A report authored last month by MPG Consulting suggests that if New York state does not get cannabis businesses licensed soon, it could cost the state $2.6 billion in related tax revenues over eight years. The report was prepared by the firm for multistate cannabis operator Acreage Holdings.
So far, New York has just 36 dispensaries projected to open this year and has so far issued more than 280 conditional cultivation licenses to existing hemp businesses in the state.
“New York is unnecessarily creating a retail bottleneck,” the report says, “slowing illicit market absorption.”
The report suggests that the slow rollout of legal cannabusinesses in the state will lead to unlicensed market operators capturing $7.2 billion in revenue between 2023 and 2030 and cost 20,600 direct cannabis and ancillary jobs per year.
“Licensing is increasingly becoming a chokepoint,” the report says, noting that “building and operating compliant retail and cultivation operations takes time, money, and experience.”
MPG says that compliant businesses need $1 million to $5 million in initial capital including property acquisition, facility improvements, operating procedure development, and initial inventory sourcing. Businesses also require nine months to a year for dispensary entitlements, inspections, permitting, and hiring.
The report suggests that “there needs to be 900 retail outlets across the state to provide sufficient market access” and that compliant cultivation facilities with between 20,000 to 50,000 square feet of canopy require $5 million to $20 million in initial capital. Additionally, it would take cultivation businesses 18 months to two years from facility development to first finished product, according to the report.
“MPG estimates indicate 6 million sq. ft. of canopy needed to meet demand. The state has committed $50 million towards industry infrastructure development, with an unfunded objective of raising an additional $150 million from investors. That may be enough for just 20 dispensaries.” — MPG Consulting, “New York Illicit Cannabis Market Absorption Analysis,” Feb. 12, 2023
The report suggests that if current registered medical cannabis operators in the state are allowed to convert to adult-use sales, illicit sales will be absorbed fastest. In that scenario, from 2023-2030, regulated sales would comprise $35.4 billion of the state market, with illicit sales comprising $9.9 billion of the market. The analysis suggests another scenario would be to phase in registered operators, which would lead to a $30.3 billion regulated market and a $15 billion unregulated market. Were the state to exclude registered operators entirely, illicit sales would comprise $17.1 billion of the market, while regulated sales would comprise $28.2 billion.
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