Almost a year in, industry leaders take stock of adult-use cannabis business

A decade ago, when Shaya Brodchandel was looking to get started in New Jersey’s medicinal cannabis landscape, many lawyers flat out refused to represent his interests, saying they did not want to get involved in the industry.

Now, many of those same firms have attorneys dedicated to handling matters related to the cannabis space.

To Brodchandel, the chief executive officer and founder of Secaucus-based dispensary Harmony Foundation, it’s just one example of how much the tide has turned in the Garden State, particularly when it comes to public sentiment about the use of cannabis, whether for medical or recreational purposes. As the one-year anniversary of adult recreational use in New Jersey approaches, he and others in the industry can reflect on how public opinion has evolved and the issues state regulators should focus on going forward. “It’s not just about running a business. It’s about changing stigma and perception,” Brodchandel said. “It takes a mix of patience and passion. So, when I notice those things happening, then I realize it actually is working.”

Harmony Dispensary
“It’s not just about running a business. It’s about changing stigma and perception,” says Harmony Foundation CEO Shaya Brodchandel. “It takes a mix of patience and passion. So, when I notice those things happening, then I realize it actually is working.”

 

Other entrepreneurs establishing themselves in the industry have had similar moments of realization. Tanmoy “TJ” Jadhav, chief executive officer and founder of MoJo Botanica LLC – a minority owned business looking to open its first cultivation and manufacturing facility this summer in Elizabeth – cited the statistics.

“The running joke in the industry is that the 2020 election was won by cannabis, as every ballot that this was on, passed with a significant majority,” he said. “New Jersey was one of them, with voters approving legalization by over 67%,” he said.

“Today, 37 states have legalized cannabis either for medicinal or recreational use,” he said. “And, that number is only expected to grow … The numbers speak for themselves. The critical mass of legalization has been reached, and there is no turning back. That said, more does need to be done in terms of education and de-stigmatization of the plant.”

For Sarah Trent, the founder and chief executive officer of Valley Wellness, a newly opened medical dispensary in Raritan and certified woman owned business enterprise, it was about the conversation.

Trent explained, “When I started on this journey in 2018, I was shy to discuss my own cannabis use. I am a lawyer and I did not want people to think that I couldn’t do my job or think less of me in some way because I used cannabis.”

Sarah Trent, the founder and chief executive officer of Valley Wellness, a newly opened medical dispensary in Raritan and certified woman owned business enterprise
Sarah Trent, founder and chief executive officer of Valley Wellness, a newly opened medical dispensary in Raritan and certified woman owned business enterprise.

“I am also the mother of two young children – my youngest being born in May 2018. During the third trimester of my second pregnancy, I went to a cannabis education class in Newark and that was the start of my own realization that cannabis was in fact becoming more normal,” said Trent, who admitted she was worried that other attendees would give her a hard time for being at a cannabis class.

“But that was not the case. It was over the course of 2018 that I started to feel more comfortable talking about cannabis and my own cannabis use,” she said.

‘Every year is in dog years’

The last 10 years have seen much development in New Jersey with respect to cannabis. Following the 2010 enactment of the New Jersey Compassionate Use Medical Marijuana Act and subsequent launch of the state’s medical marijuana patient registry two years later, Brodchandel set to work on launching a nonprofit medical dispensary.

“My background is in radiopharmaceuticals. Prior to this, I was doing pharma production in New York and, at the time, I saw firsthand a family who benefited from medicinal cannabis … then, I was presented with an opportunity to open this location in New Jersey, right over the bridge.”

“I was intrigued and decided to do it. I didn’t realize it was going to be what it was, but shortly after I did realize that I can’t do it as a side project, I decided to jump fully into the industry,” Brodchandel explained.

One of the recipients of the original six alternative treatment center permits granted by the New Jersey Department of Health, Harmony began operating in June 2018 and has had its permit renewed annually by the state since.

As part of the approval, Harmony received a Class 1 Cultivation license for its facilities at 600 Meadowlands Parkway in Secaucus and as well as a Class 2 Manufacturing license at a Lafayette site and a Class 5 Retailer license at a Secaucus location.

Headquartered at 600 Meadowlands Parkway in Secaucus, Harmony’s cultivation and dispensary facility serves about 6,200 medicinal patients. Harmony’s second location, at 144 Route 94 in Lafayette, is also now up and running, enabling the foundation to expand its product variety through onsite cultivation, manufacturing and extraction.

Headquartered at 600 Meadowlands Parkway in Secaucus, Harmony’s cultivation and dispensary facility serves about 6,200 medicinal patients.
Headquartered at 600 Meadowlands Parkway in Secaucus, Harmony’s cultivation and dispensary facility serves about 6,200 medicinal patients.

 

Though New Jersey’s legalized market for adult use launched in April 2022, Secaucus put a temporary ban on recreational cannabis establishments while local officials decided how to regulate sales. In May 2022, the restriction was lifted, allowing Harmony to begin pursuing the approvals needed for recreational sales.

In December 2022, the New Jersey Cannabis Regulatory Commission, the five-member state board that regulates the industry and oversees licensing, signed off on Harmony’s application to expand operations under its vertically integrated medicinal permits to include adult-use sales.

As part of its entry into the dual market, Harmony expects to open satellite dispensaries at 95 Hudson St. in Hoboken and at 227 Coles St. in Jersey City.

On March 1, Harmony officially began serving adult-use customers, making it the first recreational cannabis dispensary in Hudson County. It’s also the first New Jersey-based nonprofit medical dispensary to expand into the state’s adult-use market.

Brodchandel said the first day went smoothly, noting that Harmony has been “preparing for this for a long time.”

“We are ready to begin welcoming a new population of clients, while simultaneously giving our long-time patients the same great service they deserve and have become accustomed to,” he said, adding that Harmony will continue to grant priority to patients and registered caregivers.

Besides helping Harmony expand its business, Brodchandel believes becoming the first retailer rooted in the state to offer adult-use cannabis will be a great example for New Jerseyans looking to enter what is expected to be a more than $2 billion a year industry by 2026.

Brodchandel, who is president of the New Jersey Cannabis Trade Association, has spent the past few years working to help entrepreneurs overcome the challenges associated with opening a cannabis business. He also co-presented the first cohort of the Minority Cannabis Academy, a first-of-its-kind nonprofit workforce development program that aims to provide a pathway for minorities that want to begin working in the legalized space.

Through his outreach, he’s spoken to many aspiring business owners who think it’ll be “an easy way to make a lot of money quickly,” Brodchandel said.

And he always offers a reality check, telling them, “It’s a lengthy process, with varying rules and state regulations. You have to be in it for the long haul.”

“You need to have a lot of patience and ability to withstand the challenges and overcome them in order to be successful. So, a decade later in this industry, it feels like every year is in dog years – seven years,” Brodchandel said.

Room to grow

Nearly one year after the April 2022 launch of New Jersey’s adult-use market, cannabis entrepreneurs told NJBIZ they believe the CRC appears to be making moves to help the industry flourish.

As part of an effort to spur development and encourage diversity, the CRC enacted several changes in February, including letting the state’s cap on the number of cultivation licenses expire and improvements to the overall licensing process.

Additionally, the regulatory board is ending the state’s ban on certain vertically integrated businesses. It also adjusted the criteria for priority applicants to require all social equity, diversity-owned businesses and impact zone applications for annual and conversion licenses be reviewed before all others.

Since the CRC put out a notice of application in late 2021, it has received 1,647 applications for Class 1 (cultivator), Class 2 (manufacturer) and Class 5 (retailer) licenses. Of those applications, 72% are categorized as diversity-owned, 25% as social equity and 43% as impact zone.

Mojo Botanica CEO Tanmoy “TJ” Jadhav
“The running joke in the industry is that the 2020 election was won by cannabis, as every ballot that this was on, passed with a significant majority,” noted Mojo Botanica CEO Tanmoy “TJ” Jadhav.

“The CRC has done a commendable job with the task that was handed to them,” Jadhav said. “As we have seen in some of the early legalized states on the West Coast, this isn’t an easy task, and from the way that New Jersey has approached the roll out here, we are thankful to see the CRC has conducted its due diligence across other states and learned from what went well in other states and what did not.”

He went on to say, “We are appreciative of the fact that social equity, minorities and diversely owned businesses have been prioritized in the application process, although more needs to be done to empower and enable these businesses to become operational.”

Jadhav also said, “In order to bring the economic benefits of this industry to those whose lives and livelihoods have been adversely affected by this plant’s illegality over the years, we would encourage the state to do more in terms of supporting budding cannapreneurs with funding, business training and/or real estate. “

Currently, New Jersey has 22 medical and recreational dispensaries and 13 medical-only dispensaries. With roughly one dispensary per 100,000 residents, the state has the lowest per capita store count of any adult-use market.

On the supply side, New Jersey has 17 cultivation facilities with 418,000 square feet of operational canopy as of January, according to the CRC. The number of licensed operations – six that are medical only and 11 that can grow for recreational use as well as medical – is far below other states.

With low retailer availability and just a handful of brands, legal sales remain highly consolidated. The space also remains dominated by multistate operators, making it difficult for small entrepreneurs to establish themselves because they don’t have the resources and experience that larger ventures do.

Location also remains a challenge, especially since an estimated 70% of the state’s 564 municipalities opted out of allowing cannabis businesses altogether.

Trent said, “Small entrepreneurs need access to real estate that is zoned properly for cannabis use. In a lot of ways this comes down to educating municipalities that may be wary to allow a cannabis business … Many towns have enacted local licensing applications with hefty fees, others have enacted caps on the number of businesses in town—both making it hard for the little guy to succeed.”

Declining enrollment

Amid a drop in the number of patients enrolled in the state’s medical marijuana program, medical dispensaries, such as Trent’s, are increasingly seeking state approval to offer adult-use sales as a way to capture the emerging market.

Since Valley Wellness’ December 2022 grand opening at 407 Route 202 in Raritan, Trent said, “While business is going well, we have only been open three months and do not believe that we will ultimately hit our target patient number.

Valley Wellness in Raritan
“While our priority will always be to serve medical patients, we are hopeful that we will be able to expand to serve the personal use or recreational population soon,” Valley Wellness owner Sarah Trent said. – VALLEY WELLNESS

“While our priority will always be to serve medical patients, we are hopeful that we will be able to expand to serve the personal use or recreational population soon. Expansion to personal use sales is important for us specifically because we have seen a decline in medical patient numbers over the past year,” she said.

Since the launch of legalized adult-use cannabis, the number of patients seeking medicinal treatment has declined from 128,548 in April 2022 to 111,577 in February 2023.

Trent said, “I believe that many individuals that use cannabis, whether or not they have a medical card, do so for some medical reason, whether that be anxiety, trouble sleeping, or for more serious conditions such as cancer, Crohn’s disease and others. Some are afraid to enroll in the medical program because they think that they will lose their job, other benefits, or lose their right to own firearms.”

“There are many people out there that use cannabis and would qualify for a medical cannabis card, but do not see the benefits of getting a card,” she explained. “And that is just simply not the case. First and foremost, the cost is lower for medical patients because there is no state tax imposed. Furthermore, in Raritan, where Valley Wellness is located, there is no municipal tax on cannabis – making Valley Wellness one of the only dispensaries in the state to have no tax on medical cannabis. So, the financial incentive is definitely there.”

Brodchandel said, “It’s unfortunate that those numbers are dropping. I do think it’s important to have more of the medical community involved, not just a dispensary dispensing cannabis, but having the doctors, the practitioners, the hospitals, the academia and the research involved.”

“Without them, we’re simply providing the medicine. The whole interaction with one’s health needs to be part of it,” he said.

Investing in the community

When it comes to how New Jersey should invest tax revenue generated from the legalized cannabis market, the state is still determining what the priorities will be.

Under the law in New Jersey at least 70% of all tax revenue, including social equity excise fee revenue, is supposed to be invested in “impact zones,” which are defined as cities with higher-than-average unemployment rates, crime indexes and cannabis arrests.

Since April 2022, about $219,482 has been collected in SEEF revenue, according to the most recent figures provided by the CRC. For 2023, the state anticipates $1.5 million will be raised by the SEEF, which is $1.52 per ounce on all cannabis sold, according to the most recent figures available.

Based on public feedback the CRC received during a series of hearings, as well as SEEF revenue projections, the board’s first set of recommendations call for investing in grants and training/technical assistance for aspiring entrepreneurs in impact zones and economically disadvantaged areas.

Specifically, the resources would go toward the New Jersey Economic Development Authority’s soon-to-launch Cannabis Equity Grant Program, which will provide grants of up to $250,000, and training programs run by the New Jersey Business Action Center.

Minority Cannabis Academy
The Minority Cannabis Academy secured backing from Harmony Dispensary CEO Shaya Brodchandel in 2022.

Brodchandel believes a “significant amount” of SEEF revenue should be allocated to workforce development in impact zones. “Providing someone with true knowledge gives them the ability to create wealth for themselves,” he said. “Giving someone a grant may or may not result in the same thing … Grants are a good thing to have and there’s a need for it. There’s no question that there’s a need, but I think it needs to be split into multiple buckets – some of it is educating, some of it is providing capital.”

Jadhav would like to see the resources put first toward initiatives aimed at “improving the lives and livelihoods of those affected by past cannabis-related infractions,” which can often have far-reaching consequences, from prison time to unemployment to lack of access to banking and financial services.

“By using the social equity excise fees to provide record expungements, employment opportunities, education, and a path to re-entry into mainstream society, we can right these wrongs and make a real difference in people’s lives,” he said.

After that, he’d like to see resources deployed on supporting aspiring entrepreneurs, particularly those with past cannabis-related infractions.

“By providing access to funding, subsidized legal services, business training and support to secure real estate, we can help these entrepreneurs realize their dreams and create a sustainable and equitable cannabis industry,” he said.

Trent, who founded NJ Cannabis Certified, a 15-hour educational certificate program taught in conjunction with eight community colleges across the state, thinks the focus should be on “literacy programs for youth, homelessness prevention and other youth education initiatives that can improve outcomes for young people and keep them out of the criminal justice system.”

Resources should also be allocated to re-entry programs as well as grants to social equity businesses and small entrepreneurs looking to make a go of it in the cannabis industry, she said.

Community-centric

For many small cannabusiness owners, it’s not just about running a successful venture.

“We’re building a community,” Jadhav said. “By investing in both the people and the industry, we can ensure that everyone has a fair shot at success. It’s time to right the wrongs of the past and create a brighter, more equitable future for all.”

He added: “Independent entrepreneurs are the lifeblood of this industry and are the means through which real economic value can be realized at the local level, both for local entrepreneurs as well as the communities that they serve,” he said.

As the industry matures, Jadhav said he and his co-founders and partners at MoJo, KB Singh and Ankur Patel, want to see more small businesses “make it through the rigorous application process and set a foundation to thrive in the long run.”

“At MoJo we are helping multiple applicants in the process currently, and our Cannabusiness Incubator has been created for exactly this,” he said. “Small businesses also have the opportunity, and in our opinion, responsibility to invest in the communities that they serve.”

That’s why MoJo has pledged 2% of its annual revenues toward direct investment into the community via partnerships with nonprofits and municipalities, Jadhav said.

“We are hoping that this becomes an ethos that other small businesses embrace as well, and together we can collaborate to make a real difference in the community,” he added.

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