New York Cannabis is a legal market in limbo, sustained by community events
No matter how good the intentions, there are always hiccups with the rollout of new cannabis markets like New York.
Elected officials simply don’t know how to get it right the first time. And they don’t engage the people who do have that knowledge to advise them. They may have respect for legacy operators and activists but they don’t have trust with them. This is a big problem for everyone.
“New York’s ambitious regulated cannabis market is filled with uncertainty,” said Jacobi Holland, co-founder of On The Revel. “The program is under a lot of pressure to start getting more wins on the board quickly. These CAURD [justice-impacted] licensees are effectively in a joint venture with the state—trusting that they’ll receive wise cannabis business advice, adequate funding, and necessary resources through the whole process. Unfortunately, they may be falling short on all three. And the losers in this case become the licensees on both sides of the supply chain.”
On The Revel is a New York City-based company that organizes a collection of curated educational networking events, like their popular Revelry Buyers’ Club and Cannabis Summit + Block Party. They’ve been instrumental in bringing the cannabis community together to create space for entrepreneurs to network, to learn how to get products in the hands of consumers, and to navigate legalization in New York. According to Holland, the problems are not a lack of good weed in the supply chain.
“At our Buyers’ Club in February, we had 60 cultivators in the room and it’s clear that despite all the challenges there are some great products coming out of New York,” he said. “There are some fire products right now and they will only get better.”
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Since 2016, On The Revel has produced 16 events focused on supporting New York cannabis, and their community is growing every year. Participants have much to say about the quality of these events. “The Buyers’ Club curates the best selection of cultivators throughout the state in one room, making it easier for licensed retailers to build meaningful partnerships and curate the perfect product selections,” said Kheperah Kearse, Co-Founder of Kush & Keme. “My experience at the first event provided a unique opportunity to preview brands in a way that I would not have gained simply by looking through a directory, and to discover new products I might not have considered otherwise. With all of the challenges new CAURD licensees face, Revelry Buyers' Club is a critical event for this industry, making it easier for all of us to do business.”
With a lack of legal retail shops opened in the state, On The Revel continues to fill in the gaps with another successful Buyers’ Club just last week, and a massive block party slated for August 26th, 2023, at Restoration Plaza in Brooklyn. The retail outlets in New York are the most difficult to stand up. The state has overpromised and under-delivered. There’s a lack of viable locations and funding from DASNY (the entity chosen by the state to provide these resources), more than a few broken promises, and predatory deals.
Holland has strong feelings about all of this. “Before any CAURD licensees take any deals or personally guarantee anything, I strongly advise they consult with someone with a lot of cannabis retail experience,” said Holland. “The last thing this industry needs is for an entrepreneur who has been sold the dream for generational wealth to end up with crippling generational debt.”
It takes roughly $1-2 million to open a cannabis dispensary just about anywhere, and New York is an expensive place. Real estate acquisition and buildout costs are high. New York regulatory requirements for everything from ownership to securing the facility are burdensome and hard to comply with, which raises costs for lawyers and other compliance professionals. The new rules that dropped in June are over 300 pages long, written in bureaucratic language that’s difficult for most laypeople to understand.
And the costs keep coming for retail operators once they do manage to open for business. Product inventory is a never ending, toll retailers will have to shoulder in order to compete with underground supply chains. The selection has to be large and high quality enough to bring people off the streets and into the store.
Retailers will also need money to operate for at least a year so that the business can find its legs and grow enough to sustain operations. When considering all these expenses, one can understand why this is so hard to get done. The cost is enormous and the capital markets for cannabis have dried up—DASNY tried to raise money from investors at the exact wrong time. Market conditions are bad in the entire industry right now and investors are fleeing, not writing checks. This makes for an untenable situation in New York.
The hope of many is that a decent amount of the legal cannabis businesses in the state will be “thriving with staying power.” But Holland warned me that this would be a best-case scenario. “I worry most about the inclusion of the justice-involved entrepreneurs,” he said. “Worst case—a majority of the CAURD licensees don’t get operational or are treading water.”
The off-the-charts optimism that was felt two years ago when adult-use legalization was announced has changed into something more nuanced with a mix of exuberance, frustration, and worry. Building a business from the ground up is hard in the best of circumstances. While hope is not a good business strategy for anyone, with a bit more sage advice from experienced cannabis operators, it’s a good way for a community to bond together and try to figure things out.
