Projections for New York adult-use cannabis sales

How are we forecasting the New York market?

Last week, news broke about New York's plans to legalize recreational cannabis commerce and use. As anticipated, this happened quickly after the neighboring New Jersey's decision to legalize. With our New Jersey forecast we assumed some of the NJ volume would be purchased by visiting NY residents, but now this scenario seems less likely. Because of this, NJ year one estimate will likely be 15% lower than the previously reported $740M. New York will also likely wrest the largest East Coast cannabis market title from New Jersey right off the gate. News articles have sources estimating the potential tax revenue at $350M a year, which at the planned 13% tax rate (9% state/4% local) would mean a $3B a year market, once fully implemented. This seems plausible in the long run but not very likely in the first year of operation.

Massachusetts is the best model for the New York market. We used Massachusetts' first complete year of sales (December 2018 through November 2019) as a baseline for this forecast. Two key similarities between the markets remain: Both had a functioning medical market prior to recreational launch and medical operators were able to or will be able to move to a med + rec model upon legalization. By the end of MA's first year of sales there were 33 operational cannabis retailers. New York currently has 10 operational MMJ licenses, which operate a total of 38 dispensaries, with two more "coming soon". Relative to each states' population, this appears well in line with Massachusetts.

High level estimate for year one

MA year one total recreational sales and 21+ population were used to calculate the MA year one per capita spend at $77.84. The NY 21+ population was used alone since NJ will also have a legalized market. An argument could be made for other national and international tourism for which NYC is a draw. However, in the current uncertain pandemic environment and fast planned launch of the market, this estimate does not include tourism, which will likely take quite some time to resume in full force. Applying the MA per capita spend as well as applying a 3% increase based on the difference in Alcoholic Beverage CPI (sourced from Bureau of Labor Statistics) between MA and NY results in a top line sales forecast of $1.18B for the first complete year of sales.

We will be keeping an eye on New York's progress towards legalization. In the meantime, keep track of cannabis trends in current legal markets by signing up for a free Insights Pulse account.

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