The Nevada-based retailer is looking to expand its market share.
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March 27, 2023
As the small get weaker, the big get stronger by gobbling them up. Or they just wait for the weak to die off, and then take over their territory.
That’s the simple version of what Nevada-based Planet 13 Holdings’ leadership discussed as a likely strategy for their home state in 2023, since they believe many other retailers are on “life support” and ripe for acquisition, due to price compression and a broader slowdown in sales as the economy continues to tighten.
The possibility fits perfectly with Planet 13’s goal of increasing its market share, from roughly 8.5% to around 12% or higher, the company’s co-CEO’s said during the fourth quarter earnings call on Thursday.
“We’ve got a lot of stores that are struggling. We think that’s going to create some opportunities for us here in the near-term,” said co-CEO Bob Groesbeck.
“There are some that are on life support, a number of them. The problem is, (the state) keeps granting licenses. So, we’ve got a number of dispensaries that continue to prop up, but they’ve got no market share,” Groesbeck said. “The length of operation is very, very short, particularly the stand-alone… They’re basically on fumes right now.”
Groesbeck said Planet 13 might consider buying some distressed assets in northern Nevada, but he indicated it would be more likely to expand around the Las Vegas area.
Regardless, Groesbeck predicted, the situation is already dire enough for a sizable chunk of Nevada cannabis companies that “there will be no shortage of (acquisition) opportunities here as we go into this fall.”
Even if Planet 13 doesn’t go on an acquisition spree in its home state, it will likely benefit just from some existing cannabis shops going under, noted co-CEO Larry Scheffler.
“The other big benefit for us … is getting rid of some of the competition, that we’ll pick up the customers that are left. We divide (the customer base) between the ones that survive this downturn,” Scheffler said.
That position – with Planet 13 holding $52 million in cash and a decent runway forward – puts the company in a solid spot heading into 2023, Scheffler and Groesbeck asserted.
If they’re right – which isn’t a bad bet – the plan could be a road map for other cannabis companies to follow in coming months, depending on how much capital they have to acquire other distressed competitors and their assets