Is NJ legal Weed's explosive growth slowing down? Inside the 'tug of war' over Cannabis

Is NJ legal Weed's explosive growth slowing down? Inside the 'tug of war' over Cannabis

When it comes to the roaring success — or critical failure — of the New Jersey cannabis industry, fingers are pointing in every direction.

The dispensary operators. The regulators. The legislators. The black market.

But in reality?

"I don't think this is really a concern over whether the market is growing, if it's staying flat or if it's shrinking," said Paul Seaborn, a University of Virginia management professor who has researched and taught the business of cannabis in both the United States and Canada. "It's just a discussion over the pace of growth, and there's no one rate that will please everyone.

"So there will always be this tug-of-war over acceleration."

About a year and a half after New Jersey first started selling marijuana to recreational customers, it’s just too soon to tell how big the market might get. Bullish forecasters expect the market to cross the billion-dollar mark in the next few months, while bearish critics blame government bureaucracy for stagnating growth.

Last week, the New Jersey Cannabis Trade Association issued a scathing report accusing the commission of causing a “doom loop,” with the New Jersey Cannabis Regulatory Commission not issuing licenses fast enough to meet demand and the state not doing enough to crack down on synthetic cannabinoid products, such as delta-8, or "gray market" weed gifting companies.

"The anemic pace of licensing operators has suffocated the legal market ... leaving aspiring cannabis entrepreneurs unable to open their operations," the association's report states. "Consequently, potential tax revenue that would greatly benefit the state is lost as it continues to flow through the illicit market."

In a statement, Cannabis Regulatory Commission Executive Director Jeff Brown called for the association's membership, which includes dispensary and cultivation businesses, to "heed their own call to action" and lower prices, which are among the highest in the country.

Reason for optimism

Now matter how you look at it, New Jersey is selling a lot of legal weed – more and more every quarter.

According to statistics from the Cannabis Regulatory Commission, more than $635 million of legal weed was sold to recreational customers between April 2022 and June 2023, along with nearly $238 million in medical marijuana sales.

More than $160.2 million of recreational cannabis was sold in the second quarter of 2023, nearly double the sales in the second quarter of 2022. Sales have increased 37% over the last four quarters.

At least partially contributing to that growth is the — relatively — skyrocketing number of locations opening every month.

As of Sept. 1, recreational customers could purchase legal weed at 46 different New Jersey dispensaries, compared to just 18 one year ago. Only 12 opened up to recreational customers on the first day of sales last April.

Since June, 16 new dispensaries opened to recreational customers – including 11 locations in August alone.

And more could be on the way in new places: In other legal weed states, many towns that initially opt-out of allowing cannabis businesses opt back in a few years later. In Colorado, for example, the number of municipalities and counties issuing recreational cannabis licenses doubled in four years.

It’s still too early for that kind of reversal in New Jersey, but there have been a few signs. Last month, Waretown amended its cannabis ordinances to allow the medical-only Bloc dispensary on Route 9 begin selling to recreational customers (the dispensary still needs Cannabis Regulatory Commission approval).

And other municipalities, like Linden and East Rutherford, have gone from banning all cannabis businesses to allowing non-retail uses, like cultivation and manufacturing.

Slowing growth

While cannabis sales have continued to increase, the rate of growth has slowed – from 46% to 14% to under 10% the last quarter, according to the Cannabis Regulatory Commission’s statistics.

And while the commission has issued nearly 1,400 licenses to all kinds of cannabis businesses, only 246 operating permits have been issued. More than 600 applicants are still being reviewed by the commission's licensing and compliance departments, and another 349 are waiting for approval to convert their conditional licenses into full, annual ones.

In its report, the New Jersey Cannabis Trade Association argues that New Jersey should be bringing in millions more in tax revenue when compared to other states, especially Arizona, New Mexico and Montana.

Arizona raised nearly $224 million last year, according to the association, while Montana raised $42 million and New Mexico raised nearly $37 million, despite all three states having smaller populations than New Jersey.

But pitting New Jersey up against other states may not be a fair fight.

New Jersey only charges a $1.52 per ounce social equity excise fee, levied on cultivators and passed onto consumers, and the 6.625% sales tax.

But all three states — and 15 of all 23 legal weed states — charge double-digit excise fees, between 12% and 20% per retail purchase.

"New Jersey’s innovative law calls for the Social Equity Excise Fee to increase as prices fall. This ensures low taxes at the outset of the market but will lead to double or triple state revenue in the future, increasing investments in communities disproportionately impacted by cannabis prohibition," Brown said in a statement.

Nearly every state with legal weed also had robust medical marijuana programs leading up to recreational sales. Arizona allowed 73 medical marijuana dispensaries to begin recreational sales in January 2021, just two months after voters approved legal weed on Election Day 2020.

New Jersey had just 32 medical marijuana dispensaries by the time recreational sales began in April 2022.

"How mature and widespread the medical market is before adult use legalization has a huge impact on ramp-up time and the smooth transition into adult use," said Seaborn, the University of Virginia management professor.

How we got here

The issues in New Jersey started before the Cannabis Regulatory Commission was even created. Former Gov. Chris Christie, a staunch marijuana legalization opponent, put strict limitations on the medical marijuana program that limited the state to just six dispensaries.

And even though Gov. Phil Murphy ran on a marijuana legalization platform, a lawsuit by losing applicants led to an injunction that prohibited the state from issuing new licenses or winning applicants from opening up shop for nearly two years until the case was resolved in 2021.

Seaborn compared New Jersey's foray into legal weed with Maryland. In that state, medical marijuana businesses faced years of bureaucratic hurdles before dispensaries opened in 2017. And despite clamoring by activists, full recreational marijuana legalization didn't occur until legislators passed a law in 2023.

The result? On July 1, Maryland began recreational marijuana sales at 101 dispensaries, nearly double the number of both recreational and medical dispensaries in New Jersey. Maryland saw $87 million in recreational cannabis sales in its first month — more than New Jersey realized in its first quarter of sales.

"People in Maryland complained that it took so long to switch over (to recreational marijuana)," Seaborn said. "But when it takes that long, the medical market is so robust. And then, you can ramp up much faster."

For more Cannabis News like this, circle back to!


420 Intel News | 420 Advertising | Cannabis Business News | Medical Marijuana News | Recreational Marijuana News

Region: New Jersey

Disqus content widget