Cresco Exits California Amid Strategic Restructuring
July 22, 2025Illinois-based multistate operator Cresco Labs is exiting the California market as it restructures its business to take advantage of growth opportunities in other markets. For Cresco, with sales of $724 million last year, the move “allows us to reallocate capital and resources to our core markets and build out new markets where we see clear pathways for growth and shareholder value,” according to CEO Charlie Bachtell.
Cresco says it’s in active discussions with prospective buyers for its California assets, which include cultivation, manufacturing, and select distribution operations. The company is aiming to conclude a deal within the next several quarters, and says it will retain full ownership of its premium FloraCal brand, which it will continue to produce and market across key states.
“Capital is increasingly precious in this environment, and our focus is on deploying it where it earns the strongest return,” said Bachtell. “While California is the largest cannabis market in the world, the structural challenges—ranging from fragmented retail to price compression and the illicit market—combined with our lack of scaled footprint in the state, make it extremely difficult to generate sustainable profitability.”
In a research note, Roth Capital said Cresco’s retreat from the Golden State is indicative of how the market has fallen short of expectations. In 2019, when Cresco entered California with the approximately $875 million acquisition of Origin House, California’s market was projected to reach as high as $7.7 billion by 2022, but today it’s likely at less than $5 billion.
The deal for Origin House made Cresco a leading wholesale distributor in California, selling into over 575 dispensaries, or about 65% of the total, the company said at the time. Origin House’s sales were projected at $250-$270 million for 2021, Roth said, but today it estimates that Cresco’s California business is down to $20 million in revenue and not profitable.
Cresco isn’t alone in abandoning the California market in order to reallocate capital toward other growth opportunities, with none of the top five multistate cannabis operators now having a material presence in the state, Roth said. The large enduring illicit market and downward pricing pressure combined with regulatory challenges has stunted growth in the state, making it less attractive to leading players who are seeking better returns on capital under challenging conditions across the country.—Daniel Marsteller
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