‘A strong start’: Recreational cannabis sales surpass $300M in first year

A cannabis logo outside the Dulce Cannabis dispensary in Albuquerque. The state’s cannabis industry sold more than $300 million in recreational marijuana in year one of legal sales. (Jon Austria/Journal)

A year ago, hundreds lined up outside a cannabis shop in Sunland Park for opening day of recreational marijuana sales. In Albuquerque, the governor greeted dozens of customers at an Uptown dispensary before they purchased legal cannabis for the first time.

And in the months following, more than 10 million transactions took place at the hundreds of dispensaries across the state.

Now, one full year into recreational marijuana sales the state’s industry has sold nearly $301 million in cannabis products, which has accounted for more than $27 million and counting in collected cannabis excise taxes. In a sign of the industry’s growth in New Mexico, more than $32 million in recreational cannabis was sold in March – a record-breaking sales month for the industry.

“I’m beyond thrilled that the industry has gotten off to such a strong start,” Javier Martínez, a Democratic legislator who for years has supported cannabis legalization, told the Journal. “We (legalized) it the right way.”

How we got here

At the end of February, the state’s cannabis industry was roughly $32 million away from reaching $300 million in sales in the first year. It managed to do so in March, with its highest ever sales. The previous sales record was set in December, when the industry’s pot shops sold more than $28 million in recreational cannabis.

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Recreational sales last April were at about $22.2 million. By October, the state reached $25 million in adult-use sales for the first time.

Albuquerque, the largest city in the state, sold more than $96 million in recreational cannabis through 12 months. Las Cruces did $22.4 million, Santa Fe did $22.2 million and tiny Sunland Park – a town of roughly 17,000 that borders west El Paso – sold $19.4 million in recreational cannabis, state data shows.

Reilly White, an associate professor of finance at the University of New Mexico’s Anderson School of Management, said many factors played into a strong year one for the industry.

“Strong consumer spending and historically low unemployment in New Mexico … encouraged the growth of recreational marijuana, and cannabis taxes have provided an additional state and municipal revenue source,” White said.

But White also pointed to the decrease in medical cannabis sales, which was predicted to happen after the introduction of an adult-use industry.

Medical cannabis is an area that Duke Rodriguez, the president and CEO of Ultra Health, the largest cannabis business in New Mexico, says will continue to see further drops. But he added declines will also continue on the patient side – the number of enrollees has declined by nearly 30,000 since last April – for the medical cannabis program, so long as adult-use cannabis is available.

“Every month has seen a consistent drop in enrollees and medical sales,” Rodriguez said. “It is very difficult to fathom a sudden bump upward in medical demand.”

Journal illustration

What has year one been like?

Adult-use sales brought with it many new licensees. The state says, to date, there are more than 600 dispensaries, 351 producers, 415 microproducers and 507 manufacturers.

The number has drawn some criticism that the new industry may be oversaturated.

But Dulce Cannabis co-owner Victor Martinez is just happy to be here. Martinez, along with his fiancé, Samantha Zamora, were one of the first approved for a retail license last January under the Cannabis Control Division.

“It’s been a long road,” Martinez said. “I know when you first open up a business, you’re looking at taking a loss. For us, it hasn’t been anything like that. … I’m happy where we’re at and of course I’d love to expand, would love to do more, but I see (us) kind of going a long way with this whole cannabis thing.”

For R.Greenleaf, one of the state’s legacy operators – a business that operated in the medical industry prior to last year – the era of adult-use has meant continued growth. The company, before being acquired by Colorado-based Schwazze last year in a multi-million-dollar deal, has grown from 10 dispensaries to 18.

“I’m thrilled with how well they are doing,” said Ken Diehl, the division president for Schwazze that oversees R.Greenleaf in New Mexico. “There’s unbelievable potential (in this industry).”

Looking ahead

Insiders say year two is likely to be one of market correction, resulting in the shuttering of some cannabis shops across the state. But despite potential challenges, the industry can grow into something much bigger – it just might take some time, White says.

“Cannabis in New Mexico has a clear pathway to grow to more than a half billion dollars per year, especially as we compare the sales to states that legalized years ago,” White said. “But the road will get rocky ahead – many businesses may find their operations unsustainable as market saturation limits their growth. Uncertainty in the economic outlook is also a factor, particularly since it’s not clear how much consumers would cut back on recreational sales during times of economic stress. As the market matures, the industry will consolidate around the most successful companies with the greatest success in New Mexico.”

Customers line up in droves as recreational cannabis sales begin in NM…

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