Penny Pinchers: New Mexico’s Race to the Bottom

New Mexico’s adult-use market was supposed to be a beacon of opportunity. A fresh frontier. A chance for small entrepreneurs to stake their claim. Instead, three years in, the state has become one of the toughest markets in the country—a place where oversaturation, relentless price compression, wasteful operations, and consumer confusion have dragged operators into survival mode.

License Overload and Weak Store Economics

At the core of the problem is licensing. By Q4 of 2024, New Mexico has issued over 1,050 adult-use licenses, putting it second only to California in raw numbers—but with a fraction of the population. That mismatch leaves the state dead last in adult population per Store, and the results show.

In FY25, the market is projected to generate $584M in revenue. Spread across those licenses, that’s just $0.6M per store—the lowest revenue per Store in the nation. By comparison, operators in Connecticut generate $22M per license; Michigan, $4.4M per license. New Mexico’s glut has created a knife fight for customers that few will win.

The Texas Effect

Ironically, per-adult spending numbers look strong: $388 per adult per year, ranking New Mexico 5th nationally. But this figure is misleading. It isn’t driven by local households—median income here sits at just $51,945. Instead, border towns like Sunland Park and Hobbs are buoyed by Texans making the trip across state lines, loading up, and heading home. Without this lifeline, New Mexico’s revenue per adult would sink.

Price Compression: Built Into the System

From the jump, New Mexico has been an underpriced market.

• Since FY21, the state has hovered at 0.6–0.65x the national market index, meaning products here sell at just 65% of the average price elsewhere.

• Price cuts have deepened every year, with a -16% decline in FY24 alone.

• Emerging markets like New Jersey can still command premiums, while mature markets like Colorado have stabilized. New Mexico skipped stability entirely and went straight into permanent discount mode.

Wasted Cost: The Silent Killer

Beyond weak revenue, operators are bleeding from wasteful cost structures. Many order inventory “a case at a time” at higher per-unit prices instead of buying bulk. Shops stock too many form factors, run too many label variations, and carry excess packaging SKUs that drive costs higher.

The irony is that some businesses have caught on—by lowering operational costs through smarter bulk buys and leaner packaging strategies, they can afford to offer more aggressive pricing without annihilating their margins. But for the majority, inefficiency compounds their struggles. In a state where revenue is already thin, waste turns survivable pressure into fatal stress.

The Unsustainable Math

FY24 brought in $590M total market revenue, but with store counts climbing from 590 to 690, revenue per store fell from $944K to $855K.

The split between profitable and unprofitable shops is brutal:

• 307 profitable stores (44%) average $1.58M each, responsible for the lion’s share of revenue.

• 383 unprofitable stores (56%) limp along at $272K each, dragging down the market while burning cash.

Factor in overhead and 280E taxes, and many “profitable” stores end up with negative net cash (-$79K).

Collateral Damage

The fallout isn’t just hurting business owners.

• Entrepreneurs are losing life savings.

• Employees face wage pressure, layoffs, and shrinking hours.

• Communities lose tax revenues as prices collapse.

• Manufacturers and cultivators wait on late or missing payments.

• Regulators struggle to enforce oversight across too many licenses.

Where Does It Go From Here?

The path forward will demand discipline:

• Stop racing to the bottom—set minimum MSRPs to protect brand value.

• Reduce wasteful operational practices—bulk buy, simplify packaging, streamline labels.

• Focus on education and differentiation, teaching customers why quality is worth paying for.

• Embrace coopertition—collaborating on standards while competing on service and brand.

• Push policymakers to address license saturation before the system collapses.

Final Word

New Mexico’s market is a study in contradictions: border towns thrive on Texas demand, but the core is collapsing. Oversupply, price compression, and wasted operational dollars are killing profitability. The dream of an open, competitive market has turned into a cautionary tale about what happens when you flood a state with too many licenses and not enough discipline.

Unless operators and regulators act quickly, the majority of New Mexico’s businesses won’t just struggle—they’ll disappear.