Thursday, March 21, 2024

Other Voices: New Mexico Marijuana Bust; Big Hopes Go Up In Smoke; Pot Guru Says Stagnant Sales; Too Many Pot Shops, Inflation, Cheap Fentanyl And Under The Table Dealing Cited As Reasons.  

What a bust. 

The state's two year old legal marijuana industry looks like a too-crowded flea market. 

MLG pounded the table for legalizing pot and finally got it by calling the Legislature into special session and pressuring lawmakers to no end. 

Legal cannabis sales began April 1, 2022 and in spite of indicators pointing in the wrong direction the Governor is celebrating:

Cannabis sales in New Mexico have topped $1 billion in adult-use and medical sales. . .Cannabis consumers have purchased more than $678.4 million worth of cannabis products and $331.6 million in medical products since April 1, 2022. To date, the state has recorded more than 21 million transactions with $75 million in cannabis excise taxes going to the state general fund and local communities. “This is a huge milestone for New Mexico’s cannabis industry,” said Gov. Lujan Grisham. Nearly two years after beginning sales, New Mexico is on the map as a premier hub for legal and safe cannabis and the thriving business community that comes with it.” 

"A premier hub"? Try an oversupplied and stagnant hub. A "thriving business community." That's a mirage mainly visible from airy loft of the Fourth Floor of the Roundhouse.

And $75 million in excise taxes over two years from a billion in sales? That's piddling in a $10 billion state budget. 

Don't take it from this corner. Duke Rodriguez, CEO of Ultra Health, the state's largest cannabis retailer, fact checks the Governor and weed advocates with the cold, hard facts that reveal an industry in turmoil.

The truth is that New Mexico’s regulated cannabis market is not thriving, but barely surviving. The truth is that New Mexico’s cannabis sales are likely headed for decline and contraction, rather than growth.

Now, it is certainly true the cannabis market has grown since April 2022 in certain places. Smaller towns along the Texas border did see large sales increases over the past two years.

However, the central Metro areas experienced a much different reality. In April 2022, Albuquerque did $14.9 million in combined medical and recreational cannabis sales, Las Cruces did $3.7 million, and Santa Fe did $3.5 million.

Sadly, nearly two years later for the most recent month of February 2024: Albuquerque is flat at $15 million, Las Cruces is down to $3.2 million, and Santa Fe is down to $2.9 million. Those numbers come from the Cannabis Control Division’s own “Cannabis Reporting Online Portal.”

Duke Rodriguez
This means that over the past two years, the cannabis market in New Mexico’s three largest and most stable population centers has not grown. It has stayed flat and even shrunk by a million dollars. At the same time, the number of retail locations has exploded. The proverbial pie has not gotten bigger, but the slices for each business have gotten a lot smaller.

Every cannabis enterprise must face this truth to responsibly evaluate the trajectory of its business. After two flat years in most places, additional growth is, frankly, not likely. A continued decline in overall cannabis revenue is the more likely scenario.

If cannabis licensees do not face this truth. . . .then they will be in for a very rude awakening in 2024, 2025, and beyond. Likewise, municipalities that build cannabis taxes into their budgets need to plan for flat or even declining cannabis tax contributions.

If cannabis licensees want to reverse these trends and start growing the pie again, they will need to analyze why overall revenue has stagnated everywhere that is not within 15 miles of Texas.

Inflation in the rest of the economy may mean cannabis consumers spend less on weed. Cheap fentanyl may pull the most desperate into its terrible vortex. Cannabis licensees operating in the red may sell under the table and out the back door. The cannabis trend may simply have peaked.

Whatever the reasons, cannabis licensees cannot create solutions to these challenges until they acknowledge the problem.

One problem Rodriguez touched upon is the marijuana black market which refuses to be undersold. That was supposed to go away, promised the legalization crowd. 
The favored few who got in early on legal pot with new licenses--often with political connections--have been the big beneficiaries of legalization. The rest of the state? Not so much.

This is the Home of New Mexico Politics.  

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