Who's Winning In Weed? Analyst Looks At Cannabis Market's Big Players, Where Are The Best Bets? - ASCEND

In the first quarter of 2024, the cannabis sector faces a mixed economic landscape with a notable sequential decline in sales across several states.

Pablo Zuanic, senior analyst of Zuanic & Associates has detailed insights into the sector's performance, particularly focusing on multi-state operators (MSOs) and their exposure across pivotal states such as Arizona, Connecticut, Florida, and others.

Q1 2024 Sector-Wide Financial Highlights

Overall, Q1 saw a downward trend in sales, except for a few states like Florida and Pennsylvania.

The most significant sales declines were observed in Connecticut (-6%) and Illinois (-4%), with moderate decreases across Massachusetts (-3%), Ohio (-2%), and both Michigan and Maryland experiencing a -1% change.

Pennsylvania, by contrast, reported a 3% increase, showing resilience amidst broader sector struggles. Each state showcased unique trends affecting both sales and market dynamics.

Q1 2024 State-by-State Financial Performance And Leading Companies

California: Faced a 6% year-on-year decline, adjusting to a $5 billion market size. Notable MSOs like Cresco Labs (OTC:CRLBF) and Green Thumb Industries (OTC:GTBIF) have scaled back operations, reflecting a strategic pivot within the state. Other prominent MSOs include TerrAscend (OTC:TRSSF) and 4Front Ventures (OTC:FFNTF).
Michigan: A standout in the sector with a robust 24% year-on-year growth, leading to $793 million in sales for the quarter. Despite stable retail prices, the wholesale market has presented challenges with narrower retailer spreads. Leading MSOs in Michigan include Ascend Wellness (OTC:AAWH), Cresco Labs, and Verano Holdings (OTC:VRNOF).
Illinois: While there was a sequential sales dip, the year-on-year figures were up by 6%, hinting at a market still finding its footing with increased retail establishments but facing pricing pressures. Dominant players include Cresco Labs, Green Thumb Industries, and Curaleaf Holdings (OTC:CURLF).
Florida: Displayed growth stability with a slight 1% sequential increase and a 14% rise compared to the previous year. The market benefits from a consistent expansion in both retail locations and patient registration, indicating sustained demand. Leading companies are Trulieve Cannabis (OTC:TCNNF) and Curaleaf Holdings, with significant market shares.
New Jersey and Nevada: Both states are grappling with market saturation and deflation, although Nevada’s tourism boost offers some cushion against declining retail prices. In New Jersey, key operators include Curaleaf Holdings and Green Thumb Industries. In Nevada, the market is led by companies like Planet 13 Holdings (OTC:PLNHF) and Curaleaf Holdings, both benefiting from the tourist influx in Las Vegas.

Q1 2024 Operational Insights And MSO Performance

The rising number of retail locations, particularly in Illinois and New Jersey, has diluted revenues per store, pointing to an over-expansion that the market may not sustain in the longer term.

Leading MSOs like Ascend Wellness, Cresco Labs, and Green Thumb Industries have effectively managed their brand distribution, which is crucial as the market shifts towards more mainstream retail models.

Comparative Analysis: 4Q23 vs. 1Q24 Cannabis Market Trends

Sales Trends and Economic Indicators

Analyzing quarterly changes, the end of 2023 and the beginning of 2024 saw varying sales trends across key cannabis markets.

California saw a continuation of downward trends, moving from a 12% YoY decrease in 4Q23 to a 6% YoY decrease in 1Q24, suggesting a slight improvement in the market's decline rate. Conversely, Michigan exhibited strong growth in both quarters, with a 24% YoY increase in 1Q24 following a 27% YoY increase in 4Q23, highlighting its robust market expansion.

In Arizona, sales slightly recovered in 1Q24 with a decline of 6% YoY, compared to a 6% YoY decline in 4Q23, indicating consistent market challenges year-over-year.

Retail And Pricing Dynamics

The sector's retail landscape reflected notable differences in store economics and pricing pressures. For example, Illinois reported a sales decrease of 4% sequentially in 1Q24 after a positive trend in 4Q23 (+3% seq).

Florida's market showed stable growth in both quarters but with a slight increase in sales velocity from flat sequential growth in 4Q23 to +1% sequentially in 1Q24. Retail prices across these states continued to stabilize or decline slightly, impacting overall revenue per store and pointing to a trend of market saturation and increased competition.

Strategic Shifts And MSO Activities

Multi-state operators (MSOs) adjusted their operations strategically to accommodate changing conditions, scaling their activities in saturated markets like New Jersey and Nevada while expanding in states like Florida and Pennsylvania, where positive sales trends offered growth opportunities that companies like Trulieve and Curaleaf capitalized on.

Photo: AI-Generated Image.

AAWHASCEND WELLNESS HOLDNGS A by Ascend Wellness Holdings, Inc.

$0.5275-0.81%

Overview

CRLBFCRESCO LABS INC by Cresco Labs Inc.

$0.8011-2.29%

CURLFCuraleaf Holdings Inc

$3.48-4.40%

FFNTF4FRONT VENTURES CORP by 4Front Ventures Corp.

$0.000001-%

GTBIFGREEN THUMB INDUS SUB VTG by Green Thumb Industries Inc.

$7.60-0.65%

TCNNFTRULIEVE CANNABIS CORP by Trulieve Cannabis Corporation

$13.4016.0%

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