Pablo Zuanic from Cantor Fitzgerald offered an industry update, covering cannabis pricing in Pennsylvania and Florida based on retailers’ menus.
“Think of this report as 'food for thought' - we are not adjusting estimates or our investment views,” Zuanic said.
Survey of 50 Stores And All Flower SKUs
Zuanic explained PA retail flower prices are down 13% YTD. Although the decline is somewhat similar to the 11% drop he calculated for Florida (FL).
He noted Pennsylvania (PA) prices are about 23% higher than in FL ($13.6/g vs. $11).
“Med states with no clear line of sight on legalization have become more competitive, but things are not as bad as in more matured recreational states, and prices are much higher,” Zuanic said. “In Colorado and Oregon prices average $3.5/g (down 16% YTD); Michigan is down 23% YTD to $5.04/g, and California with prices of $6.49/g, is down 13% YTD.”
Zuanic also highlighted that MSOs are talking down prior lofty profit margin expectations.
“Verano VRNOF this morning no longer guides for long-term 40% EBITDA margins; [and] Trulieve TCNNF recently lowered implied EBITDA margin guidance for the year. (...) With MSOs trading near historical lows, we prefer to opt for quality (stronger balance sheets; less execution risk; depth in attractive states; a track record of providing realistic guidance) vs. the necessarily cheaper EBITDA multiples in the group,” Zuanic said.
Findings Of The Survey
Market Flower Prices
According to Cantor’s survey, the average retail flower prices in PA (for all 3.5g SKUs at 50 stores) are at $13.55/g, down 13% from $15.62 back in mid-Dec. “The 13% drop is somewhat similar to what we found in FL (-11.5%), another somewhat matured medical market, with no clear line of sight on recreational legalization,” Zuanic said.
In the case of FL, Zuanic found three companies with average prices 20% or higher than the survey average (Trulieve, Surterra, Verano), and three companies 20% or more below the average (Curaleaf CURLF, Fluent Consortium CNTMF, and Cannabist).
“In the case of PA, averages were much closer together, a reflection of the available wholesale market. Only Columbia Care CCHWF was more than 10% above the survey average, and only Jushi was more than 10% below (19%). (...) It seems price competition between stores is not yet as fierce as seen in FL (if we go by the price gaps found in our survey). As per the survey, Curaleaf was the outlier, with a YTD decline of 19%.”
SKU Counts In PA vs. FL
SKU count is much higher in PA. The 50 stores surveyed had an average of 125 3.5g flower SKUs (178 in total), compared with 78 in FL (100 in total). But most companies (10 retail chains surveyed; five stores for each) were close to the average (Jushi JUSHF at the bottom with 129 total flower SKUs; Green Thumb GTBIF at the top with 260). In the case of FL, Trulieve was well above the group, with 214 SKUs, compared with 100 or less for all stores (ex Cannabist). “The latter reflects the vertical (mandatory) nature of the FL and Trulieve’s capacity edge,” Zuanic said.
Supply Per Store By Cannabis Operator
In terms of total flower SKUs, Zuanic noted the companies in the sample have more than 180 flower SKUs (in order from higher to lower: Green Thumb, AYR Wellness AYRWF, Columbia Care, Cresco CRLBF, and three had 150 or less (Trulieve, Verilife, Jushi).
“Both PA and FL are far from saturated (regarding store count). The 3.5g packs accounted for 70% of all flower SKUs in the 50 stores surveyed, compared with 75% in FL (this was 70% in FL six months ago). But in PA, most were close to the 70% average (TerrAscend TRSSF and Green Thumb close to ~60%, and Jushi/Verano ~80%); in FL, at several chains, 3.5g packs were 90% or more of flower SKUs (with Cresco/Cannabist the outliers at 50%).”
Zuanic explained that both states, PA and FL, can be described as low density compared with other more mature markets.
“There are 178 dispensaries in PA. Relative to the population (PA 13mn), this is less than in FL (461 stores, for 22mn), in PA there are 73K people per store vs. 48K in FL,” Zuanic concluded.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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