New Jersey adult-use cannabis market heats up with new entrants

New Jersey’s adult-use cannabis market has experienced surging growth since it launched in April 2022.

Recreational cannabis sales in New Jersey totaled $789.8 million in 2024, and the number of retailers has proliferated, giving the multistate operators who were first in the market some serious competition.

With the influx of new operators, primarily small independent retailers, multistate operators are facing the challenge of maintaining market share as the market diversifies and pricing pressures mount.

“From an MSO perspective, first-mover advantage was powerful, but we’re very excited about the new entrants,” said Richard Proud, CEO of New York-based iAnthus Capital Holdings.

“It forces everyone to compete on product quality.”

New Jersey’s adult-use market by the numbers

New Jersey’s recreational market opened on April 21, 2022, with 13 retailers – all owned by MSOs – that converted from medical marijuana dispensaries.

That number has grown to more than 200 retail outlets, with the bulk being independent operators, according to the New Jersey Cannabis Regulatory Commission (CRC).

But 1,524 conditional recreational licenses have been approved, indicating that a bottleneck is preventing more businesses from opening.

Chantelle Elsner, president of the Northeast division of TerrAscend Corp., said the MSO has strategically expanded its portfolio to produce innovative strains, formats and pack sizes.

“We continuously monitor market conditions and listen to customer feedback to develop trusted products that meet our customers’ needs at a variety of price points,” Elsner said.

TerrAscend, which has offices in Toronto and King of Prussia, Pennsylvania, had two of the 13 stores that converted from New Jersey’s MMJ market to adult use and, shortly after, opened a third.

“The market saw the slow price compression of 2023 accelerate in 2024 as the retail landscape expanded and more brands and products entered the state,” Elsner said.

“There has been significant diversification in the premium space in addition to increased demand for affordable products.”

Flower is the best-selling cannabis product in New Jersey, accounting for almost 43% of the market, according to Chicago-based Hoodie Analytics.

Vape cartridges are No. 2, accounting for 25%, while edibles make up nearly 13% of the market, Hoodie’s data shows.

How municipal control impacts recreational operators

About two-thirds of the state’s 564 municipalities prohibit adult-use sales, and regulations differ across the municipalities that do allow it. That makes it difficult for marijuana operators to open new stores.

“We would like to open more stores in New Jersey, but it’s tough,” said Francesca DeRogatis, owner of Nightjar, which has stores in Bloomfield, New Jersey, and East Lime, Connecticut.

“Over 70% of towns opted out, so the availability of real estate is tight. You have to get municipal approval, find an appropriately zoned site and have permission from the CRC.”

While there are no caps on licenses at the state level, some towns and cities that allow marijuana businesses to open restrict the number of marijuana businesses permitted in their limits.

For instance, a municipality will allow one cultivation facility while another will permit two retailers, said Jessica Gonzalez, an attorney with the New York-based Rudick Law Group.

“Even if they don’t have caps, they restrict zoning so much that you create caps anyway because there’s not enough real estate,” Gonzalez said.

But that’s not the case in all municipalities.

Tahir Johnson, CEO of Simply Pure Trenton, said there are seven adult-use stores within 15 minutes of his shop and four of them are within a few blocks.

“It’s much more competitive now,” Johnson said.

Medical cannabis operators could get an edge

A bill recently introduced in the New Jersey Senate could give medical cannabis dispensaries an edge in municipalities that prohibit recreational marijuana.

If S4074 passes, medical cannabis dispensaries would be able to bypass local bans and start selling recreational marijuana without municipal approval if they’ve operated complaint-free for six months.

If approved, the bill also would allow dual-license retailers to designate medical marijuana products as recreational and prohibit municipalities from capping the number of MMJ dispensaries within their boundaries.

Out-of-state brands such as Flower Union, which launched in Colorado last year, are entering the New Jersey market through partnerships with local businesses.

The packaging and labels, which require more information than Flower Union’s home state, must be submitted to New Jersey regulators for approval.

But Flower Union CEO Jon Spadafora said jumping through the regulatory hoops will be worth it.

Because the market is relatively new, consumers are more excited to try new products than they are in established markets such as Colorado.

“New Jersey has an invigorated audience – they want to try everything,” Spadafora said.

Unregulated competition

One of the biggest challenges facing New Jersey cannabis businesses is competing against convenience stores and gas stations that sell unregulated intoxicating hemp products.

The hemp-based alternatives, often marketed as delta-8 and delta-9, can be significantly cheaper than regulated cannabis.

The price difference, coupled with wider availability, makes it more difficult for licensed retailers that are trying to gain a foothold in the legal market.

“It creates an uneven playing field for licensed operators who had to go through the process and pay the licensing fee,” Gonzalez said.

“All of these shops and gas stations are selling intoxicating hemp products and taking away from their base.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.