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Marijuana multistate operators continue to flee regulated state markets

Publicly traded marijuana multistate operators exited regulated cannabis markets through late 2023, continuing a pattern fueled by increased capital costs, high taxes and the slow pace of federal reform.

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New York-based The Cannabist Co., for example, recently exited Missouri and Utah after what CEO David Hart called an “arduous year.”

Meanwhile, Florida-based Trulieve Cannabis Corp. wound down its presence in Massachusetts. (This map pinpoints where the large MSOs are operating.)

While some companies may have invested too heavily in expansion plans or tried to spread themselves too thin across fragmented markets with different regulations, the industry is also young – and still federally illegal.

“Part of the issue is that it’s still, to some extent, the Wild West,” Matt Karnes, founder of cannabis finance research company GreenWave Advisors in New York, said in an interview with MJBizDaily.

“They’re still learning as they go.”

Marijuana market challenges

New York-based Curaleaf Holdings had operations in 23 states in the first quarter of 2021.

Today, Curaleaf operates in 17 states after exiting mature markets including California, Colorado and Oregon as well as less-mature markets such as Arkansas, Vermont and Kentucky, where the company was invested in hemp.

The changes are part of Curaleaf’s plan to increase return on investment and divest from less lucrative areas.

While the company operates two fewer cultivation sites than it did at the beginning of 2021, it now employs 5,600 workers – about 800 more than three years ago.

Revenue also increased during that time, although profitability remains elusive.

Curaleaf’s total revenue in 2023 was $1.35 billion, a 12.5% increase from 2021, when it posted revenue of $1.2 billion.

Mature markets with an unlimited number of available licenses are challenging to many MSOs.

California, for example, is unlike other markets because consumers are more educated about cannabis and are accustomed to having plenty of choice from both illicit and regulated suppliers.

“In California, you really have to be on top of it – whether it’s the product offerings they provide, a cultural fit or a price point,” said Avis Bulbulyan, CEO of California-based cannabis holding company Siva Enterprises.

“That’s where a lot of (MSOs) came up short.”

Less mature markets with an oversupply of cannabis also are challenging.

For example, wholesale marijuana prices in Massachusetts have declined by about 25% over the past year because of oversupply and currently average about $1,400 per pound, according to New York-headquartered wholesale cannabis platform Leaflink.

As MSOs max out their available retail licenses in various states, many are focused on growing wholesale cannabis sales in 2024.

Cannabis retail opportunities

New York is likely to be another challenge for MSOs, according to Bulbulyan.

Larger operators got the green light to enter the market in 2024, and more retailers are coming online.

But Bulbulyan said most MSOs haven’t yet identified or fine-tuned their primary lines of business in the state, nor are they offering enough variety to compete with smaller operators and the illicit market.

“As these dispensaries get up and running, it’s going to put a lot of pressure on the MSOs,” Bulbulyan said.

Emerging regulated marijuana markets in Florida and Ohio also could lead to more growth among the MSOs.

Floridians will vote on adult-use legalization in November – something MSOs such as Ayr Wellness and Trulieve have been planning for over the past year.

Ohio approved adult-use cannabis legalization, but details about the program are still forthcoming.

International marijuana reform also could present opportunities for MSOs.

Curaleaf recently acquired Canada’s Northern Green Supply, a cannabis producer focused on the import-export market, which Curaleaf said will help it supply emerging European markets “with secure and consistent high quality indoor (European Union-Good Manufacturing Practice-certified) flower.”

While it’s still too early to know for sure, GreenWave’s Karnes said it theoretically makes sense to invest in international opportunities – particularly since it’s impossible to know if or when U.S. federal reform will occur.

Karnes added that for the industry to be successful, new cannabis laws need to be enforced and noncompliant players should face consequences.

“For the industry to achieve its full potential,” he said, “we really have to have a more proactive role on the part of law enforcement.”


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