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Subpar Products Were One of New York’s First Legal Market Missteps. How Did It Happen?   by Andrew Ward

Subpar products were one of New York’s first legal market missteps. How did it happen? Not long ago, New York’s legal cannabis market was being hailed as the eventual gold standard. Today, the market is teetering on abject failure, riddled with internal and external forces doing damage.

With projections of $3 billion in annual earnings and a fair and equitable market prioritizing drug war victims, the state seemed on the right track. However, questionable decisions have hindered optimism and market momentum from nearly the start.

One of the more controversial issues in the early days of the market’s rollout was the first wave of cultivation licensing going to existing hemp farmers.

In the months after that decision, product quality stumbled early while prices were relatively high. Anecdotal reports suggest product quality has improved in the months since the initial market rollout. However, the decision helped fuel negative sentiments toward the nascent adult-use market. 

While picking on New York’s early market plant quality at this time feels akin to complaining about the interior decorating on the Titanic, it is still worth assessing this critical decision.

Depending on who you ask, hemp producers were incapable of meeting the needs of the early market. Or, the state once again set up a critical market component for failure. Or possibly both. 

In April 2022, New York State granted 52 conditional cannabis cultivation licenses. The move was, in part, done to support the state’s need for cannabis products and provide a lift to struggling hemp farmers. However, some cannabis cultivation professionals and consultants voiced concerns, with worries such as:

• New York’s hemp farmers’ prolonged struggles with generating profits.

• Worries that cannabis cultivation was more labor intensive, followed different growing procedures, and held different standards for products.

• Some hemp farms were allegedly more focused on producing biomass instead of top-quality flower.

Hemp farmers defended their capabilities, with some of the selected 52 farms asserting that they had the experience, noting their ability to grow various CBD and other high-quality cannabinoid-specific cultivars.

By September of that year, cannabis farmers began harvesting. In the weeks after, reports began to surface that consumers should brace for suboptimal products early on. The anticipated letdowns included lots of biomass and subpar flower, with both lacking the aesthetic qualities associated with cannabis. 

While biomass was typically used for extraction purposes, the lack of high-quality, visually appealing pot left the initial shops with little quality to attract buyers from unlicensed shops and delivery services. In some cases, farmers admitted to the NYC newsroom Gothamist that their first product season was considered “test runs,” with a few potentially unable to meet the standards of smokable flower.

Some letdowns were out of cultivators’ control. Bloomberg reported one of the more glaring missteps in the process is the $750 million of cannabis products with nowhere to be sold. Over several months, New York issued over 200 licenses to farmers to ensure the market never ran out of cannabis like some early market states had done.

However, with few stores open to sell to, products remained in storage–giving producers no outlets to legally sell their products. If a company wanted to remain state-compliant, it had to watch products deteriorate. 

By early February 2023, consumers had several weeks to sample products from the first two shops opened in the state, both in Manhattan. At that time, more than a few consumers and industry professionals told Cannabis & Tech Today they felt the products were “mids,” with some growers feeling the products reflected what outdoor and loop house grow ops had to offer. 

Some consumers and industry professionals noted that certain products were enjoyable. Still, with taxes applied, the $68 per eighth price further diminished flower quality compared to other states.

The product backlog persisted into the summer. Frustrations boiled over so much that one hemp farmer, Tricolla Farms Founder Brittany Carbone, accused the state of executing the market so poorly that it provided farmers with “a headstart running off a cliff,” reported New York Upstate. 

In early August, Cannabis & Tech Today spoke with Naturae CEO Nicolas Guarino, whose Jaunty brand operates across several extracted cannabis verticals, including edibles, tinctures, and vape carts. He feels product quality concerns were valid in January, but he said the space has caught up. Jaunty uses cannabis flower sourced from various cultivators to make its products. 

“The biggest challenge that we’ve had in this transition, it’s just that the market hasn’t opened up quickly enough,” Guarino said, comparing the state to Missouri, which according to NPR surpassed $1 billion in adult-use sales in May 2023, just three months after sales began. Gothamist reported New York had generated $12 million in sales in its first six months of operation. 

At this time, it doesn’t matter who created a scenario for subpar products. The market’s initial product was no doubt fumbled, leading to less-than-ideal items hitting sale shelves and scores of products not even reaching stores. All the while, unsold products from New York and out of state have allegedly found themselves in the state’s unlicensed shops, with brands selling products in a bid to turn some profit. 

Just 23 shops have been licensed and can operate in the state. Hundreds more licensees were in the process of opening in the coming months. However, in late August, the New York State Supreme Court upheld a temporary injunction preventing hundreds of conditional adult-use recreational dispensary (CAURD) operators from opening, with the social equity-focused licensing system being challenged in court. 

The ruling comes off the heels of a lawsuit filed by four veterans, alleging that the prioritization of drug war victims fails to uphold the parameters of the state’s Marihuana Regulation and Taxation Act. The court decision handed down in mid-August will halt any new shops from opening until at least early- to mid-autumn unless a settlement is reached. As of Aug. 22, 2023, the OCM has four cases pending against them.

No matter who’s to blame, New York opened an anticipated $3 billion annual market with biomass and weed that few reputable legal or illegal services would sell. This, along with several other botched rollouts, leaves operators like hemp farmers, CAURD applicants, and scores of other market participants and aspiring parties left to wonder what’s next and if it will ever get any better. 

This article first appeared in Volume 5 Issue 2 of Cannabis & Tech Today. Read the full issue here.

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