Most of the industry was waiting with bated breath for the Empire State to officially start its adult-use market. After all, New York represents one of the biggest previously untapped opportunities for legal cannabis in the country. The launch was fraught with regulatory delays and other challenges, and while it took over two years from legalization to launch sales, New York is still set to be the biggest single new market in the world in 2023.
New York’s medical market performance
Back in 2014, former Governor Cuomo signed a law making New York the twenty-third state to legalize medical cannabis. Sales launched in eight dispensaries open across the state in early 2016, but with a limited licensing program and product restrictions prohibiting smokable flower and concentrates, the state saw sluggish growth. New York’s program saw reforms over time, including the addition of smokable flower and other form factors, and an increase in the number of permitted retailers from twenty to forty.
Based on an analysis of New York sales tax data, the state’s medical program saw an estimated $155 million in medical sales for January-November 2022. BDSA Retail Sales Tracking data shows that medical sales totaled ~$14 million in October 2022, falling slightly to ~$12 million in November. As of January 1, 2023, New York’s medical program had 122,805 registered patients, a decrease from ~150,000 reported patients in October 2021.
New York cannabis consumer trends
Consumer participation has skyrocketed in New York since the legalization of adult-use. Per BDSA Consumer Insights data, the share of those who claim to be past six-month cannabis consumers grew from 22 percent in spring 2020 to 45 percent in spring 2022. This rate of consumer participation growth is much faster than we have seen in other adult-use markets. California, which launched adult-use in January 2018, saw its consumer participation rate grow at a slower rate, from 30 percent in spring 2018 to 45 percent in spring 2021.
When we look at consumer behavior, New Yorkers mostly fall in line with what we expect for consumers in adult-use markets generally. Per BDSA’s Spring 2022 Consumer Insights data, 69 percent of consumers in New York claim to be daily consumers, which is comparable to the 70 percent of consumers across all adult-use markets who claim daily consumption.
New York consumers also describe their consumption similarly to the aggregate of adult-use consumers. In New York, 69 percent describe their cannabis use as recreational, 58 percent as medical, and 42 percent as “quality of life” consumption. In the aggregate of adult-use markets, 72 percent describe use as recreational, 60 percent as medical, and 42 percent as “quality of life.”
New York market brand and product category dynamics
In November 2022, BDSA Retail Sales Tracking show that New York had thirty-four brands active in the medical market, with ~857 distinct product SKUs, making the New York market even less mature than the neighboring New Jersey market, which was home to ~2,282 distinct SKUs across seventy different brands in the same time period.
While the New York medical market may be underdeveloped from a brand and product perspective, their product category mix more closely resembles that of a mature adult-use market. In November 2022, flower brought in ~35 percent of legal medical dollar sales, while concentrates made up a ~35 percent share, and edibles made up a ~20 percent share, while pre-roll brought in ~3 percent and sublinguals ~4 percent. This product mix is roughly in line with what is seen in mature adult-use markets like Colorado and California.
The adult-use market is facing an uphill battle in New York. The gray market will continue to be an issue until availability of legal adult-use retailers is widespread. However, encouraging signs show that the situation in the New York market will improve. New York City has continued to crack down on illicit operators, and New York state is planning to allow adult-use delivery, which will be especially important to cut into the share of sales being eaten up by illicit retailers, especially in New York City where a large portion of consumers have come to expect delivery.
Even with all the troubles the legal market is facing, the state’s ~15 million 21+ adults make New York the single biggest new market in the world in 2023, and one of the top growth opportunities for the legal cannabis industry out to 2026. Additionally, the repeated delays to the start of adult-use sales may present an opportunity for the medical cannabis program to hold on to a higher share of legal sales.
