The U.S. marijuana industry had a mixed third quarter, with some states showing promising growth signs while others faced setbacks.
Ten states saw an uptick in sequential sales, according to a report by Zuanic & Associates, while seven others weren’t as fortunate. Maryland emerged as the quarter’s superstar, with sales more than doubling the second quarter, following the introduction of recreational cannabis sales in July.
Michigan and Connecticut followed with sequential sales growth of 10% and 8%, respectively.
“(Maryland’s) market economics are quite attractive, and we calculate that both wholesale prices and retailer spreads are up since the start of rec,” wrote Pablo Zuanic, the firm’s principal analyst. “Average annual revenue per store is now at a run rate of north of $10 million.”
Still, the state just posted its first monthly sales dip, though it was primarily due to a 6% drop on the medical side.
The sailing wasn’t nearly as smooth for states like Missouri, Ohio, and Oregon, which reported slumps in sales. Arizona also reported a dip, though it was “partly seasonal.”
Price and Profitability
Retail flower prices have generally trended downwards on a year-over-year basis, according to Headset data. A sharp 37% dive was observed in Massachusetts, while Arizona, Illinois, and Michigan also noted drops.
Despite the declines, the third quarter has shown potential for growth, and some states even reported gains on a quarter-over-quarter basis.
In terms of profitability, retailer spreads remained relatively unchanged, highlighting stability in the overall industry. Once again, Maryland emerged at the forefront with a noteworthy increase.
“But in year-over-year terms, dollar spreads per gram were down in most states,” Zuanic said.
Comparing Apples to Apples
The report also touched on the same-store sales metric. Zuanic warned that event if the industry spits out more stores, it’s important to make sure the average revenue per store isn’t dipping, because that could hurt operators’ bottom lines.
One state to watch is Florida. Although dollar sales showed a 4% sequential growth, volumes only increased by 1%, signaling a potential price surge.
“Market economics are quite attractive, and we calculate that both wholesale prices and retailer spreads are up since the start of rec,” Zuanic wrote. “Average annual revenue per store is now at a run rate of north of $10 million.”
For multistate operators, the mixed bag could actually be a positive thing. Curaleaf (OTC: CURLF), for example, could counterbalance pressures from Arizona with growth in markets like New Jersey and Maryland could potentially counterbalance the Arizona pressure.
For Green Thumb Industires, the report anticipates a positive third quarter due to growth in states like Rhode Island, Connecticut, and, of course, Maryland.
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