Image: Juan Di Nelta/Unsplash
Last week, a State Supreme Court Justice essentially froze the New York Office of Cannabis Management’s (OCM) program to license adult use retailers in response to a new lawsuit. According to The Center Square, OCM is blocked from issuing Conditional Adult Use Retail Dispensary (CAURD) licenses or processing existing ones until the lawsuit is resolved. The suit was filed by disabled military veterans who claim that, by prioritizing individuals with past cannabis convictions for CAURD licensing, OCM is in violation of New York’s law legalizing cannabis for adult use. At a hearing on the matter held on Friday, August 11, the court ruled that the temporary restraining order halting OCM’s licensing process would remain in place until at least August 25, when a new hearing will take place.
Also last week, New York saw its first cannabis “farmers market” open under the state’s recently-implemented Cannabis Growers Showcase (CGS) initiative. An OCM announcement stated, “The first Cannabis Growers Showcase will be hosted in New Paltz on Thursday, August 10” and is scheduled to be open every Thursday, Friday, and Saturday through the end of the year. The CGS initiative allows licensed growers and processors to partner with licensed retailers to set up events where consumers can purchase cannabis and cannabis products. The initiative is intended to help address the issue of a lack of permanent licensed retail storefronts and provide an outlet for producers who have been sitting on product grown and harvested last year.
For on-the-ground perspective on recent developments in New York, Cannabis Benchmarks spoke this week with a recent CAURD license recipient about the road ahead.
Nearly two years after it legalized adult use cannabis, New York State’s program for licensing retail storefronts appeared to finally be gaining some traction. In mid-July, New York’s Cannabis Control Board (CCB) and its Office of Cannabis Management (OCM) announced plans to expand and accelerate Conditional Adult Use Retail Dispensary (CAURD) licensing across the state. The agencies approved an additional 212 provisional CAURD licenses at that time, bringing the total number to 463, although currently only 23 have received their final licenses and are open for business.
A state press release noted that the CAURD initiative ensures that New York’s first legal adult use dispensaries “will be operated by individuals most impacted by the unjust enforcement of the prohibition of cannabis or nonprofit organizations whose services include support for the formerly incarcerated.” As noted above, however, the rollout has been temporarily suspended by a New York State Supreme Court judge, following a civil suit filed by service-disabled military veterans who also want to apply for those licenses.
Vladimir Bautista is the CEO and co-founder of the Happy Munkey cannabis brand in New York, which received its CAURD license in July. He is also sympathetic to the veterans’ lawsuit. “We understand that just like we were a marginalized group, so were the veterans,” he told Cannabis Benchmarks, “and everybody deserves their opportunity to try and operate and compete in this market.”
Bautista is a veteran of New York City’s rough-and-tumble cannabis industry. As part of the pre-legalization “legacy” business, he was arrested 22 times. His Happy Munkey brand is already popular with the city’s cannabis consumers largely due to word-of-mouth. He estimated it will take anywhere from six to eight months before his company can get their storefront operational.
One of the biggest challenges for a fledgling New York dispensary, Bautisa noted, is coping simultaneously with the city’s challenging real estate market and its cannabis regulations. “Real estate is so complex in New York, without cannabis,” he said. “When you add cannabis it gets more complex. The building [to be used for a cannabis retailer] cannot have a mortgage. You cannot be within a certain … footage of a church, of a school. You also can’t be within 1,000 feet of another dispensary. So that really puts you in a small pool of real estate. And then when you add the fact that you’re in the financial capital of the world, some landlords just flat-out don’t want it.”
Fortunately, Bautista added, his firm has been anticipating this challenge for some time. So far they’ve looked at around 80 properties as potential sites for their dispensary and are narrowing down their choices.
When asked about how licensed cannabis retailers can be price-competitive with their unlicensed competitors, Bautista said he expects New Yorkers to welcome retail price points for cannabis at legal dispensaries, even if those prices are higher than in the past. “To be honest, that should not be a barrier,” he said. “The consumers seem pretty thrilled about getting tested product,” referring to the fact that products sold in licensed stores must undergo required quality assurance and safety screenings.
Still, he expects the unlicensed market will continue despite legalization. “I come from the legacy market, we went from legacy to legal,” he noted, “so I can’t be a hypocrite and now try to look down on the legacy market. But I am against the 80% of the illegal stores that are operating in New York that are not legacy, that are opportunist carpetbaggers giving legacy a bad name. These are some of the same people who would call the cops on me when I was selling in front of their market. Now it’s the same people capitalizing off of this two-year gray market.”
While Bautista believes the New York cannabis industry will eventually become competitive in terms of quality with Colorado, California, and other long-established cannabis-cultivating states, he also expects a slow start for New York’s licensed dispensaries given the state’s current supply of cannabis flower. At this time, the legal supply of wholesale flower available to licensed retailers was – and is – grown outdoors and in greenhouses by cultivators who were previously registered in New York’s industrial hemp program.
“We expect to have access to indoor flower in 2024, so that will make it more interesting,” he said. “So right now it’s hard to compete. Once 2024 comes and we have access to indoor too, I think it will be competitive. Will it ever be cheaper than black market? No. But as long as it’s fairly comparable I’m confident that the market will keep on rising. We’re already seeing astronomical numbers here that we haven’t seen in many places, as far as sales. We’re just in our infancy.”
Looking further ahead, Bautista is optimistic that the quality of New York’s sun-grown flower will only increase. “I’m a firm believer that once the [cannabis] genetics get dialed in here, the growers get a lay of the weather and the land, we might grow better stuff here,” he said. “New York State has some of the best water in the world. Eventually we will have to be just as good or better.”
Due to New York’s regulations, cannabis cultivators are barred from also owning retail operations, and vice versa, which prohibits cannabis brands like Happy Munkey from pursuing white label contracts with licensed producers in the state. Those regulations aside, Bautista noted his company has been heavily involved in New York’s cannabis industry for years, including on the advocacy side.
“Our rolodex is pretty strong and … is tapped-in with everybody from the state, from the farmers to the processors to the other dispensary owners,” he noted. “We feel like we have a pretty good gauge on what’s happening in the market and who are the right people to talk to.”
A native New Yorker, Bautista is certain his city and state will eventually become world leaders in the cannabis sector. He also noted that New York is the first state in the U.S. to prioritize smaller players directly impacted by the War on Drugs for licensing. “For those criticizing the program: it’s not perfect, but you can’t let perfect get in the way of good,” he said. “And compared to what I’ve seen around the country, it’s pretty good. New York is the testing ground, the capital of the world. What happens here in the next five years will determine what happens elsewhere.”