We sat down with acting Director of the Cannabis Control Division (CCD) Andrew Vallejos to discuss the industry.
The Paper.: We’ve seen record cannabis sales and dispensaries popping up everywhere. Can you tell us a little bit about the general state of the state’s cannabis industry right now?
Vallejos: I think we came out of the gate a little bit more mature than other states. Other states saw a lot more fluctuation in that first couple of months—on both sides of this. Either you saw really high sales the first month and then a big fall off, or they started off slow and then rose up. We’ve been remarkably consistent since April. Both on the medical and recreational side. It’s been interesting to see the consistency in sales.
Now, just like in most states that had a medical program, we did see some migration from the medical program to the to the adult-use side, so that doesn’t surprise us. We’re just monitoring the situation. We’re taking a “wait and see” approach to see how the industry is shaking out in New Mexico. But it’s been remarkably consistent.
We were told that there were some staffing shortages at CCD. Has that problem been fixed?
To a certain extent. This bill was very ambitious in its timeline. From the passage to implementation, there were more statutory timelines to stand up the industry than almost any legislation I had ever seen before. It was certainly the legislative intent to get the regulatory body up and running. So I think a lot of the effort went into writing the rules, first and foremost, but we’re also trying to build the airplane as we’re flying it.
It was a challenge to get the staffing ramped up, but most of the resources that we put in prior was on the licensing side. We’ve gotten people licensed up now, so we’re trying to develop more of our compliance side at this point. So we’re still ramping up. We still have some enforcement strategies that we’re trying to build out.
For example, we were tasked with regulating it statewide. With inspections, it doesn’t make any sense to have this one central location. We have our Santa Fe office, and we’re building out our Albuquerque office as we speak. We’re also building the Las Cruces office as we speak, so that we can put inspection resources and compliance resources in all three parts of the state: southern, central and the northern part.
You’ve said that the state shouldn’t limit the number of cannabis licenses. Why do you feel that way?
The legislative intent behind the cannabis regulation act was to provide economic opportunities for people who haven’t been in the market before. There are states that basically go into the cannabis market and they choose 10 growers, and they have market control over the entire cannabis industry. So you’re really picking winners or losers there. I think the idea behind the cannabis act was to give everybody an opportunity to get into the industry and make a go of it, and to let the better business model win. It’s not that everyone who has a license is going to be successful. That’s not the point. The point is to give people the opportunity to get into the industry, and then let the industry sort out who the winners or losers are—not the state of New Mexico.
Limiting licenses kind of looks like the quota system we have for liquor licenses, which led to the sale of liquor licenses and a high cost for getting into the industry. I think the fundamental value behind the cannabis act was to provide opportunities and let the market sort out who is going to be winners or losers.
One of the things that we look at as kind of distressing to us is that we hear a lot of people say that New Mexico is “oversaturated.” And I think that’s a real misnomer. We have to be careful with our words. When we talk about saturation from a regulatory side, we talk more about density—or how much is out there. With alcohol, over-density in certain areas might lead to this outcome or that outcome. When people are talking about oversaturation, what they’re really talking about is limiting the amount of people who can get into the market so that they could solidify their market share. We’re concerned about the opposite of that. We’re concerned about the antitrust issues that are raised when—let’s say—the top 10 growers have control over 50 percent of the market. We’re concerned about what that does for things like price fixing or collusion. A well regulated market is one that’s open to people and is not being dominated by a few licensees that have the vast majority of the plants.
Budweiser and Coors dominate the beer market nationally. Does that mean that we should get rid of craft brewing? Absolutely not. Craft brewing is very successful and people have very successful business models that are never going to compete with Budweiser and Coors and Molson, but they will send their kids to college and they’re hiring 15 employees and being a general economic driver in the state. We see it the same way. There can be big cannabis businesses, but the economy in New Mexico does not have to be dominated by them. There’s room for smaller operators, and there’s room for bigger operators.
Is there anything exciting coming up with the CCD that our readers should know about?
I’m sure you already heard about our data reporting system on our website [Cannabis Reporting Online Portal (C.R.O.P.)]. We’re going to create enhancements to that. It’s pretty exciting to allow people to look at the industry from the outside—whether you’re a journalist or you’re a member of the public or if you’re a policymaker. It’s also a great tool for the auxiliary and supplemental businesses that are associated with cannabis. For example, insurance companies and insured cannabis shops, or bankers that want to lend money, or even if you have private equity and want to see data that’s not provided from the licensee.