What are ATC’s, and How Do They Add to New Jersey’s Recreational Cannabis Market?
New Jersey’s path to legal weed has been somewhat rocky, to say the least. Although the use of medical marijuana among qualified patients has been legal in the state since 2010, recreational sales weren’t made legal until March 2020 – after the state passed Public Question No. 1 – and recreational sales weren’t approved until April of this year (2022). This period was marked by many attempts to reform the state’s existing cannabis legislature, especially by current Governor Phil Murphy, who made drastic changes to its medical marijuana program after repeatedly being unable to come to an agreement with state legislators which would result in legalization.
These changes were extremely widespread, and included phasing out sales taxes on medical marijuana, increased monthly consumption limits, and the establishment of a new regulatory program known as the Cannabis Regulatory Commission (CRC) to oversee the medical marijuana program; many of these fell under the 2019 Jake Honig Compassionate Use Medical Cannabis Act. But among the most impactful were various improvements to the state’s Alternative Treatment Centers, or ATC’s; state-licensed businesses that are allowed to grow, sell, and manufacture medical cannabis. These businesses have been crucial to the state’s efforts to make cannabis more available for the average citizen, and will continue to play a significant part in New Jersey’s recreational cannabis market.
A Brief History of ATC’s
If you’ve lived in New Jersey within the past 10 years, you may have heard of ATC’s as a kind of cannabis dispensary used for purely medicinal purposes. Up until this past April, ATC’s were essentially the only place where residents could legally obtain cannabis of any kind, and even under these circumstances it could only be through a doctor’s prescription to a specific set of ailments. They first began appearing in 2010 after the passage of New Jersey Senate Bill 119; on top of legalizing medical marijuana, the bill allowed residents to apply for and obtain medical marijuana business licenses, with which they could then open an ATC.
However, for a long time these licenses proved to be worth their weight in gold. Although six were awarded in 2011, no more were given out until six more were awarded in 2018; strict regulations and criteria for prospective owners made the application process no easy task. Because of this, the 12 ATC’s which resulted were scattered across different parts of the state. This made it difficult for many patients without access to proper transportation to obtain the medication they needed, on top of the other ongoing setbacks in the legalization process.
It’s therefore no surprise that ATC’s became a hot topic of discussion once the possibility of legalization started edging closer toward reality. Firstly, in order to more easily jumpstart the recreational market, the state government authorized each of the 12 existing ATC’s in the state to receive the first adult-use retail licenses as soon as recreational sales were made legal. But with the CRC having expected over 800,000 consumers to purchase marijuana in the first month of sales, this offer was conditional upon each location’s ability to prove that they had enough marijuana both for these consumers and the 130,000 registered medical marijuana users in the state at the time.
Only 7 ATC’s were able to expand in the end. But even so, when looking at these 7 locations, this demonstrates not only the adaptability and profitable potential of capable ATC’s in modern cannabis markets, but also the power of this potential under governments which prioritize both patient access and public safety. As the chair of the CRC Diana Houenou stated, these ATC’s have a promise to uphold to both their “patients and communities”.
ATC’s as a Business Model
Another way in which ATC’s have positively contributed to New Jersey’s recreational industry has been the usefulness of their structure as a business model, with which the state government has organized much of its new market. For example, in May 2019 – about a month before the Jake Honig Act was signed – Gov. Murphy issued an executive order to expand the state’s medical marijuana program to include ATC licenses specializing in a certain stage of production, known as endorsements. Whereas a full-on medical marijuana business license is vertically integrated, allowing an ATC to perform all of these functions, endorsements created an opportunity for residents to participate in the medical market in a non-vertical fashion. These included:
- Cultivation Endorsements: Allowing an ATC to possess, cultivate, and package marijuana, and to distribute/sell it to other licenses ATC’s, but not directly to registered patients.
- Manufacturing/Processing Endorsements: Allowing an ATC to possess and process marijuana, and to purchase, manufacture, and conduct research on marijuana, but not from registered patients.
- Dispensary Endorsements: Allowing an ATC to purchase marijuana from other licensed ATC’s, and to supply and sell marijiuana to registered patients.
In the state’s present-day recreational market, the CRC has clearly drawn on this system as a source of inspiration. As a result of the CREAMM Act, the commission has established 6 classes of licenses for recreational use licensed businesses, including cultivation, manufacturing, wholesale, distribution, retail, and delivery; similar to the ATC system, you can also obtain a recreational use license, with which you can do all of the above. And although no recreational use licenses have been awarded yet, this system has proven to be pretty successful; as of June 2022, 148 recreational use licenses had been awarded in the cultivation, manufacturing, and retail categories, along with 4 more given to testing laboratories.
New Jersey has seen positive results since the state government gave recreational use the green light, its first month alone bringing in over $24 million in sales according to the New Jersey Monitor. This figure is arguably low compared to some other states; Arizona, for example, reported over $32 million in sales within its first month, and New Mexico reached nearly $40 million in the same period of time. However, it is important to note in this regard that the profit being generated by each New Jersey dispensary was much higher than that in the other two states. More specifically, the $24 million in New Jersey was generated by the 7 aforementioned ATC’s (running through 12 dispensary locations) which had been authorized to sell to recreational consumers, as compared to the 73 facilities and at least 100 stores operating in Arizona and New Mexico, respectively, at the time of their markets opening.
In short, the impactfulness of ATC’s on New Jersey’s recreational cannabis market has been undeniable. With its market still ever-expanding, the foundation which the ATC model has provided will only help the state work with prospective license holders to achieve both of their desired outcomes. For any other state where legalization is looking possible, ATC’s are a great example to learn from.
Want to learn more about ATC’s? Or, how you can set up your cannabis business after earning a retail dispensary license in New Jersey? Reach out today for a demo of the BioTrack software!