Multistate operators are busy expanding their retail footprints in Florida’s nearly $2 billion medical marijuana market, in some cases betting that adult-use legalization is on the horizon and jostling into position to capitalize on that possibility.

But investing in Florida marijuana retail could be a gamble.

Medical cannabis dispensaries are already offering deep discounts to the more than 800,000 registered medical consumers in the increasingly competitive Florida market, and some companies reported flat sales in the state for the quarter ending June 30.

Also, more competition is on the way.

There are 22 companies currently licensed in Florida’s medical market, which is one of the nation’s largest, in addition to two licenses that were recently awarded to Black cultivators.

Regulators are currently reviewing license applications for a new batch of 22 vertically integrated Medical Marijuana Treatment Centers (MMTCs) – as MMJ operators in Florida are known.

Adult-use legalization is hardly guaranteed, what with the Florida attorney general trying to block an effort by the state’s largest MMJ operator to put the issue as it’s currently worded before voters in November 2024.

But that’s hardly put a damper on MMJ companies deciding to open new retail outlets.

In July, Chicago-based Verano Holdings celebrated the opening of its 70^th dispensary, placing the MSO in the No. 2 spot in store counts behind Florida-based Trulieve Cannabis and ahead of No. 3 Ayr Wellness and No. 4 Curaleaf Holdings.

New York-based Curaleaf, for its part, plans to expand further into the state this year.

And Miami-based Ayr said it has met its goal of opening 10 new dispensaries in the state in 2023.

The company plans to open another two to four dispensaries before the end of the year.

Even Trulieve, long the market leader in the state, is still expanding, adding three more stores to its portfolio so far this year and bringing its total number to 126 as of Aug. 11, according to the Florida Department of Health’s Office of Medical Marijuana Use (OMMU).

Florida regulators limit the number of MMTC licenses, but there’s no cap on the number of dispensaries licensees can open.

And even though the deep discounts and promotions offered to consumers by retailers can be a sign of a saturated market, representatives of operators say they haven’t reached the store-saturation point – especially if the state legalizes adult-use sales.

Too many dispensaries?

Verano’s sales in Florida for the quarter ending June 30 were flat year-over-year – and CEO George Archos said during the company’s Aug. 8 earnings call he was pleased with that result.

That’s because the company hasn’t participated in the kinds of deep discounts and promotions other stores are offering consumers in the oversupplied market, Darren Weiss, the company’s president, said in an interview with MJBizDaily.

Weiss said that his team’s analysis shows that as more stores open, each one is taking a “smaller piece of the pie.”

But over the long term, new stores do drive growth and are accretive to the portfolio, he added.

“But whereas it used to be that, within three to six months of store openings, you are really seeing that type of accretion, now that takes about a year,” he said.

In an email to MJBizDaily, Curaleaf CEO Matt Darin said the company will continue to expand its Florida footprint, which already includes 60 dispensaries, through 2023.

Darin also said the company chose not to match some of the discounts it sees, instead choosing to add new products and brands to the roster.

“Rather, we have taken proactive measures to organically increase our store traffic through an expanded product assortment, including Select Briq and Select Liquid Diamonds, as well as targeted marketing initiatives,” Darin said, referring to vape and high-potency oil products.

“We are pleased that these measures are already yielding positive results.”

Similarly, Ayr is expanding its product portfolio, most recently adding edibles brand Kiva Confections to its lineup in its Florida stores.

Verano’s Weiss and an Ayr spokesperson also said their Florida stores haven’t discounted products to the same degree as some competitors.

However, Verano and Ayr – in addition to Trulieve – all offer regular sales and promotions to shoppers, according to MMJ discount tracking website FLCannabisDeals.

Meanwhile, the medical cannabis market is still growing, albeit at a slower pace than last year.

The 2023 MJBiz Factbook projects Florida’s medical cannabis market will grow from $1.75 billion in 2023 to $2.4 billion by 2026.

Registered active patient numbers have increased by more than 7% since January, from 781,354 to 838,470, according to the OMMU.

Adult-use legalization uncertain

Expanding in state medical marijuana markets to prepare for forthcoming, larger adult-use markets is a well-worn strategy for cannabis operators.

Just recently in Maryland, for example, MMJ operators scrambled to acquire or open dispensaries in time for adult-use sales to launch July 1.

But it’s unclear if voters in Florida will have the opportunity to vote on the issue in November of next year – and, if they do, whether they would approve recreational marijuana.

Trulieve donated nearly $40 million toward the Smart & Safe Florida adult-use legalization campaign.

The group collected more than 900,000 signatures – more than enough to put the amendment on the ballot in November 2024.

The amendment “allows adults 21 years or older to possess, purchase, or use marijuana products and marijuana accessories for non-medical personal consumption by smoking, ingestion, or otherwise.”

But according to documents filed with the state Supreme Court, the attorney general, the Florida Chamber of Commerce and the Drug Free America Foundation are trying to block the effort, calling it unconstitutional and accusing Trulieve of trying to have a “monopolistic stranglehold” on the adult-use market.

The group also argued that the amendment invites Floridians to violate federal law and misleads voters into thinking that sales would be allowed by others who aren’t already licensed MMTCs.

Trulieve, in a statement to WUSF Public Media, disputed the arguments.

“The ballot language is clear, states the chief purpose of the amendment and – without a doubt – covers one and only one subject,” Trulieve said.

“For these reasons, we trust the court will agree that the voters of Florida should have the opportunity to vote to allow adults in Florida the freedom to use cannabis for their personal consumption.”

The uncertainty is why Weiss said Verano isn’t necessarily banking on adult use launching in Florida and is instead focusing on MMJ, which made up 25% of the company’s consolidated sales last year, according to the operator’s financial results for 2022.

“We’re building our business to be sustainable in the (MMJ) market,” Weiss said.

Ayr, by contrast, is wagering on a recreational market.

“We’re looking at dispensaries more in terms of the future adult-use market, and many of the stores we’re opening are strategically positioned for the adult-use future,” the Ayr spokesperson said.

Miami-Dade and Broward counties aren’t large medical cannabis markets, for example, the spokesperson added.

But the company is betting that its new stores in those areas will be fruitful investments if and when the state legalizes adult-use sales.

“We strive to be the neighborhood dispensary that is ingrained in the local community and offers a unique, personalized experience to every patient and customer that enters,” the Ayr spokesperson said.

Source: https://mjbizdaily.com/marijuana-msos-expand-florida-retail-betting-on-adult-use-legalization/