February 26, 2021

Projections for New Jersey's adult-use cannabis market

With the potential to be the largest recreational cannabis market on the East Coast, we explore estimates for year one of legalization.
Written by
Team Headset
Published on
February 26, 2021
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How are we forecasting the New Jersey cannabis market?

New Jersey is likely to be the largest recreational cannabis market on the East Coast. With a total population of approximately 8.8M, it is the most densely populated of all US states. It is also closely bordered by the NYC metro area to the northeast and the Philadelphia metro area to the west. Until New York and Pennsylvania legalize recreational cannabis, some cross-border shopping is assumed in the below projection.

Massachusetts' first complete year of sales (December 2018 through November 2019) was used as a baseline for this forecast. Like New Jersey, Massachusetts had an operational medical cannabis market before adopting recreational sales. Also like New Jersey, medical operators in Massachusetts were able to move to a med + rec model upon legalization. By the end of MA's first year of sales there were 33 operational cannabis retailers. New Jersey currently only has 10 operational vertically integrated MMJ licenses, most of which operate only a single dispensary. This indicates that the year one pipeline of supply and retail availability should be fairly similar between the two markets.

It could be argued that a higher per capita spend should be expected in New Jersey because in 2020, Question 1 passed with 67% of the vote whereas Massachusetts' 2016 Question 4 only passed with 54% of the vote. However, the COVID-19 pandemic's influence needs to be factored in. The potential tax revenue from cannabis legalization may have motivated more New Jersey voters in 2020 than Massachusetts voters in 2016. Additionally, public attitudes towards cannabis have greatly shifted over that time period, lessening the influence of this factor on the forecast.

High level estimates for year one

MA year one total recreational sales and 21+ population were used to calculate the MA year one per capita spend at $78.86. The NJ 21+ population was summed with 10% of both Pennsylvania and New York's 21+ population (to account for cross-border shopping) for an adjusted eligible population of 9.0M. Applying the MA per capita spend as well as applying a 4% increase based on the difference in Alcoholic Beverage CPI (sourced from Bureau of Labor Statistics) between MA and NJ results in a top line sales forecast of $740M for the first complete year of sales.

It is important to note that if both PA and NY were to have operational recreational markets by the time of NJ's first year of sales, implying negligible cross-border shopping, the forecast would decrease to $540M.

We will continue to track the progress of the New Jersey cannabis market as it matures. To explore other legal markets, sign up for an Insights account for high-level market data and trends.

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