New Mexico Intends To Attract Texans With $400M Recreational Market

As the efforts to legalize marijuana continue, some states are leveraging their pro-cannabis stance to lure consumers in prohibition states into their recreational market. New Mexico will be the latest state to launch an adult-use market. On April 1st, New Mexico will formally introduce a legal recreational industry that experts predict will bring in upwards of $400M within the first year, per MJBizDaily.

New Mexico is in a unique position, and small local cannabis businesses will get first dibs on new opportunities to cater to their state. Still, Texas, the second-most populous state in America, sits next door. While Texas still has only a few medical marijuana suppliers, the businesses in New Mexico are anticipating a surge in sales among Texans crossing the border to purchase marijuana.

The expected growth in sales within the next five years is around $400M. Experts predict sales will hit $100M-$125M in their first year before reaching $325M-$400M in their fifth year. Texas’s contributions to massive economic growth will come through the numerous retailers who’ve set up shop by the New Mexico-Texas border. 

“Our studies show that 40% to 42% of all adult-use cannabis will be derived from out-of-state purchases, particularly Texas,” CEO of New Mexico’s largest cannabis operator, Ultra Health, Duke Rodriguez, told the Sante Fe New Mexican in 2021. 

Lawmakers in New Mexico passed the bill for legalization nearly a year to date of the launch of their budding market. Despite the April 1st launch date, there likely won’t be many dispensaries popping up across the state. Businesses and producers are still establishing themselves amid the ongoing processing of municipal approvals. Meanwhile, medical patients will likely see more dispensaries spring up in their community as medicinal cannabis operators.

The legislation wasn’t passed without its fair share of criticism, even though certain aspects of the bill received praise. The emphasis on micro-businesses is part of a larger initiative to put more economic power in the hands of small, local businesses. The bill includes:

• Microbusiness categories.
• No limitations on licensing issuance.
• A discount on license fees for retail stores that order on consignment from microbusinesses.

There’s also a provision dedicated to protecting the environment — a key component in a state that regularly faces droughts threats. Officials said that there are plans to create a section geared towards energy efficiency. A business applying for a license must have proof of a water source.

One of the main concerns regarding the incoming legalization is the lack of focus on social equity, mainly because there isn’t a plan addressing the matter. However, there is hope that the emphasis on microbusinesses — with micro-producers defined as growers limited to 200 plants — will be able to create equal opportunities to include marginalized communities in the anticipated booming market. Anyone in New Mexico can participate in the growing cannabis industry because there’s no cap on licenses. Attorney Jordan Wellington of VS Strategies said that it would “allow greater entrepreneurialism and opportunities for everyone in the state.”  

“Microbusiness licenses and consignment have the potential to lower barriers to entry, and lowering barriers to entry will improve social equity,” he continued. Still, with $5M set aside for grants and loans towards microbusinesses, New Mexico is expected to draft a plan to address social equity, similar to other states that have allocated a percentage of cannabis tax revenue towards programs to uplift communities affected by the War On Drugs.

Director of New Mexico’s Cannabis Control Division, Kristen Thomson, explained that it’s integral to the state to provide startup businesses and local businesses the facilities to grow along with the industry. She explained that the 35 vertically integrated legacy cannabis businesses would receive further support in securing their footing in the market. 

However, an anticipated supply shortage sparked concerns earlier this year. In January, officials issued an emergency ruling that allowed growers to double the plants’ limit. Much like establishing retail stores for recreational use, officials in New Mexico believe that time is needed for growers to supply the demand. There are possibilities that there will be a day when you can’t find an oil syringe with your favorite tincture, but Thomson added that it doesn’t seem likely there will be a shortage of marijuana. In the case it does occur, the state will prioritize medical patients.

Despite the potential hurdles the cannabis industry will have to face in New Mexico, there is optimism towards the future of the state’s market.

“We anticipate that on April 1st, the industry will look much like it does today,” Thomson said. “What is exciting is what it will look like six months to a year from now when small craft producers and small retail stores open across the state.”