Correction: This article has been updated with additional information on Lobo Cannagar.
Despite the intentions of New York lawmakers and regulators to craft a recreational cannabis market that is run almost exclusively by local entrepreneurs, out-of-state brands already have made inroads into the state market – and more are actively preparing their entrance.
Out of the 12 marijuana product brands available to date from the two operational adult-use retailers – nonprofit Housing Works and the social equity retailer Smacked Village – at least one is from outside the state, having likely entered via an intellectual property licensing deal, struck with one or more of the state’s 40 processors.
But several of the 280 licensed farmers also reported having been approached by out-of-state brands about possible licensing deals, which could portend a wide array of national brands eventually saturating the New York market, and possibly creating far more competition for local brands.
According to the websites of both Housing Works and Smacked Village, the two retailers have only a handful of brands in stock, but among them are vape cartridges by Massachusetts-based Theory Wellness. They also carry cannabis flower and pre-rolled joints from multi-state brand Lobo, which is best known in California, where it first launched in 2018 before expanding into Arizona, Colorado, Oregon, Canada, and eventually New York.
Theory Wellness did not respond to requests for comment. Housing Works and Smacked Village also did not respond to requests for comment.
The founders of Lobo, however, defended their brand on Monday as having originated in Brooklyn. Despite their out-of-state footprint, which has given some in the New York market that they’re not locals, executives Lobo executives said there’s no more genuine New York brand than theirs. Its “asset-light” approach means they don’t carry any state cannabis business permits.
According to the company website, the Lobo brand is affiliated with Back Home Farm in New York, but founder Aaron Raskin said the brand first launched in California five years ago before returning home to New York.
“The first compliant market we launched into was (California) in 2018,” said Raskin, adding that that past has garnered the company plenty of “haters” in the industry who think Lobo is based on the West Coast.
“Does that make us a California brand? I don’t know. We’ve been selling in New York the whole time in the gray market, for better or for worse, and then we were politely told last year to stop doing that last year, and we did,” Raskin said. “We knew the critical importance of being first on the shelf in New York.”
Licensing Deals Galore?
Although Theory Wellness may have become the first out-of-state cannabis brand to crack the New York recreational market, it won’t be the last. Aside from the likelihood that the 10 licensed medical companies will also be spreading their brands in the coming years, industry sources expect a rush of national brands.
Florida-based national brand Binske confirmed it has plans to enter New York with a licensing deal struck with a cultivator and a processor, according to the company’s president, Alex Pasternack.
Pasternack said he hopes that Binske products will be available at legal retailers in New York by this summer, and eventually he’d like to have Binske’s “entire portfolio” of cannabis products available for sale.
“It’s the same thing that happens in any other state,” Pasternack said of the longstanding industry practice of licensing deals between national companies and local cannabis license winners, almost like franchise models.
Such agreements are common practice and give national brands the exposure they want while also delivering inventory to local companies. In fact, Pasternack said, it was the New York licensees who reached out to Binske about a licensing deal, and not the other way around.
“We will continue to piggy back off licenses … We will license our IP to these cultivators and processors,” Pasternack said. “We’re excited about New York.”
New York City attorney David Feder said several of his processor and cultivator clients have also been approached by big-name national cannabis brands about licensing deals, but he declined to identify any of the companies. He predicts that the trend is going to accelerate through 2023, as both more licensed retailers and processors begin clamoring for well-known marijuana brands that are already available at unlicensed smoke shops and bodegas.
“They’re doing deals with major players from out of state who already have the know how,” Feder said of licensed New York processors and farmers.
Not only that, but he said a lot of national brands are deliberately sweetening the deals by offering major financial incentives to New York processors and farmers.
“They have the money, and they’re offering to do the marketing and sales for the manufacturer and cultivator as part of the agreement,” Feder said of some offers on the table. Some international brands from Canada and Australia have even approached his clients.
“The conversation we’re having is, ‘We’re a juggernaut, we want to come into New York, find us the right partner… We’ll facilitate and provide a tremendous amount of value, in exchange for being first to market,'” Feder summarized. “It’s a no-brainer. It’s a quick way to monetize” for the in-state license holders.
“We’re talking about out-of-state brands dominating New York,” Feder said. “How will New York brands emerge, compete, and survive against way better capitalized companies from out of state? … What’s to prevent everybody who wants to from getting in?”
To be fair, not all national brands are targeting New York, and many large companies are actively avoiding it. In a written statement to Green Market Report, Colorado-based SLANG Worldwide, which has a cannabis footprint in 13 states and Puerto Rico, said it has “no plans” to enter New York.
“New York’s illicit market is out of control, and we don’t see any signs of that slowing down; we’ve seen how that plays out in other states, especially California. I don’t see anyone in New York making any money legally for a long time,” SLANG CEO John Moynan said in an email.
The entrance of out-of-state brands also comes at a time when many of the local companies are still waiting on packaging, testing results, or other logistics in order to get their own products to market, creating at least some bitterness among the small companies that comprise the supply chain to date.
“It’s a little disheartening to see out-of-state brands already starting to hit the shelves,” said Brittany Carbone, a board member of the Cannabis Association of New York and the CEO of Tricolla Farms in Berkshire, New York.
Tess Interlicchia, the CEO and founder of Grateful Valley Farm in Corning, New York, said she and many other farmers are still sitting on much of last year’s harvest, waiting for a chance to make their first sales at Housing Works, Smacked Village, or one of the other upcoming retailers. So to her, the fact that Theory Wellness and Lobo are already being sold is frustrating.
“A good chunk of us are still sitting on everything. We still haven’t been able to sell anything, and the labs are still bottlenecked, and the OCM has to approve testing, and it’s the Chinese New Year, so most of us can’t get sustainable packaging,” Interlicchia said.
She added that a lot of processors she’s spoken to have said they’re looking for brands they know will sell, which often means national brands that already have a following.
“I have spoken to many possible dispensaries, and also the processors, and some of them are just focusing solely on bringing California brands here, which is ridiculous. They’re just looking to sell what people are familiar with,” Interlicchia said, adding that she’s also had out-of-state brands contact her in search of a New York business partner.
February 6, 2023 at 8:31 am
Lobo isn’t owned by Loud Brands out of SF. Lobo is owned by Aaron Raskin out of Brooklyn, and Eduardo Whittington out of NJ. Can we please get a correction posted on this article?