Florida Cannabis Market Remains Under Pressure

Each week, Florida’s Office of Medical Marijuana Use (OMMU), which is part of the state’s Department of Health, releases data on the state’s medical cannabis program, including an active patient count, a qualified physician count, new dispensary approvals and an update for each operator. That data includes the number of dispensaries and the unit sales each week. This is the ninth New Cannabis Ventures monthly update. We also published a newsletter about the state in May, suggesting that readers be careful with Florida. This article is based upon the update that was provided this week by the state. Readers who are interested in the data going forward can visit the OMMU update page.

Patient Growth Is Slowing

We last updated on the Florida market a little over a month ago, and the annual growth in patient count had fallen to 4.1% in early October  from 8.4% in late May.  The rate has bounced just a bit to 3.3% this past week:

While the number of patients is still increasing, the growth is very low. 892K patients represent 4% of the state’s population. The number of patients was declining but  has increased slightly recently to a new high:

The post-pandemic population boom aided patient growth, and some program improvements have helped excite Florida residents. There has been an increase in dispensaries to 701 from 610 a year ago. This is an increase of 14.9%, which is much faster than the medical cannabis patient growth has been at 3.3%.

Unit Growth Remains Strong

We recently shared that Florida revenue was up only 1.4% from a year earlier in April by the estimate of BDSA. This was a record low. Florida’s growth picked up a bit afterwards, but in November, it rose only 5.9%. This is quite slow, especially considering patient growth and dispensary growth.

The increased competition and falling prices combined with slightly increasing sales has suggested that unit growth remains strong. In the most recent week, sales of medical cannabis product units with THC increased by 11.5% from a year ago. Smokeable flower units expanded 15.7% from the week ending 12/12/23. Unit volume growths remain higher than the revenue gain and the patient gain. There are more stores, and unit volume is growing more rapidly than revenue.

Conclusion

We warned readers on May 17th regarding the MSOs that are big in Florida, as investors seemed overly optimistic. The entire cannabis market has pulled back since then, and the entire group of MSOs is sharply lower, especially after the defeat of the adult-use ballot initiative last week. All four leaders in Florida have declined substantially though 12/12/11:

The overall market, as measured by the NCV Global Cannabis Stock Index, has declined by 34.7% since then as of 12/12, and the NCV American Cannabis Operator Index has dropped 61.1%. All of the Florida 4 have dropped by more than both of them.

Investors  likely will not be happy with a mature medical market that is slowing and  becoming more competitive. Investors should remain careful in our view with the big Florida operators, though Verano Holdings, which is down the second-most, has less exposure than Ayr Wellness and Trulieve. I have bought VRNOF in my model portfolio at 420 Investor on this big decline.