Sacred Garden dispensary closing, cites market saturation

Customers of one of the oldest cannabis dispensaries in Las Cruces were dismayed last week to find signs announcing it was going out of business and holding liquidation sales.

Sacred Garden Las Cruces is closing its doors after Sept. 20, following nearly seven years of operation, along with the parent company founded as a medical cannabis provider in 2010 by Zeke Shortes of Santa Fe.

Sacred Garden is a vertically-integrated operation, “seed to sale,” meaning the company is involved in growing the plant, manufacturing cannabis products, distributing and selling them through its seven dispensaries around the state, including one near downtown Las Cruces and one in Sunland Park.

Carla Padilla, manager of the Las Cruces shop, attributed the closure to a crowded marketplace that exploded after New Mexico legalized cannabis for non-medical adult use in 2021, followed by the opening in 2022 of a state-regulated commercial market with no cap on licenses for cannabis producers or retailers.

“Right now, there's just so much competition, the market is so overly saturated, that we're just not making money,” Padilla told the Las Cruces Bulletin.

Padilla started work at Sacred Garden as a budtender in 2018 and worked her way up to store manager, but says she may leave the industry altogether. In the meantime, the store has already begun reducing staff and cutting hours for those who remain as it begins saying farewell to longtime customers, particularly patients enrolled in New Mexico’s medical cannabis program since before recreational use was legalized in the state.

“We developed this rapport with all of our customers and patients, and we're really well-known in the community for helping our elderly that are more, you know, medically based,” she said. “Those are the ones that really I fear for, that people aren't going to give the same compassion and care, and I just hope that they do – that they find somewhere that treats them good and listens to their needs.”

The Bulletin reached out to the Sacred Garden parent company in Santa Fe, which did not respond before this article appeared online.

More retailers share shrinking market

Concerns for protecting access and affordability for medical cannabis patients have been voiced by patients and producers alike since before the legislature approved recreational use during a 2021 special session. Medical cannabis was legalized in 2007 and administered through a state-operated enrollment program. When New Mexico opened the gates to recreational use, the state’s regulatory agency, the Cannabis Control Division, took on the role of reporting revenues for the new industry that had state officials cheering.

Cumulative sales topped $1 billion in March of this year. Yet prices have remained high compared to the unregulated or “illicit” market, refuting one of the arguments in favor of legalization; and enrollment in the medical program has declined steadily.

Bill Sluben of the Data Heard, an analyst who reports on medical cannabis industry data, posted on LinkedIn that the medical program lost 20,000 active enrolled patients over the past year, and that every municipality with medical cannabis providers, except for Ruidoso and Taos, saw decreases in year-to-year sales.

According to CCD data, medical sales have slowly trended downward since the opening of the recreational market, and the trend in monthly Las Cruces sales of medical product mirrors the trend: From $1.6 million in April 2022 to $926,000 in July 2024, with more retailers than ever sharing a diminishing market.

“We are definitely seeing more than a handful of businesses struggling in the industry and looking at possible closure due to the vast amount of competition for cannabis retailers,” said Nicole Fuchs of the Southwest Cannabis Trade Association.

As a consultant working with new entrants to the industry, Fuchs said the field favors the wealthier operators: “Cannabis businesses, especially retail, require a lot of capital inputs to get through the startup phase and remain operational.” While New Mexico may boast of lower barriers and fees for getting into the market, Fuchs said the costs of operation plus the excise tax for adult-use cannabis make it “a system where it's survival of the ones with the most money.”

Ben Lewinger of the New Mexico Cannabis Chamber of Commerce in Albuquerque acknowledged that the high number of entrants to the industry made it highly competitive and that a market correction was inevitable as operators find their revenue simply won’t cover the cost of doing business. Even so, he said others, including some smaller locally-held operations, are “doing just fine.”

He also pointed to signs that some of the newer operators had the advantage of viewing what has happened over the first two and a half years of New Mexico’s marketplace.

“You have these folks who have seen what's happened with the market, and they're maybe better capitalized, they have a better strategy, a better business model, who are going to open retail while all these other locations are closing – and some of them will be successful.”

To the criticism of unlimited licenses for qualifying applicants, Lewinger recalled the process of legalization in 2021. Low barriers to enter the marketplace were viewed by lawmakers and his chamber as an essential measure on social justice grounds, yet the original version of cannabis bill  – which did not survive the regular session – had allowed regulators to temporarily “throttle” new licenses to head off market saturation and maintain equilibrium.

“That language was taken out … in the special session,” Lewinger said. “It's something the (Cannabis Chamber) has tried to add back in each legislative session since then, and it's one of our top priorities still.”

Sacred Garden took the state’s Taxation and Revenue Department to court to challenge taxation of medical cannabis, leading the state Supreme Court to rule in 2022 that enrolled patients should not have to pay gross receipts taxes on their medicine, since medical prescriptions are shielded from GRT under the law, in a win for medical cannabis providers.

Shortly after that, Sacred Garden was back in court, fighting a claim by state regulators that it had violated public health standards. Ultimately, Shortes would tell the Santa Fe Reporter in 2023, the dispute cost Sacred Garden $1 million in sales and he predicted it would take “a couple of years to recover.”

In Las Cruces, as Padilla greeted customers on Sept. 3, she said it was an untenable competitive field that ultimately brought Sacred Garden down.

“I think that, sadly, a bunch more dispensaries, you’ll see go down, because it’s just a really tough market.”