You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.
Friends,
The summer of 2020 was a great time for the legal cannabis industry, with sales soaring even in the most mature markets, like Colorado and Oregon. There were many reasons for the robust growth, some transitory and others, in our view, more sustainable. Last summer, the short-term drivers of booming sales included high levels of anxiety, extra time and also stimulus checks. At the same time, consumers weren’t spending money on travel, restaurants and leisure, leaving more for cannabis consumption. This summer, these drivers were absent. At the same time a year ago, cannabis companies, deemed essential service providers, were able to shift towards delivery and curbside pickup. E-commerce took off, enabled as well by new forms of payment processing, and this created a more permanent positive driver for the cannabis industry.
For June and July, we noted slowing growth across multiple states as well as Canada, citing government data or estimates from BDSA. This trend continued in August, with several markets down from a year ago. On Q2 conference calls, which took place in August, slowing near-term growth was a big topic of discussion. On Friday, the topic came up on the Trulieve conference call to discuss the closing of the Harvest Health & Recreation acquisition. For two of their key markets, Arizona and Florida, seasonal factors have played a role in recent trends. Additionally, Florida ended telemedicine as an option for obtaining a card. While patient growth has certainly slowed, we note that it remains robust:
Beginning a little over a year ago, aided by telemedicine and an influx of residents, patient growth soared. Even against those difficult comparisons and with telemedicine no longer an option, this relatively mature medical cannabis market continues to see 46% annual growth in registered patients. Annualizing the last thirteen weeks of data, which shows stabilization now, suggests a 26% annual growth rate in patient count. According to the state’s data, the four-week period ending 9/30 saw 60% unit growth for medical cannabis products and 80% growth for flower compared to the same period a year ago.
Despite slowing patient growth, the overall demand for cannabis remains quite strong, as depicted in the annual growth rates for THC medical cannabis and for flower.
Investors seeing the slowing or even negative growth in some markets may conclude that the outlook for long-term growth may be deteriorating, but we think this would be a premature conclusion. First, the tough comparisons will ease shortly. In addition to the strongest growth taking place last summer, which should help as we move past that time-frame, the reacceleration of the pandemic since August may reinstate some of the transitory factors we discussed. Second, many markets are seeing expanding distribution, which will help drive growth ahead. For example, retail stores are being added in California, which is underserved. Illinois is another market that has too few retail stores, though the new licenses being awarded recently will help address this challenge. Third, new markets are opening, including New Jersey in the coming months. Finally, we remind our readers that consolidation is taking place at a rapid pace. This will allow the leading public companies to grow through acquisitions even if overall consumption trends continue to moderate.
We have been concerned that the year-over-year comparisons against last year’s sales would prove to be tough, and that has been the case. Each market has different dynamics, including the licensing structure and the maturity of the market. The most mature markets, like Colorado and Oregon, have little public company exposure. When we look at the other markets, they appear, despite some concerns with a few of them, to have years of strong growth ahead. Adding in new adult-use markets opening and the ability to consolidate the industry through acquisitions suggests to us that investors should be optimistic about the growth ahead despite these tough near-term comparisons.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
- Exclusive: American Cannabis Operator Index Declines 2.7% in September
- Exclusive: Ancillary Cannabis Stocks Drop 10% in September
- Aurora Cannabis Q4 Revenue Declines 20% to $54.8 Million
- Exclusive: Global Cannabis Stock Index Declines 21% in Q3
- Exclusive: Hawthorne Collective-Backed Dewey Scientific Delves into Cannabis Genetics and Its Own Recreational Brand
- Innovative Industrial Properties to Invest Up to $56.3 Million in Goodness Growth New York Expansion
- Private Cannabis REIT Pelorus Equity Group Raises $42.2 Million at 7% for 5 Years
- Exclusive: The Canadian Licensed Producer Index Is Now Down 4% in 2021
- Trulieve to Borrow $350 Million at 8% for 5 Years
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:
- Exclusive: Canadian Cannabis Sales Increased 46% in July to Record $339 Million
- Exclusive: Cannabis Accessories Brand Session Goods Is Creating Products for the Modern Cannabis Market
- Cresco Labs to Acquire Three Pennsylvania Medical Cannabis Dispensaries for $90 Million
- MedMen Q4 Revenue Increases 55% to $42 Million
- Skymint Raises $78 Million and Expands in Michigan Cannabis Market
- Exclusive: This Is the Cannabis Beverage Company That Has Attracted Green Thumb Industries as a Strategic Partner
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Sincerely,
Alan & Joel
