. Timeline projections vary. If the yet-to-be-fully-seated Cannabis Regulatory Commission makes quick work of establishing the regulations by the end of the third quarter, some aspects of business can be up and running in the fourth quarter, said New Jersey CannaBusiness Association President Edmund DeVeaux. Rules must be drafted and then are subject to a period of public comment before being promulgated.

“If nothing else, dispensaries, and maybe the lounges, could be going,” he said.

Patrik Jonsson, regional president of the northeast at Curaleaf, said the transition is unlikely to happen before late summer or early fall.

Kris Krane of 4Front Ventures provided a more conservative estimate that New Jersey’s best-case scenario is opening the market in early 2022, contingent upon existing operators being allowed to start adult use sales. New Jerseyans might even have to wait until early 2023, he said, pointing to Maine, which had its first legal sales late last year after legalizing in 2016.

TerrAscend CEO Jason Ackerman told NJBIZ in November that it takes regulatory commissions six to nine months to create the regulations around adult use cannabis. The CREAMM Act gives the CRC 180 days, about six months, to nail down the industry framework.

DeVeaux predicts that “big box multi-state operators” and cannabis Wall Street will take advantage of New Jersey’s focus on diversity with predatory lending, citing a bill backed by a Maryland-based MSO that would allow investors to back up to 10 women, minority, or veteran-owned licenses. As Senate Bill 2875, which has been referred to the Assembly Health Committee, doesn’t permit these investors – which he argues could be MSOs – to claim ownership of the license, DeVeaux said it allows them to avoid paying their fair share of New Jersey business taxes while also collecting interest on the loans and revenue derived as partnership shares. The money made by those investors won’t stay in or be reinvested in New Jersey, he said.

“This is what we talk about what’s available to the industry by virtue of the law, versus what will be allowed via the CRC. There’s nothing in [the legislation] about how to protect them from predatory lending. The lender/backer says ‘we have it in the bill that the CRC oversees the contract [between the investor and the investee]’ and my response to that is, that’s not their job,” DeVeaux said. “They don’t have professionals that do forensic accounting. We didn’t create the CRC to oversee your financial transactions. We created it to create regulation.”

The state’s canopy, or the number of plants ATCs are growing, will need to increase to fulfill the needs of the growing medical market and the new adult use market. Jonsson told NJBIZ that Curaleaf’s canopy will triple with the planned expansion of cultivation capacity at a new facility in Winslow township.

In light of a court ruling in a challenge to the 2018 Request for Applications process and the ongoing litigation
regarding the 2019 RFA, DeVeaux expects the state to revamp the application process for medical cannabis licenses.

“You have nearly 200 applicants sitting waiting to hear something from 2019. These are people that spend hundreds of thousands of dollars individually to put in an application and they want to hear something about the work they did,” DeVeaux said. “I’d like to believe something happens for them and those 24 licenses get issued somehow.”

Once addressed—which is perhaps easier said than done, as the 2019 RFA process has been halted by a court ordered stay since last January— the medical market could expand ahead of the first days of the adult use market and would help stave off potential product shortages.

New facilities will add jobs throughout the state, including two Curaleaf dispensaries and at least one TerrAscend dispensary. Harmony has two dispensaries planned in Hoboken and Jersey City. Curaleaf alone will add 125 new jobs in the state.

Brian Sickora, New Jersey general manager for Acreage Holdings’ dispensary banner The Botanist which has two south Jersey locations after its acquisition of original ATC Compassionate Care Foundation, projected that New Jersey will be a leader in offering insurance coverage for medicinal cannabis this year.

“In 2021, the hope is that New Jersey will lead the nation in understanding the high cost and value of cannabis as medicine and supporting the immediate need for affordability with patients seeking cannabis medicinally,” Sickora said. “Currently, there are no states in our country that offer insurance for medicinal cannabis, and New Jersey has the ability to change and lead this area in 2021.”

With the opening and growth of the adult use market will come greater interest and a greater need for education on how to operate in the industry, Cannabis Advisory Group founder Jacqueline Ferraro said. CAG has already announced a five-part educational webinar series covering topics of employment, zoning, taxation and more. “The goal must be to give the adult-use industry the tools it needs to succeed, while maintaining a vibrant medicinal market and, crucially, preserving the public’s trust,” Ferraro said.

In a series of predictions published on the financial web site Seeking Alpha, Entourage Effect Capital Managing Partner Matt Hawkins forecast further consolidation in the cannabis industry in 2021. Cannabis-related companies completed or announced 124 deals in the U.S. or Canada from January to July 2020, dwarfed by the totals from that period the previous two years, according to S&P Global Market Intelligence. But while 2020 was a bad year for other businesses, it was a fine year for cannabis—considered an essential business in New Jersey and beyond—and Hawkins wrote that that should create “a renewed appetite for M&A deals in 2021 – especially in the newly legal or soon-to-be-legal states” like New Jersey.

According to data published by cannabis website Leafly based on state tax and revenue data, nationwide sales of medical and adult-use marijuana increased by 67% over 2019. Though a spokesperson for the New Jersey Department of Treasury did not immediately respond to an information request, Leafly named New Jersey among nine states where cannabis sales doubled in 2020. Now that legal adult use cannabis is imminent, industry publication Marijuana Business Daily projected that the state’s market would reach between $850 million and $950 million in sales by 2024, and that it will set off regional changes affecting Pennsylvania, New York, Connecticut and Rhode Island, all of which have been considering adult use cannabis.

Jonsson echoed Marijuana Business’ prediction. “New Jersey’s adult use legislation has inspired the momentum we are starting to see across the East Coast, with New York announcing plans for legalization, and Connecticut, Rhode Island and Pennsylvania believed to also introduce legislation this year,” he said. “The potential for New York adult-use alone, a state with 20 million residents, would represent another game changing catalyst for Curaleaf and the industry. … In addition, on the federal level, the recent developments in the Senate could also be a game changer for the industry, and we support a measured approach to rolling out legislation that ends the state/federal conflict.”