Multistate Players Position For Growth As New Markets Come Online
August 13, 2024Leading multistate players Curaleaf, Cresco, Verano, and Ayr Wellness continue to focus on right-sizing their businesses and deploying resources to key markets amid uneven conditions in the national cannabis industry. Sales have been boosted by new states coming online, such as Ohio and Maryland, and key operators are looking ahead to the potentially lucrative adult-use market of Florida, while legacy markets continue to decline.
Curaleaf, with yearly sales of $1.3 billion and a market cap of $2.4 billion, has been busy expanding its Florida operations and launching new hemp THC products. For the second quarter, Curaleaf reported adjusted EBITDA of just under $73 million, a slight rise over last year. Revenue for the quarter was up 2% to $342 million. Executive chairman Boris Jordan believes revenue and margins will improve in a number of Curaleaf’s markets, pointing to New York, the new adult-use market in Ohio, and the company’s growing E.U. business in Germany. “We are starting to see the benefits of the work we initiated 18 months ago to streamline the business, drive efficiencies in our cultivation facilities, and leverage both domestic and international growth opportunities,” he said.
Curaleaf recently opened its 62nd dispensary in Florida, bringing its total footprint to 146 stores. In addition, the company expanded into the hemp-derived THC market with gummies and seltzer under the Select brand and sold online via its site the Hemp Company. The company told SND the products are available through DoorDash in up to 20 states focusing initially on some of the largest markets where DoorDash operates like Florida, Texas, Illinois, New Jersey, and Minnesota.
Illinois-based Cresco Labs saw revenue dip 7% to $184 million after realigning its business to focus on core markets over the past year. The move appears to be paying off, as adjusted EBITDA registered particularly strong growth, rising 33% year-over-year to $54 million. Cresco maintained its market share lead in Pennsylvania, Illinois, and Massachusetts, with CEO Charlie Bachtell adding that the company has doubled its operating cash flow in the first half of the year.
Looking ahead, Cresco is confident that the potential rescheduling of cannabis from a Schedule I to a Schedule III drug will bring considerable upside, including reducing the industry’s tax burden. “As the pace of reform challenges even the most patient of us, it’s important for all stakeholders to remember that cannabis reform consistently polls higher than any candidate in any election, and the public has made it clear that it’s time for change. Reform is imminent and we are ready,” said Bachtell.
Competitor Ayr Wellness posted flat revenues of $117 million, but noted that tough market conditions ate into earnings, with adjusted EBITDA down 13% to $26 million. “The second quarter presented challenges due to both internal and external factors including wholesale pricing pressure, tightening consumer wallets from persistent inflation, and margin pressure in select markets where we have recently increased our cultivation and production,” said David Goubert, president and CEO.
Ayr was among the first multi-state operators to launch in Ohio, with the company shifting three of its medical dispensaries to dual use in the first days of Ohio’s adult-use market. In addition, Ayr opened a third retail store in Illinois and projects low to mid single-digit growth looking ahead.
Chicago-based Verano similarly faced headwinds, seeing adjusted EBITDA drop slightly to $70.6 million from $71.5 million a year earlier. Revenue was also down, dropping 5% to $222.4 million. The company attributes much of the challenges to expected declines in New Jersey, as more competition comes online, partially offset by growth in Maryland.
But Verano continues to invest, expanding its Florida holdings to 77 dispensaries, adding three new Müv locations. In addition, the company entered an agreement with The Cannabist Company to acquire Cannabist subsidiaries in Virginia and Arizona. “We’re prepared to leverage near-term catalysts including this week’s launch of Ohio adult use sales, positive polling trends in Florida showing strengthening support of Amendment 3, ongoing adult use discussions in Pennsylvania, and continued rescheduling momentum at the federal level,” said George Archos, founder and CEO.—Shane English
Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning. You will also receive the Cannabis edition as part of your subscription.
