While cannabis has its own unique considerations, it aligns with general retail on at least one front: Cannabis retailers typically experience a drop in sales in the first quarter, with the come-down from end-of-year holiday celebrations translating to a decrease in purchases.
2024 looks to be no different.
Equity analyst Pablo Zuanic of Zuanic & Associates reviewed the leading adult-use states’ sales trends to see if he could get an idea of what first-quarter earnings could look like for multistate operators. Overall, he said, sales fell sequentially from the 2023 fourth quarter.
An increase in the number of stores has created more competition, leading to less revenue per store. Zuanic noted that it’s easier to open a store than start a cultivation facility, which has helped to keep wholesale prices steady.
The analyst also acknowledged that the focus in the industry right now seems to be mostly on legislation versus reviewing company performance. However, good performers in a challenging environment could be even better operators when the landscape eases.
Michigan
Michigan has had four years of adult sales, and instead of leveling out like other mature markets, the state continues to grow at a robust pace. According to state data, sales in the first quarter for the state were $793 million.
Zuanic pointed out that even though sales fell 1% sequentially, they were up 24% over last year. The state’s entire program is contained in only 132 cities, as well, which Zuanic said presents some density issues.
“Public MSOs in MI: Other than SSO Red White & Bloom, TerrAscend has the most exposure to (Michigan). Other MSOs in the state include 4Front, Ascend, Cresco, and Verano.”
Illinois
Illinois logged $493 million in sales for the first quarter, which was down 4% from the fourth quarter but up 6% year-over-year.
“If we just look at rec sales, these were up 9% year-over-year in 1Q24, with sales to residents up 14% yoy vs. down 5% for sales to out-of-state residents (these were 23% of rec sales in 1Q24),” Zuanic wrote. “We attribute the yoy acceleration in total sales to more stores opening and to affordability improving.”
The report noted that Illinois has 13 MSOs, led in number by Ascend Wellness (CSE: AAWH.U) (OTC: AAWH), Curaleaf (CSE: CURA) (OTCQX: CURLF), Verano Holdings (CSE: VRNO) (OTCQX: VRNOF), Cresco Labs (CSE: CL) (OTCMKTS: CRLBF), and Green Thumb Industries (CSE: GTII) (OTC: GTBIF), each of which have 10 stores in the state.
Florida
Despite being a medical-only state, Florida reported $488 million in sales in the first quarter, according to data from analytics firm Headset. That is an improvement of 1% over the fourth quarter and a whopping 14% increase over last year.
The big Kahuna in the state is Trulieve Cannabis Corp. (CSE: TRUL) (OTC: TCNNF) with 135 stores. Even with 627 stores in the state, Zuanic believes Florida is understored compared to adult-use states.
The report stated that the MSOs with the highest relative exposure to Florida are Trulieve, AYR Wellness, Verano, and Planet 13, which is in the process of buying VidaCann.
Massachusetts
Massachusetts’ first-quarter sales fell 3% from the fourth quarter but rose 4% over last year as the state recorded $441 million in sales.
As a mature market, medical sales have fallen off and the state’s consumption seems to have leveled out. Despite that, the state continues to issue more licenses and add more stores. While Zuanic didn’t mention it, with New York’s adult-use program beginning to expand, it is certainly eating into the neighboring state’s sales.
Market share, according to the report, remains fragmented in the state, with the largest presence being held by the Ascend brands at 7% share. Other MSOs clocked in at:
- Cresco Labs, 5%
- Curaleaf, 3%
- Green Thumb Industries, 3%
- AYR Wellness, 2%
- MariMed, 2%
- TILT Holdings, 2%
The report also highlighted first-quarter growth trends for the MSOs, noting that the pattern “varied (for their brands sold at own stores and 3rd party stores): Ascend +73%, Cresco +7%, Curaleaf +50%, Green Thumb – 13%, AYR +32%, MariMed -5%, and TILT +77%, all as per Headset.”
Arizona
Arizona appears to be a contracting market, as sales have fallen from a peak of $380 million in the first quarter of 2022 to $318 million in the first quarter of 2024.
Zuanic doesn’t believe this is a growing market, with limitations placed on the number of stores that can operate in the state.
The report noted that for six public MSOs have stores in Arizona: The Cannabist Co. (two dispensaries), Curaleaf (16), iAnthus (4), Trulieve (21), Verano (6), and Vext Science (2).
Maryland
Maryland began adult-use sales in July 2023. Total sales in the first quarter of 2024 were essentially flat from the fourth quarter at $273 million.
Zuanic expressed disappointment in the sales figure, saying, “We believe this is due to tight supplies and high prices (vs. other rec states). All this said, per capita spend of ~$180 is above most states in the eastern U.S.; we think this is partly explained by out of state visitors (DC, PA, VA).”
The noted that there are 10 MSOs active in the state: Ascend, The Cannabist Co., Curaleaf, Goodness Growth, Green Thumb, iAnthus, MariMed, TerrAscend, Trulieve, and Verano.
Other states
- New Jersey hadn’t yet posted its first-quarter sales data when the report was issued. Zuanic pointed out that the state only has 117 stores and could be considered understored at this time. Nine MSOs have operations in the state, including: Acreage, Ascend, AYR, Cannabist, Curaleaf, Green Thumb, iAnthus, TerrAscend, Verano. In addition, Trulieve was recently awarded a cultivation license.
- Nevada also hasn’t released full first-quarter sales data, but Zuanic said that Headset data points to first-quarter sales falling 14% year-over-year.
- Pennsylvania also hasn’t published the full data for the first quarter. This medical-only state however, is putting up better numbers per population than Florida. Pennsylvania patient spend versus Florida is $311 per month vs. $167 per month.
- Zuanic describes Connecticut as an underachieving state with first-quarter sales of $73.3 million, down 6% sequentially and up 29% year-over-year.
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