A New Era in New Mexico

Duke Rodriquez lays it out bluntly: New Mexico’s adult-use cannabis retail program underperformed in April, the first month for the new market.

Rodriguez, the president and CEO of Ultra Health, a vertically integrated operator with 38 dispensaries serving both patients and adult-use customers in the state, says the nearly $39.5 million in combined adult-use and medical sales recorded by licensed dispensaries were about 25% short of his expectations. Rodriguez’s $50-million benchmark for April was two-fold.

First, New Mexico has roughly twice the population of Montana, which launched its adult-use retail program Jan. 1, 2022, and ended up recording $25.4 million in combined adult-use and medical sales in April, according to the state’s department of revenue. Therefore, New Mexico’s sales should have roughly doubled that figure, especially considering its geographic draw to customers from Texas—the second most populated state, where only medical cannabis with a 1% THC is legally accessible—according to Rodriguez.

Second, a trifecta of stars aligned in April for stellar retail conditions, including five Fridays and five Saturdays; the excitement surrounding the April 1 launch; and the natural sales surge associated with April 20, he said.

Rodriguez provides further details on the new market, Ultra Health’s expanded operations in the state, what industry stakeholders can expect for the remainder of 2022 and more in this Q&A.

Tony Lange: Looking back, what stood out most about Ultra Health’s preparations leading up to the April 1 launch of adult use?

Duke Rodriguez: In the areas we had direct control, such as building out new cultivation capacity or completing construction of new dispensaries, we were full steam ahead. In the 12 months preceding the start date of April 1, we doubled the number of store locations and increased our greenhouse capacity by more than 80%. Over 150 new employees were hired and trained. The Ultra Health system grew tremendously outside of waiting for the state of New Mexico to make a final determination on the number of plants to be allowed per licensee.

TL: What do you anticipate for the remainder of 2022?

DR: The year 2022 could see further deterioration on the medical side, as has been experienced by other states. The illicit market is likely to make an aggressive move to fill the void with lower priced—but untested and potentially unsafe—products. The risk of illicit product ... from neighboring states like California or Oklahoma is a real consideration ....

TL: How has vertical integration helped Ultra Health adapt to the nascent adult-use market?

DR: Vertical integration remains the best path for success under the New Mexico framework. Being able to have more control over the supply side of the equation is a huge advantage. Being a retailer-only kind of operator that is wholly dependent on an unknown or not yet developed wholesale market is a recipe for likely failure. The wholesale price per pound has more than doubled in the last six months alone, from under $2,000 per pound to over $4,000 per pound. The regulated market is going to be hard-pressed to effectively compete with the illicit market.

Editor’s note: This interview has been edited for style, length and clarity. Read a longer version of the conversation.

Tony Lange is associate editor for Cannabis Business Times.