Cannabis Chart Of The Week: Who's Growing In Florida, And Has The State Gotten Ahead Of Itself?

Florida is often considered one of the most critical states in terms of growing legal cannabis sales. The State is estimated to have approximately $2.6B in 2023 legal sales, representing a per capita consumption of about $118 based on the total population or $145 based on adult population.

The State has a highly developed medical cannabis market. As of 1/26/24, Florida had 871,459 registered active medical cannabis patients, representing 4.9% of its over-18-year-old population, significantly exceeding Pennsylvania, another state teetering on Adult Recreational Use allowance with approximately 4.0%.

The bars on the graph show the number of open dispensaries for the top ten competitors in Florida. These companies account for approximately 85% of the total dispensary count, with the following five accounting for an additional 10.5%. Interestingly, neither Green Thumb GTBIF nor Cannabist CBSTF is in the top ten, and other significant MSOs, including Cresco CRLBF, TerrAscend TSNDF and Ascend AAWH have no presence in Florida.

The top five competitors in Florida have made outsized bets on the State with disproportionate percentages of their total national dispensary portfolios:  Surterra (88.0%), AYR (70.0%), Trulieve (67.5%), Verano (54.0%), and Curaleaf (41.5%)

The companies with the highest growth in stores over the last year include Green Dragon (20), Verano VRNOF and Sunnyside (12 each), and Trulieve TCNNF, and AYR AYRWF (8 each). Florida is and will remain a mandatory integrated production state, and as such, the growth in stores is limited by the cultivation capacity of each company. 

Has the State gotten ahead of itself? The blue line on the graph depicts the number of active patients per dispensary, which has dropped by approximately 8% over the last year as dispensary locations grew by 21% while patient counts grew by 12%. Florida’s 1410 patients per dispensary figure compares to 2445 in Pennsylvania, indicating that FL may be temporarily overstored.

The store growth partially reflects a bet that Florida will become an adult rec market. Florida’s Governor DeSantis believes that adult rec will be on the 2024 ballot in Florida, but the road ahead is still difficult. The state attorney general continues challenging the initiative’s wording and legality under the Florida Constitution. The initiative also needs to achieve a 60% supermajority as it requires an amendment to the State’s constitution. Still, polling indicates support at even higher levels.

What’s the upside from Adult Rec? Many analysts project a state will at least double its legal cannabis revenues when switching to adult rec. But doubling Florida’s already high medical revenue would require a per capita consumption of approximately $234, significantly higher than that of Illinois or Massachusetts. If Florida matched Massachusetts, sales would only rise by about 70%.

The top companies in Florida are making a massive bet on the State, with it accounting for more than ½ of their combined national dispensary portfolios. The State has many advantages, and the required vertical integration limits the downside risk of new entrants. Still, it is far from clear that the bet will pay off as handsomely as expected.

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

• Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors - from Cultivation to Brands to Software)

• Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)

• Principals to the Transaction (Issuer/Investor/Lender/Acquirer) Key deal terms (Pricing and Valuation)

• Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)

• Deals by Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)

• Credit Ratings (Leverage and Liquidity Ratios)

Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.