Revenue:

Speaking of players, New Jersey had only 23 total brands in the pre-roll category for this period, with merely two added in Q4. So yeah, 9.5% growth doesn’t sound like a meaningful number here. Put another way, only four brand names are visible on the packaging of the top 15 pre-roll products. The total number of products also dropped by 19 to 758 against P3M. Why is that? We assume licensing issues, coupled with supply-side factors, were the major contributors to the shallow bench (ie., lack of brands). As mentioned above and as everyone saw with Curaleaf early this year, the state’s regulators are…still working things out. We also doubt these barriers will last long.

It seems New Jersey didn’t get the memo on the explosion of infused pre-rolls. As a percentage of pre-rolls, infused options hold the smallest category share we’ve seen in any market: 7%. Of the top 15 pre-roll products, two are infused. For context, 60% of California’s pre-roll revenue came from infused pre-rolls in Q3. Infused pre-rolls still gobbled up an extra 2.1% share versus P3M, but dang, there’s so much potential there. This subcategory is where the smart money (and really, anyone with a license and the ability to produce these products), should go. New Jersey isn’t some weird backwater who’s consumers don’t know weed. When more infused options hit the market, they’ll gravitate that way, just like they have in every other market.

It might not have felt quick and easy to them, but it was certainly a shorter pathway.

It’s in line with what you’ve seen in other highly regulated states like Massachusetts. I actually think the state regulators have done a really good job in making it an approachable licensing process. There are certainly a lot of requirements, but their job is to make sure that they have a really good and compliant marketplace, so from that perspective I think they’ve done a good job. Whenever you’ve got a new regulatory body like this they’ve got to staff up, deal with the glut of applications they received when they first opened the portal, and process requests in the way they committed to doing with various priority statuses. The machine seems to be cranking along well on the regulator’s side. They’re responsive, and we have questions, they answer quickly and clearly.

The high population density in New Jersey is a unique factor and there’s definitely enthusiasm for legal cannabis products in the marketplace. The culture, especially from the trade side, has been strong, supported by a robust medical program that laid a good foundation for a community when adult use came online in 2021. My interactions in the New Jersey industry have been consistently positive and I’ve seen a lot of growth.

I’m optimistic. As people get more comfortable with just going and visiting a dispensary you’re going to see the customer base grow significantly. It’ll grow again as prices come down, because in most of these states the vast majority of cannabis that’s being consumed is still being procured from the gray or illicit market. For example, in November or December 2023 Massachusetts set a revenue record. Because of price compression, they saw more customers coming in from the illicit market. I think that will happen here, too.

I think pre-rolls overall as a category have continued to grow a customer base. It’s a convenience thing, but again, there may have been a pricing issue in New Jersey. That said, a single pre-roll can be cheap, sometimes the cheapest thing on the shelf, and easily transportable.

Cultivation. New Jersey is still limited by the lack of cultivators. Right now cultivators and manufacturers might have their own brands or they’re licensing deals with some subset of other brands, but you just don’t have the volume of independent cultivators where you’re going to see that brand expansion grow significantly. Even for retail, it’s pretty reasonable to expect 18 months from initial application to doors open, so if you layer in the additional complexity of a cultivation facility, additional equipment, going through the land use process, educating boards about how you’ll meet requirements, how you’ll deal with odor issues and things of that nature, it elongates the whole timeline. I don’t think it’s surprising that there aren’t many new cultivators open and operational in the marketplace yet. That’s probably going to change as you get into the middle or latter part of 2024 and early 2025, and we’ll have more brands come in when they do. Brands might build out their own facilities in the four corners of New Jersey or partner with cultivators and manufacturers on licensing deals.

Good luck finding property. Although there’s no cap on licenses at the state level, many municipalities have opted out or capped the number of operators. Finding appropriately zoned property with an available municipal resolution isn’t impossible, but increasingly challenging.