Florida Sees More Consolidation as Medical Cannabis Sales Soar

September 16, 2023 · Green Market Report

Florida’s medical cannabis industry, already boasting a valuation at over $1.4 billion, continues to grow. And with potential recreational legalization this upcoming election season, the space will likely see some hefty deals.

“Florida has already established itself with a sizeable medical market,” Pablo Zuanic, lead analyst at Zuanic & Associates, wrote in a report Friday.

Altogether, the state’s medical cannabis sales growth has accelerated recently, with sales topping $92 million in August and $480 million for the three months ending on Aug. 31. With a current market annualized run rate of $1.44 billion and more than 800,000 registered patients, the average monthly spend per patient stands at roughly $145.

However, the market’s swift growth isn’t solely attributed to new patient registrations.

“New entrants continue to drive overall growth,” Zuanic said, pointing out that June to August sales rose 13% year-over-year.

And after a period of creeping compression, Florida’s cannabis market may be finding its footing as prices “seem to be bottoming,” said Zuanic. The average price per unit dropped to $22.34 this August, a decline from $28.85 a year prior. But recent trends show promise, with a 2% quarter-over-quarter rise in August. Data shows basket sizes are getting bigger as well.

Still, even though the industry as a whole is making more money, the relationship between Headset and the Office of Medical Marijuana Use’s data suggests the sagging prices are taking a toll on store margins.

“Yes, on the aggregate the market continues to grow in dollars and volumes, but what about profit margins?” he said.

With the market experiencing significant price drops, Zuanic estimates that vertically integrated earnings per store might have fallen by as much as 25% on a per gram basis.

“We realize FL is a vertically integrated market, so it is not just about the store economics,” he noted. “But if you are not expanding (stores), your absolute earnings are falling.”

In other words, while more stores opening can help balance out the loss, if an operator who owns its entire supply chain isn’t expanding or opening new branches, it’s likely earning less than before.

When it comes to product preferences, data from the past few months indicates flowers leading at 43%, followed by vapes (24%), edibles (14%), concentrates (9%), and pre-rolls (5%). The demand for edibles has surged, showing a whopping 47% year-on-year growth.

Planet 13 and VidaCann Merger: A Glimpse into the Future?

Overall, Trulieve (OTC: TCNNF) continues to dominate in sales, store count, and sales per store, notably outpacing the industry average in flower sales.

Among the top five, yoy volume growth showcases varying performances:

  1. Trulieve (+14%)
  2. Curaleaf (-6%)
  3. Verano (+67%)
  4. AYR (+77%)
  5. Surterra (+10%)

But recent movements in the market hint at further consolidation — a trend illustrated by Nevada-based Planet 13’s plans to acquire VidaCann, the state’s ninth-largest retail network. The move, according to Zuanic, could “make Planet 13 a top 5 player in Florida over time.”

The acquisition deal includes VidaCann’s 26 dispensaries, greenhouse cultivation facility, state-of-the-art processing lab, and more. Moreover, another merger of two major entities in the market could catalyze more deals. And any deal involved Planet 13 likely signals a focus toward on-site consumption.

“We also expect other mid-size operators in Florida to be acquired,” Zuanic predicted.

Florida’s cannabis industry is undeniably in flux. As the state awaits a decision from the Supreme Court regarding recreational legalization, industry players may be making their moves sooner rather than later, with potential mergers and acquisitions on the horizon. (Full Story)

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