Florida's Cannabis Market: What Investors And Entrepreneurs Need To Know

Florida's medical cannabis market is a top performer, with a booming industry backed by a sizable patient count. Solid sales and patient counts serve as an appeal to would-be investors and entrepreneurs.

Data from the 2021 Marijuana Business Factbook projects Florida generating between $775 million and $950 million in 2021.

Strong sales are backed by 582,883 active cardholders as of July 2. Meanwhile, new stores continue to come online, with Harvest House of Cannabis opening a dispensary in Miami and Liberty Health Sciences opening its doors in Hollywood between June 28 and July 2.

Several MSOs and major brands call Florida home. Trulieve Cannabis Corporation TCNNF leads the way with 85 locations across the state, with Surterra Wellness (39), Liberty (38) and Curaleaf Hldgs Inc. CURLF (37) trailing.

A Promising Medical Market With Adult Use Hopes On The Horizon

Sources highlighted an array of positives entrepreneurs and investors should consider.

Jonathan Sandelman is CEO of AYR WELLNESS INC. AYRWF, which acquired Liberty Health Sciences in February 2021. He cited the state's sales and growing patient counts as a highlight.

"We strongly believe that our Florida operation...in a year-and-a-half or two years could be worth what our whole company is worth today in terms of market cap," Sandelman said.

Other market leaders in the state voiced similar optimism. Victoria Walker, Columbia Care Inc. CCHWF VP of east marketing, reported that revenue across 14 Florida locations was up 58% sequentially during Q1 2021.

Walker highlighted recent regulations for boosting the market. "Florida regulations have also improved to allow for smokable flower and edibles, adding to the expansive product mix companies can produce and sell," Walker said.

Nate Reid, VP of Strategy for Cresco Labs Inc. CRLBF, said he views the state's vertical integration laws as beneficial.

Due to the laws, "you are only as good as what you produce." Reid added that building portfolio brands that resonate with distinct consumers are essential for long-term market success.

Reid advised investors to look for companies with track records of accomplishment, focusing on quality products rather than store openings.

License caps were also discussed. Dustin Robinson, managing principal at psychedelic fund Iter Investments, noted that only 22 licenses are available. Robinson, who practices cannabis and psychedelics laws in Florida, said current license holders have a "huge head start" in the market.
"The licensing structure in Florida requires full vertical integration and there is no cap on the amount of dispensaries, thus allowing these 22 companies to build an enormous footprint within Florida," Robinson said.
Marc Stephen Shuster, partner at Florida law firm Berger Singerman and co-head of the firm’s Family Office Practice, highlighted a "pro-business regime," including no state income tax. Combined with a predominantly wealthy population, Shuster said that "similar to most asset classes, Florida is the darling in the crowd."

He added that "Betting against Florida is to your own peril."

Competition, Vertical Integration Pain Points And Legalization All Loom

Much of the market appears optimistic at this time. However, vertical integration causes its problems. Reid called vertical integration a "gift and a curse," requiring companies to efficiently scale with well-developed consumer propositions.

Sandelman said the rules make cultivation quality essential. "We inherited this situation with the acquisition of Liberty Health Sciences and have been laser-focused on fixing that," he added.

Meanwhile, Walker noted that additional competition is coming via 15 additional licenses. The licenses could help diversify market ownership, with two-thirds of the current permits held by three operators.

Still, much of the market remains focused on adult-use prospects. While several sources believe that legalization is on its way, the state continues to see setbacks.

In June, Florida's Supreme Court struck down its second adult use ballot initiative this year, calling its summary "misleading."

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