Cannabis Multi-State Operators: Who They Are, Where They’re Going

The rise of the legal cannabis marketplace has brought forth ample opportunity to establish a brand. Unlike any other industry, however, cannabis brands can’t set up shop across the nation as other sectors can. Due to federal law, cannabis remains a state-by-state marketplace. If a brand wants to establish in numerous states, it must obtain the needed licenses to adhere to that state’s rules and regulations.  

In recent years, several operators began to master the art of license acquisition. Spanning several states, these brands would be labeled multi-state operators or MSOs.

Holding licenses in several states allows companies to establish themselves as brands in an industry with little to no household name brands at this time. MSOs are behemoths in scale, often holding licenses for most, if not all, of the supply chain. Obtaining all the needed paperwork for such a venture often comes through years of mergers and acquisitions, joint ventures, takeovers and other business maneuverings.

As Green Market Report's Debra Borchardt wrote in March 2019, there are immense benefits to operating across state lines even if a company has to set up facilities in each state to avoid breaking any federal transporting laws.

Borchardt explained that, "These companies, while not permitted to bring cannabis and cannabis-derived products across state lines...they can share intellectual property, equipment, branding, and employees across states."

With the capabilities to support a significant brand name in place, MSOs are in prime position to become the central figures in the marijuana marketplace as more states legalize adult use cannabis laws.

The Top Multi-State Operators in America

Multi-state operators now stand as some of the most significant players in the cannabis market today. Of the numerous brands competing for eventual market dominance, several currently lead the way. As of January 2020, Curaleaf, which reached 19 states and 131 retail licenses to start off the new year, had a value of $2.75 billion. Green Thumb Industries, which operates 96 licenses, including 34 RISE-branded shops, across 12 states, started the year off valued at $1.89 billion. Other popular MSOs with billion-dollar market caps include Tilray ($1.55 billion), Aphria ($1.22 billion), Trulieve ($1.18 billion) and Harvest Health & Recreation ($.93 billion). 

Marijuana multi-state operators set to capitalize on new markets, but small firms face hurdles.

Image Source: Marijuana Business Daily 

While these companies led the way to start the year, 2019 and 2020 have been tumultuous years for the industry. While cannabis has been able to weather the pandemic's downturn better than most, several MSOs felt the impact of COVID-19. The global virus's effects were the second blow in a one-two punch that includes the long-standing bare market that already put many brands on the ropes.

In response to one or both, numerous MSOs shifted gears to refocus their business development and growth plans in several ways. Some acquired more, expanding their name. Others sold off property, exiting states to focus on other markets. With so many moving parts, the top MSOs in the U.S. market could very well look quite different by the start of 2021.

Major American Cannabis Marketplaces 

Cannabis Multi State Operators US Map

Image Source: Medium

A growing opportunity exists for MSOs, as more and more states pass legislation allowing medical or adult use cannabis sales. Most rec states are already booming markets, or stand poised to become one.

Even despite an ongoing, uphill battle against the illicit market, states like California netted $2.5 billion in adult use sales during 2018. Forecasts from BDS Analytics and Arcview Market Research expect that figure to jump to $7.2 billion by 2024. Meanwhile, a more modest increase is expected to occur in Colorado, where sales are expected to jump from $1.2 billion to $1.8 billion during the same period.

Washington State is another $1 billion market from 2018 that should see a slight increase in the years to come, reaching $1.3 billion. Meanwhile, other legal markets like Massachusetts, Oregon, Illinois, Nevada, Michigan and other legal markets all should reach or come close to becoming of similar stature in the years to come. 

Medical markets can be just as lucrative. Florida is expected to have a medical market worth $1.9 billion by 2024. Arizona isn't far behind, with expectations of its medical spending to increase from $581 million in 2018 to $761 million in 2024. Meanwhile, several other states such as New York, Pennsylvania, Ohio and New Jersey all could spend topping $300 million or more in the coming years.

MSOs Seeking to Grow Market Lead

Cannabis companies have been vying for market dominance and name brand recognition since the industry began to take form. That said, creating a name in the market simply can’t come from having several licenses across many states. To succeed, any marijuana brand has to produce a product that makes customers want to buy from them regularly. Creating products that meet the shifting demands of the market is key to that success. Keeping in mind that those demands are varied across a wide range of target consumers is just as essential.

Some demands are impossible to account for. Consider the COVID-19 pandemic shifting buyer demands, propelling edibles up the sales charts. The same could be said for the EVALI lung injury crisis brought on by unlicensed processors. However, others like the demand for all-natural, chemical-free products can be prepared for. The trend has been apparent in recent years, with examples from diverse spaces ranging from candy to skincare. Cannabis is no exception. Studies in recent years have indicated that many consumers want all-natural cannabis products.

Chart: Coronavirus Prompts Shift in US Adult-Use Marijuana Product Sales

Chart: Coronavirus prompts shift in US adult-use marijuana product sales

Image source: Marijuana Business Daily 

While it isn't guaranteed that MSOs are going to respond by producing large solventless lines, we are seeing examples emerging from some brands. Even if an MSO isn't creating a solventless product now, they are certainly eyeing solventless as a way to create premium SKUs for their extracted and infused product lines. As state and eventually federal regulations change, the presence of MSOs, specifically those targeting solventless will expand dramatically. 

If you're looking to add premium solventless concentrates and infused products into your operation, contact our experts today!