New Mexico's green thumb: Cannabis sales topped $40 million in July

Gov. Michelle Lujan Grisham's office hailed cannabis revenue numbers from July last week, as total reported sales topped $40 million for the first time since New Mexico's regulated marketplace opened sales of adult-use cannabis.

Locally cultivated Canna Company in Deming, NM has seen an increase in customer sales since opening its' doors at 115 N. Silver Avenue back on April 20th.

Every month, our customer-base has grown by at least 20 percent," said co-owner Leo Aviles. Aviles, along with Terry Brenner, plan on opening a cannabis dispensary in Silver City this month.

Canna Company served 1,400 customers in June and 2,300 in July. "We are already at 60 this month," Aviles said.

Canna Company boasts a locally cultivated product right here in Deming. Growing in Luna County affords them the ability to sell more strains than their competitors in town. "Our biggest thing that sets us apart is that we cultivate locally. I get good feedback from our customers because our product is fresh off the shelf," Aviles said. "We feed our dispensary with six to eight strains where normally a dispensary would have two."

Canna Co. currently employs 23 at its; cultivating plant and retail dispensary. Aviles added, "We feel like we are Deming proud because of the fact that our product is grown locally."

One of New Mexico's largest cannabis producers and retailers, Ultra Health, signaled concern over the progress over the fledgling industry.

The July numbers represented an increase following a dip in June, but gross medical cannabis sales have deteriorated since April while recreational cannabis sales have grown by 5.8 percent since April as more retailers have entered the market.

In July, medical products accounted for $16.8 million of total sales reported to New Mexico's Cannabis Control Division. That's on a level with $16.5 million reported in June, which declined nearly $1 million from April and May.

Non-medical sales for adults age 21 and older amounted to $23.5 million per CCD reporting, compared to $22.1 million during the first month of legal transactions.

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Dispensaries operated in 51 municipalities — up from 40 in April — with the highest reported revenues in Albuquerque ($14.6 million in total), Santa Fe ($3.5 million), Las Cruces ($3.3 million), Hobbs and Rio Rancho (both around $1.6 million).

Adult use cannabis sales are subject to state and local gross receipts taxes as well as New Mexico's cannabis excise tax. Medical cannabis sales are tax-free. In July, the state Tax and Revenue Department collected returns from 149 retailers for total excise taxes of $2,472,376.45, in addition to GRT that varies based on local tax rates.

When ranked in order of recreational sales alone, which are taxable (unlike medical sales), those cities lined up similarly except that Rio Rancho was displaced by Sunland Park, which posted $1.2 million in adult use sales to Rio Rancho's $742,725. Sunland Park is among the municipalities where dispensaries operate close to the Texas, where cannabis remains illegal under state law for all but limited medical uses. (Cannabis is also prohibited under federal law.)

In a statement, Lujan Grisham exulted: "We've established a new industry that is already generating millions of dollars in local and state revenue and will continue to generate millions more in economic activity across the state, creating thousands of jobs for New Mexicans in communities both small and large."

'Nowhere near our true potential'

Duke Rodriguez, Ultra Health's CEO, is not celebrating just yet.

"The results are nowhere near our true potential," he observed. "At best it rates a report card grade of maybe a C."

The modest increase came during a month with five Fridays and with adult-use sales opening in new communities, he pointed out. "What we are actually seeing, sadly, is that the average purchase per consumer is on a downward trend. We're mitigating that downward trend by bringing up new markets that we previously weren't serving. So the results are more disturbing than they are encouraging."

"Montana, with only half the adult population of New Mexico and without the benefit of Texas at the doorstep, did $19.2 million," he added, arguing combined New Mexico sales should be far higher by now ― perhaps around $50 million.

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He also expressed concern over declining medical cannabis purchases over the past year and decreased participation in the state's medical cannabis program, which peaked at 135,388 cardholders in May but has receded each month since to 130,128 in July.

Rodriguez says the monthly reports from regulators, accompanied by triumphant news releases, are useful largely as a preliminary outlook and that data on collected tax revenues, and the number of active operators filing returns, are a better indicator of true economic activity.

Meanwhile, Rodriguez argued that New Mexico's market may be saturated with operators relative to some local populations, while cannabis plant count limits — the maximum number of plants producers may cultivate, which has been challenged in court by Ultra Health and other litigators — limit supply and push prices upward.

Plant count limits have also been defended as a way to level the field for new entrants into the marketplace, including operators much smaller than Ultra Health, as part of the Cannabis Regulation Act's social justice imperative.

But Rodriguez says another purpose of the law, to combat illegal sales or unregulated product, is being neglected. With prices per gram as high as they are before taxes, Rodriguez said the "illicit market" can easily set its prices lower — by as much as half per gram of cannabis, he claimed.

"We will never be competitive with the illicit market until we can be more competitive with the amount of product, the quality of the product and the price of the product," he said.

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Algernon D'Ammassa can be reached at 575-541-5451, adammassa@lcsun-news.com or @AlgernonWrites on Twitter.

This article originally appeared on Las Cruces Sun-News: New Mexico's green thumb: Cannabis sales topped $40 million in July