A brand new Florida legislation repealing a ban on smokable medical marijuana merchandise has given the state’s MMJ market a shot within the arm, prompting giant multistate firms to aggressively broaden their manufacturing, operations and retail footprints.
That has injected contemporary competitors into one of many nation’s fastest-growing medical hashish markets and loosened the grip of the state’s largest MMJ firm.
Some multistate operators probably have overpaid to get into Florida’s market, with stories of some acquisitions exceeding $40 million – together with a $53 million transaction by MedMen.
Whereas smokable flower clearly has figured prominently in lots of corporations’ returns on funding methods, one professional questions whether or not their investments will repay anytime quickly given their present restricted market shares in Florida.
Tallahassee-based Trulieve nonetheless controls practically 52% of the gross sales within the nonsmokable marijuana market, however its share of smokable merchandise has progressively declined from 57% in mid-July – when the state began publishing the information – to lower than 45%. The smokable flower ban was lifted in March.
Trulieve’s smokable share declined to as little as 35% throughout one current week.
However the firm, which has a big cultivation capability, would possibly now be benefiting some from flower shortages throughout Florida.
Flower gross sales have offered extra market alternatives and a bigger revenue potential and would possibly assist rebalance a market that Trulieve has largely dominated.
Florida’s medical marijuana operators are also eyeing one other large potential market down the highway: leisure hashish, though it’s unsure if the difficulty will get on the state’s 2020 poll.
Smokable merchandise generate roughly $three.5 million-$5 million per week in gross sales in Florida, based mostly on costs of $10-15 a gram, in keeping with business officers.
That works out to annualized gross sales of $200 million or extra.
“Smokable flower has grow to be the biggest vendor,” stated Jeffrey Sharkey, president of the Medical Marijuana Enterprise Affiliation of Florida.
“Whereas Trulieve has dominated the market as a result of their benefit in retail dispensary places (and excessive gross sales per retailer),” he stated, “their closest opponents are aggressively ramping up retail places, market visibility and manufacturing, and are closing the hole on share of smokable product gross sales.”
After ban lifted, multistate operators charged in
Since March 21, when Trulieve was the first to promote smokable medical hashish in Florida, the variety of dispensaries within the state has shot up greater than 70%, from 109 to 187 as of Nov. 1, in keeping with weekly market updates revealed by the well being division.
A number of multistate operators (MSOs) instantly turned lively in Florida. For instance:
- New York-based iAnthus, which owns the GrowHealthy chain, elevated its retail footprint from three to 9 dispensaries. It additionally signed actual property leases to spice up that quantity to 20 by early 2020.
- Cresco Florida, previously VidaCann, practically doubled the variety of its dispensaries from seven to 13.
- California-based MedMen launched in Florida in March as delivery-only however now operates seven dispensaries. And extra are on the way in which.
- Arizona-based Harvest Well being & Recreation expanded from one to 6 dispensaries within the state.
- Chicago-based Inexperienced Thumb Industries (doing enterprise as Rise Dispensaries) elevated its footprint from one to 5 dispensaries.
- Columbia Care Florida, a part of New York-based Columbia Care, was beforehand delivery-only. It now has three dispensaries.
- Surterra Wellness already had 23 dispensaries in Florida, however the Atlanta-based firm has bumped that quantity as much as 36.
Trulieve, the chief in Florida with 26 dispensaries in late March, had elevated that whole to 38 dispensaries as of Nov. 1.
Sally Peebles, a companion with the Vicente Sederberg legislation agency in Florida, stated that many firms – often known as medical marijuana remedy facilities (MMTCs) – have been ready for the smokable ban to carry earlier than making giant operational investments within the state’s MMJ market.
“I consider many MMTCs selected to not open up dispensary places till flower turned authorized, as flower accounts for a majority of a dispensary’s income,” Peebles wrote in an e mail to Marijuana Enterprise Day by day.
Added Sharkey: “The price of manufacturing is much less (than different merchandise), the margins are larger. And individuals who have been conversant in hashish for years – that’s the way in which they give it some thought (as a product to smoke).”’
Trulieve faces contemporary competitors
As extra MMJ firms open dispensaries, and competitors heats up, Trulieve’s general market share would possibly go down, Peebles stated.
“I think about as extra gamers enter the market, particularly the multistate operators who can apply their years of expertise in aggressive markets out West, the Florida market might grow to be extra balanced,” she wrote.
Nonetheless, the truth that Trulieve nonetheless controls half the nonsmokable market reveals that some rivals are focusing totally on flower.
Take Harvest Well being, for instance.
Its six shops are promoting principally flower, a small quantity of nonsmokable THC hashish merchandise and no CBD merchandise, in keeping with Florida well being division information.
Then there’s Toronto-based Liberty Well being Sciences, which at the moment has 19 dispensaries in Florida, up from 12 in late March.
Liberty sells nonsmokable merchandise however has made its greatest mark within the smokable market and is now the state’s second-largest vendor of smokable flower, with a market share of practically 20%.
Liberty has succeeded, partially, by aggressive pricing that features a hashish flower product priced at $28 for three.5 grams.
Sarasota-based Different Medical Enterprises (AltMed), which has 9 dispensaries throughout Florida, is the one firm to rival Trulieve by way of gross sales per retailer and has garnered greater than 10% of the smokable market.
Did some MJ corporations overspend to get into Florida?
Some MSOs reportedly paid $40 million or extra for a vertically built-in license, which permits them to open as many as 35 dispensaries throughout the state. (Trulieve and Surterra gained authorized challenges towards the state, permitting every firm to divulge heart’s contents to 49 dispensaries.)
Andrew Livingston, director of economics and analysis within the Denver workplace of Vicente Sederberg, has puzzled over the massive amount of cash some MSOs ponied as much as purchase licenses with out working grows or shops in Florida.
He stated MSOs that paid tens of hundreds of thousands of would possibly discover it laborious for his or her investments to repay anytime quickly, even with their aggressive efforts to enter the smokable market.
“You will need to do not forget that it takes hundreds of thousands of on prime of what they paid for the license to assemble giant cultivation services and dozens of shops,” Livingston stated.
Apart from Trulieve, all of the medical marijuana firms in Florida nonetheless have general market shares of lower than 20%, in keeping with state information. Most are within the single digits.
Making main inroads in a market the place there’s an entrenched, dominant participant is tough, Livingston famous, particularly if that firm has a powerful model, the most effective places and maintains a loyal buyer base.
Jeff Smith may be reached at [email protected]