Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Viridian Capital Chart of the Week: New York Cannabis Accelerates While California Cannabis Stagnates
- Two of the most dysfunctional cannabis markets in the country are now heading in sharply different directions. New York and California are both plagued by massive, entrenched illicit markets that are ironically closely related. A great deal of the product sold in NY’s illicit shops comes from California.
- The chart shows two key metrics for state cannabis programs: Adults per dispensary (green bars) measures how successful the state has been in making legal cannabis available to consumers. Sales per adult (red line) measures the success in converting illicit sales to legal sales.
- New York struggled greatly out of the rec gate. Its nearly single-minded focus on social equity resulted in muted capital formation and a slow retail rollout. Lately, however, the state has clearly begun to get its act together. A rapid pace of new dispensary openings has reduced the number of adults per dispensary from 58,000 at year end 2024 to an estimated 30,000 by year end 2025. Still, well above California’s 22,000 but heading in the right direction.
- The gains in retail locations and stepped-up closings of illicit locations have helped propel New York’s sales per average adult upward by 62%, from $66 in 2024 to $107 in 2025. NY still lags California ($134 but seems likely to surpass California within a year. New York is now forecast at $1.5B of sales for 2025 and between 500 and 625 dispensaries.
- California continues to struggle with a large part of the state being a “cannabis desert”, and the numbers show that little progress has been made. Over half of the state’s municipalities have opted out of allowing cannabis retail locations. Moreover, the state’s tax and regulatory system seems geared toward killing the golden goose. The State government seems incapable of understanding that raising tax rates does not necessarily raise tax revenues. Declining tax revenues automatically triggered an increase in the excise tax slated for July. The planned increase, if enacted, will further strengthen the illicit market and harm the legal market.
- Both New York and California could learn from Colorado. Colorado is widely heralded as the state that has been the most successful in eliminating the illicit market. How do they do it?
- Like New York and California, Colorado does allow municipalities to opt out of hosting cannabis businesses. However, nearly 60% of Colorado municipalities opt in whereas only 40% of California’s do. The difference is that Colorado shares the tax revenue from cannabis with municipalities that opt in, providing a powerful incentive for towns to allow cannabis businesses.
- The Colorado Marijuana Enforcement Division (MED) has built a well-funded compliance infrastructure.
- Taxation is moderate
- The potential is huge! If California and New York, through rationalized taxation and greater enforcement, could achieve revenues per adult of $250, still well below Colorado’s $300+, but similar to Illinois, it would add nearly $5.4B or 17% to nationwide cannabis sales! Will the Big Apple continue on course? Will California ever wake up? Stay tuned!
