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At long last, New York has legalized cannabis.
Text of the bill was released in late March. State lawmakers quickly passed the bill and Gov. Andrew Cuomo signed the legislation into law on March 31. New York is now one of the latest states to legalize cannabis, following in the footsteps of its neighbor New Jersey.
The legislation focuses heavily on social equity but there’s no mistake that the 10 companies that entered the state as medical operators will have a big leg up as sales begin.
Current medical companies in New York will be allowed to transition into the state’s recreational market. They’ll also be allowed to stay vertically integrated, meaning they control every part of the supply chain from seed to storefront.
None of the incoming players into New York’s market — aside from a small class of operators called “micro-businesses” — will be able to do the same according to the language in the law, giving incumbents room to supply the market, which will lead to bigger market share initially.
CEOs from companies Curaleaf, Green Thumb Industries, Columbia Care, and Ascend Wellness Holdings told Insider they’re generally happy with the framework outlined under the legislation and are preparing to ramp up cultivation and infrastructure plans to be able to meet the demand from New York’s 19 million population.
They added that because they’re able to cultivate, distribute, and sell cannabis products in their own retail stores, they’re building out ways to be able to take advantage of their positions in supplying the larger market and other players as sales begin in the state.
Companies say they’re waiting patiently as the more regulations around cultivation caps, dispensary location requirements, and other details come to light in the coming months. The law creates an Office of Cannabis Management and a Cannabis Control Board to regulate the industry.
“New York could be one of the most compelling markets in the US if not in the world,” Joseph Bayern, CEO of Curaleaf, told Insider. “We’re very pleased with what we’ve seen so far.”
Curaleaf says it wants to see clarity around cultivation capacity
Bayern says that the company is looking forward to seeing more clarity around canopy capacity, that is the full cultivation area that each operator can use to grow cannabis plants. This is especially important as the current companies are the only ones as of right now that have cultivation capacity in New York.
“We believe there’s going to be tremendous demand over the next few years,” he added. “It takes time to get the supply chain up and running. By the time you build out cultivation sites and get flower through the process, it could be up to two years to build out the site.”
Because of this, Bayern says he’s looking forward to getting clarity on what the limits for cultivation might look like, so that Curaleaf can begin to “invest appropriately.”
Bayern says Curaleaf currently has around 70,000 square feet of cultivation and that they’re looking at doubling their current footprint. He added that the company is also working to build out products that they can distributed through multiple channels.
“We expect to be able to sell wholesale, retail and even direct-to-consumer and sell through the distribution network we’re going to be creating, which will benefit a lot of different parties in the marketplace,” he said.
Bayern says that it wouldn’t be unrealistic to think that Curaleaf’s revenue in New York could be split evenly between wholesale and retail sales. “It could even be higher wholesale in the long term,” he said.
Green Thumb Industries says it’s ready to invest big in New York
Green Thumb Industries CEO Ben Kovler told Insider that as more rules and regulations come to light, the company is planning a “massive capital expenditure project” to prepare for New York’s recreational market.
Like Curaleaf, Green Thumb Industries is also planning to take full advantage of their position as a player that can both cultivate as well as sell their own products.
Kovler says that though New York is a small part of Green Thumb Industries’ business today, he believes in a few years time, that will change — in large part due to the sheer population in the state.
“Our core competency will be making branded cannabis products,” Kovler said, adding that his company’s thesis in New York will be to meet consumers where they are, whether they first see the products in Green Thumb Industries’ own stores or in somebody else’s.
“We don’t think our store should only stock our products. We’ll run like a bar. We want to stock everybody’s booze and let the consumer decide what they want,” he said, adding that he wants Green Thumb Industries’ products to exist in virtually every dispensary in the state of New York.
“We don’t want to get ahead of ourselves because we’re not positive about all the details of the rules,” Kovler added. “I don’t want to be too forward on that sort of stuff, but that’s essentially the plan.”
The cannabis industry is watching with excitement, but New York based companies will have a strong advantage
Matt Hawkins, managing partner at Entourage Effect Capital, a cannabis investment firm that invests in multiple facets of the cannabis industry, including cultivation, retail, and technology, says that the excitement around New York legalization is “palpable across the industry.”
“Everybody’s very excited,” he said, but added that it will take time before we see which sectors within cannabis will benefit most from New York’s new market.
Hawkins said that he and others in the industry do wish that sales would happen faster than current state projections, but that this isn’t dampening the excitement over the sheer size of the potential market in New York.
“We’d be foolish not to want to start working on having a big piece of that market right away,” he added.
Jeffrey Schultz, partner at cannabis-focused law firm Feuerstein Kulick told Insider he thinks the bill is a “fair attempt at an equitable industry” where no one operator will be able to control the entirety of the market.
Schultz says that while he thinks some of his clients will be very happy with the bill, others will be less so — it’ll depend on where they are currently.
The current operators in New York are probably happy with the bill, Schultz said, though they may have wanted more retail locations. Companies eyeing the new market from the outside, however, will now have to make a difficult decision about how they want to enter the market, according to Schultz.
“Are they going to be in the cultivation business? Are they going to be in retail? That’s unfortunately a decision that will have to be made at the outset for these operators,” he said. “Many operators who don’t currently operate in New York, who would like to get into New York, don’t have the chance to be vertically integrated like the incumbents and now have to make that choice.”
Columbia Care says clear guidance will be necessary to encourage companies to invest in the state
Columbia Care SVP of Corporate Affairs Adam Goers told Insider that the legislation is a great start, but that there is still “a lot of work to be done.”
“I think it’s really imperative that New York really encourages companies like Columbia Care to invest and invest significantly here for economic development potential but also for the fact that New York is going to need to supply this industry,” Goers said.
Goers added that while Columbia Care is currently making investments to expand its cultivation capacity in Rochester, New York and looking at possible ways to work with hemp operators, he hopes clear guidance will come from regulators soon about exactly how current operators should prepare for the market.
Goers added that as a medical operator, Columbia Care is also excited about the bill’s effects on the state’s medical industry.
The bill would expand the list of qualifying medical conditions for medical cannabis as well as expand product options for patients. Flower products, which are not allowed under New York’s medical program, may be permitted under the expansions.
Ascend Wellness Holdings’ CEO said he plans to expand cultivation to the maximum capacity laid out by the state
About a month before New York officially legalized adult-use, then-private multistate operator Ascend Wellness Holdings made an investment into MedMen’s New York assets for $73 million. Ascend now holds 86.7% stake in MedMen’s New York assets and has an option to acquire the rest.
MedMen has struggled to turn its operations around in recent years and analysts had pointed to the possibility of such a sale as the company looks for ways to stabilize its balance sheets.
Ascend CEO Abner Kurtin told Insider in a May interview prior to the company’s public debut on the Canadian Securities Exchange that the company’s strategy is to target distressed assets, like MedMen’s, to get the best deals and reap the best opportunities even before lawmakers officially legalize cannabis in the state.
There are some risks to doing this, Kurtin said, “but it’s a tremendous opportunity.”
Kurtin says that New York may become one of Ascend’s best economic opportunities and added that though regulations are still forthcoming, he expects to build out cultivation capacity to the maximum limit that the New York regulators allow.
He added that this kind of expansion is necessary to output enough products to Ascend’s own stores as well as to other retailers in the state.
“Indications are that the state’s talking about 150,000 foot canopy cap,” he said. “If that’s the case, we would build right up to the canopy cap.”
Ascend is already moving ahead with the buildout project, but Kurtin added that the company still needs to get more details from the state in order to ensure a fast roll out of products onto the market.
“If the state doesn’t get product, then there’s nothing to sell,” he said.
This article was initially published on March 31 and has been updated with an interview with Ascend CEO Abner Kurtin.