Florida is pouring millions into the push for adult-use cannabis legalization, but the market is showing signs of strain. A recent report by Beacon Securities reveals that while financial backing for the legalization campaign has surged, dispensary sales have actually dipped during the third quarter of 2024. This raises questions about whether the market’s fundamentals can support the anticipated boom.
Companies like Trulieve Cannabis Corp. and Curaleaf Holdings Inc. are leading the charge in funding the legalization campaign, but the growing number of dispensaries and external factors, like Hurricane Helene, have cast a shadow on the market’s growth trajectory.
The Smart & Safe Florida campaign, spearheading the legalization efforts, received a significant financial boost in September. Trulieve Cannabis recently added $9.5 million to its contributions, while Curaleaf chipped in $1 million, bringing the campaign’s total fundraising to over $100 million. However, the report reveals a softening of per-dispensary sales in Florida during the third quarter. This softening is attributed to the increasing number of dispensaries and temporary disruptions like Hurricane Helene. The state saw a 4% quarter-over-quarter (q/q) increase in dispensaries, with nine companies adding 26 new locations. Trulieve alone accounted for 12 of these openings.
While overall flower sales volume increased by 3% q/q, oil-based product sales dipped by 1%, both showing slower growth compared to the previous quarter. On a per-dispensary basis, flower sales volumes slipped 1% q/q, and oil-based product sales fell by 5%. These figures likely reflect the increased competition from new dispensaries and the impact of storm-related closures.
Despite mixed results in both product categories, Trulieve, the dominant player in Florida, maintained its leadership position. Its flower sales increased by 1% q/q, although the company lost 68 basis points (bps) in market share, now standing at 38%. In the oil-based product category, Trulieve’s sales remained flat, but it gained 50 bps in market share, increasing its lead to 31%.
Coming in second, Curaleaf reported a strong 11% rise in flower sales volumes, boosting its market share by 79 bps to 10%. However, its oil-based product sales fell by 2%, though it retained its second-place ranking with a 13% market share despite a slight loss of share.
Verano Holdings Corp. had flat flower sales following sequential declines in Q1 and Q2, which were attributed to capacity upgrades. The company’s market share in flower sales slipped by 19 bps, landing at 7%, keeping its third-place ranking. Verano’s oil-based product sales dropped by 8%, reducing its share by 68 bps to 9%.
Ayr Wellness Inc. experienced strong growth in flower sales, up 12% q/q, which increased its market share by 51 bps to over 6%, ranking fourth in the state. However, its oil-based product sales declined by 7%, dropping its share by 72 bps, though it maintained its third-place position with a 12% market share.
Smaller players like Cresco Labs Inc. and Green Thumb Industries Inc. also saw mixed results, with some product categories showing growth and others facing declines. Planet 13 Holdings Inc. managed to hold its ground in the oil-based products segment, with market share flat at 2% despite a 2% sales decline. However, the company’s flower sales fell by 12%, reducing its market share by 47 bps to just under 3%.
With adult-use cannabis legalization on the horizon through Amendment 3, Florida’s market is poised for significant changes. BDSA data projects total cannabis sales in Florida to grow at a 12% compound annual growth rate (CAGR) from 2023 to 2028, reaching $4.5 billion by the end of that period. However, legislative uncertainties surrounding the expansion of adult-use licenses add unpredictability to the market, with over 600 dispensaries already in operation and medical cannabis sales hitting $2.6 billion in 2023.
Pablo Zuanic’s analysis paints an optimistic picture for Florida’s cannabis market, predicting a $6 billion valuation and significant growth for operators like Cansortium and AYR Wellness if adult-use legalization passes in November 2024. Zuanic forecasts up to 400% growth for AYR and substantial upside for other major players, highlighting the potential market explosion. However, when compared to the recent Beacon Securities report, which shows slipping per-dispensary sales and slowing growth, the question remains whether the market fundamentals can sustain this anticipated boom.
While Florida’s investment in legalization is substantial, the current market trends suggest that the road to a thriving adult-use cannabis market may be bumpier than expected. The coming months will be crucial for determining whether the market can sustain the anticipated growth and whether the hype surrounding legalization is justified.
