Exclusive: What NY's Cannabis Market Will Look Like — A CEO's Perspective On Navigating East Coast Mine Field

The recently created New York legal cannabis market is one of the most exciting cannabis opportunities in 2023.

In January, BDSA — a global leader in providing actionable cannabis market intelligence — announced the launch of Retail Sales Tracking for the New York cannabis market. BDSA predicts New York will be the largest new market for legal cannabis in 2023 and the second largest contributor to sales growth through 2026, following Florida.

“Consumer Insights data reveal strong growth within the state, with 45% of those surveyed claiming to be past six-month consumers, an approximate 17% increase in consumer penetration since fall 2021,” BDSA said. “An additional 27% of New York adults indicate they’re likely to consume in the future.”

See Also: What Will Happen With Cannabis In 2023? Industry Experts Debate

On top of market growth, BDSA’s data scientists sampled the vast universe of consumption trends in New York to shed light on one of the most important questions for the industry: What type of cannabis do New Yorkers want?

BDSA chief executive Roy Bingham shared exclusive insights with Benzinga that might come in handy for investors, managers, and entrepreneurs interested in the New York cannabis market.

What Cannabis Do New Yorkers Want?

Flowers, coated pre-rolls, distillates, extractions, edibles, topicals, and infused drinks are just a few of the many cannabis products available at retail. But how can businesses concentrate on thriving segments that assure a path to liquidity sooner than later?

According to BDSA, New Yorkers have a propensity for flower-based products. Some 35% are more likely to prefer joints they have rolled themselves, and 27% are more likely to prefer joints that include tobacco.

“Recent New York medical sales indicate that the vape category in New York’s adult-use market may account for a larger share of sales than in other newly minted adult-use markets,” Bingham said.

In terms of branding, New York consumers are significantly more likely to purchase a product based on visually appealing, discreet, premium, resealable or reusable packaging.

Bingham noted these consumption trends evolved throughout time and seem far from waning.

“If you go back about two years ago and ask in New York, 'have you consumed cannabis in the last six months?' The answer was 22% of adults were telling us they had consumed cannabis in the last six months. Very low compared to the national average."

By spring 2022, that number doubled to 45%.

"And that's the fastest rate of growth that we've seen,” Bingham said. “Now, some of that is because they feel more comfortable acknowledging that they have consumed cannabis where it has become legal. But we're now getting up to kind of normal consumer participation rates in the New York market relative to the rest of the country."

Bingham also noted:

• 58% of New York users say they consume cannabis for medical reasons.
• 42% say it's due to quality of life.
• 72% use it for recreational purposes

"These are very similar to patterns that we see in the rest of the country,” Bingham said.

NY: A Boutique Cannabis Market?

Bingham highlighted that the New York cannabis market is "a bit unique in terms of its demographics and psychographics."

The adult-use cannabis market is also unique in the way that it's being allowed to emerge in terms of the licensing, he explained, citing the effects of regulations on the size of players, operations and retail offers to consumers.

“The fact that the incumbent players, the ten licenses that have the medical licenses are not being granted any of the adult use licenses at present, affects what's available in the dispensaries," Bingham said. "The incumbent players in New York being quite sizable companies, are not going to be the players who are most active in the adult-use market for the near future."

“So the market is of course going to be driven by the locations opening up at all from the equity applicants and they will, by their nature, be independent. And what they're able to offer may look a bit more like three or four or five years ago. So fewer vape products are probably at first being available and therefore perhaps lower consumption,” he continued.

Premium Rd

Bingham describes what seems to be an emerging landscape of boutique cannabis firms. Like the small bodegas that proliferate in every corner of the five boroughs, cannabis small businesses could benefit from avoiding competition against multinational corporations.

However, how they will reach productive scale, favorable pricing points, and sustainable margins, are still incognito. In this context, premiumizing cannabis products and differentiating cannabis offers are a must-do for cannabis firms.

“We do certainly think that New York has an opportunity to be one of the markets that succeed with premium products because you have an affluent consumer. On average, New Yorkers don't have much higher disposable income than the rest of the nation. But obviously, there are a lot of people there who have a lot of very high incomes. Connoisseur types of products could do quite well in New York if companies can establish awareness and establish a premium image because you're talking about hundreds of thousands of people for whom price is not a serious consideration,” Bingham explained.

Weed, Everywhere

Whoever visits New York in 2023 will likely notice weed trucks offering deals on cannabis products. Pop the shaft, bring a few chairs, and blast the speakers, the blackboard is on, with prices that go as low as $30 an 8th. But, is this cannabis tourism? Sort of — or at least the seed of a worldly renown weed destination.

“You have the trucks. Dozens of trucks and dozens of locations. But as a tourist, you don't know that. And if you are coming in from a part of the world where licensed legal cannabis is not available, that's kind of your first experience of it. I'm not sure that is the ideal experience for visitors to the United States. It's a little bit more like going to Amsterdam. Used to be, you know, in the 1990s or something,” Bingham explained.

“A more licensed, regulated upmarket experience for those visitors has to be desirable and ultimately that will emerge. New York City is an attractive place to visit if you're from any part of the world, and obviously, cannabis will be a component of that for some of those visitors,” he continued.

Is There Room For MSOs?

Bingham noted the current regulatory landscape in New York remains “challenging” for MSOs.

“They are limited to their medical locations for the time being until they're permitted to have adult-use locations. So they have made a great investment and it's going to be the only thing that they can do at present is try to grow the medical market. But the medical market has been pretty much flat for the last year. And they do that in the face of all of these headwinds from the illicit market and the emergence of an adult-use market gradually,” Bingham said.

“The first one is to increase the number of registered patients, which isn't easy given the regulatory hurdles that must be overcome, and then, of course, is to ensure that those patients are purchasing in the licensed legal channel and your dispensary. It's about having a sophisticated approach to attracting those registered patients and retaining them within your dispensary or delivery services,” Bingham continued. “The vape category in New York had a good performance in medical sales. That could be another avenue for MSOs if they want to attract people (...) One of the challenges is that the leading products in the nation are already available in the various stores that are operating without licenses.”

How Will The New York Market Look Like?

“I think some of the newly awarded licensees may operate and open large dispensaries that are quite sophisticated. But of course, they have to raise all the capital to do that. It takes time, and it's very difficult in the current economic environment as well. So I expect there is great ambition among some of those to have, you know, the most attractive retail experience in the best locations,” Bingham added. “At the other end of the spectrum, there will be some very low-cost small locations that are open that would not normally interest the masses.”

“I think the governing point is that New York has a tremendous opportunity in 2023, but it has a lot of headwinds, a lot of challenges to the pace at which it's going to grow because of the way the regulations are rolling out. But obviously, it's a massive market with 15 million-plus adult residents and a great opportunity if people can navigate all of the challenges, has enough capital and enough time and patience to execute their strategies,” Bingham concluded.

Photo by Robinson Greig on Unsplash.