New York’s adult-use cannabis industry has achieved significant milestones since its launch in December 2022, but behind the billion-dollar sales projections lies a troubling issue: product inversion. As regulators attempt to tighten control, questions about the integrity of the market and the struggles of local growers have come to the forefront.
New York Cannabis Sales Hit $1 Billion Milestone
The New York Office of Cannabis Management (OCM) announced this week that cumulative adult-use cannabis sales are expected to surpass $1 billion by the end of 2024. Retail dispensaries currently generate about $26 million weekly, with 261 retail locations now serving adult customers statewide.
Policy Director John Kagia highlighted the achievements during the recent Cannabis Control Board (CCB) meeting. “It’s a billion dollars of cannabis that is not being sold in the unregulated market,” Kagia emphasized, citing $100 million in state tax revenue generated over two years.
However, despite these promising numbers, challenges persist. Licensed cultivators and processors are reportedly struggling, even as retail sales climb.
Local Growers Grapple With Oversupply and Limited Retail
CCB Board Member Dr. Jennifer Gilbert Jenkins raised a critical point: how can growers and processors be struggling while retail sales soar? During the meeting, she noted hearing from stakeholders about unsold inventory and dwindling profits.
New York’s initial “Seeding Opportunity Initiative” granted hemp farmers the exclusive chance to grow cannabis for the adult-use market in 2022. Yet, the sluggish rollout of retail dispensaries left many of these farmers with unsellable crops, leading to financial losses and widespread frustration.
Kagia acknowledged the issue but attributed it partly to the pace of new dispensary openings. “As we get more stores open, we believe that sell-through is going to happen at an increasingly quickened pace,” he said.
Gilbert Jenkins, however, pushed back, arguing that the problem might not be limited to retail expansion. “How are we validating that the products in stores are actually coming from New York State?” she asked.
The ‘Dirty Little Secret’ of Product Inversion
One of the most controversial revelations from the meeting was Gilbert Jenkins’ assertion that product inversion—where cannabis products from out of state infiltrate the licensed market—is an open secret in the industry.
The infiltration of out-of-state cannabis undermines New York growers, who face stiff competition from cheaper products illegally entering the market. The problem, according to Jenkins, has not received adequate enforcement attention.
“Are we truly selling New York products?” she asked. Her concerns echo past reports of California cannabis flooding unlicensed dispensaries in New York. But now, there are allegations that similar practices might be affecting state-licensed facilities.
Kagia reassured the board that the OCM is committed to addressing these claims. “We take any charges, allegations or claims of inversion extremely seriously,” he said.
Tracking Inventory: The Seed-to-Sale System
A key issue at the heart of the debate is New York’s incomplete seed-to-sale tracking system. The technology is designed to monitor cannabis from cultivation to retail, ensuring compliance and safety.
Currently, New York’s cannabis industry operates with fragmented reporting streams, making it difficult to track product origins and validate claims of inversion. Acting Executive Director Felicia Reid announced steps to integrate BioTrack THC as the state’s tracking system, requiring licensees to comply by Jan. 17.
The rollout includes:
- Integration of BioTrack THC: An API will allow real-time data transmission to regulators.
- Cost Relief for Producers: The state is covering the first year of tracking tag costs for cultivators and processors.
Reid underscored the importance of the system. “Tracking, monitoring, and knowing what’s in our cannabis ecosystem is crucial,” she said.
Striking a Balance: Local Support vs. Consumer Demand
Despite the challenges, New York’s cannabis market has shown growth and resilience. Weekly sales figures indicate increasing consumer demand, but systemic issues persist. The struggles of local growers and processors point to the need for stronger regulatory enforcement and better market alignment.
Jenkins’ insistence on focusing enforcement efforts to protect New York producers highlights the tension between market expansion and sustainability.
The OCM’s response reflects optimism but leaves unanswered questions about the pace and effectiveness of the measures in place. “This market was intended to be for New York-grown, New York-bred product,” Kagia said, reaffirming the state’s commitment.
For now, the success of New York’s cannabis industry hinges on striking a delicate balance between ensuring product integrity and meeting consumer demand. The rollout of the seed-to-sale system will be a pivotal step toward restoring confidence in a market that has yet to reach its full potential.
David Johnson is a respected writer known for his expertise in crafting compelling articles about cannabis. With a passion for exploring the intersection of cannabis, health, and wellness, he sheds light on the therapeutic properties and potential uses of this versatile plant. David’s in-depth analysis and thought-provoking commentary offer readers a deeper understanding of the evolving landscape of cannabis legislation, consumption methods, and industry trends.
