Curaleaf speeds Florida strategy, bucks competition in Jersey

In its recent fourth-quarter earnings call, Curaleaf Holdings (OTCQX: CURLF) (TSX:CURA) detailed plans to expand – and level – its reach in two key markets.

“We’ve seen a resurgence of demand throughout the whole country,” Executive Chairman Boris Jordan said.

“Not in every single market, but I would say in the bulk of our larger markets, we’re seeing a resurgence of demand from customers and patients.”

Florida

The Wakefield, Massachusetts-based company aims to open around 85 stores across Florida, as a looming legal decision in the state could allow adult-use sales alongside medical cannabis.

“The State Supreme Court is due to provide a final summary judgment by April 1 on whether the adult use initiative will be on the November ballot,” Jordan told investors. “We believe there’s a high probability it will.”

He estimated that the state’s cannabis market could double in its first full-year of adult-use legalization.And that doesn’t include additional tourism-driven demand.

Curaleaf plans to leverage its current medical market share and brand recognition to transition into the expanded market. That means maintaining its top-five position by making sure it has enough cultivation capacity and retail outlets ready to meet higher demand.

The decision on how to expand is based on geographical spread rather than merely increasing store count, according to Jordan. It’s designed to cover the population without reaching the saturation levels of its competitors.

Jordan pointed to the company’s efficiency in Florida. He said that an expansion plan had been in development prior to the latest effort to legalize recreational use but has since been accelerated.

“We have the most efficient stores, I believe, in the state in terms of volume that goes through them,” he said. “We don’t believe we need to go to the 130 stores. We don’t believe we’ll get the incremental benefit from that number.”

The strategy is part of its broader goal to dominate not just in Florida but also in other key markets across the United States and internationally, management says.

The team also said its keeping a watch on Trulieve’s industry-first IRS tax challenge, which was allegedly grounded in an undisclosed legal basis that the Florida operator claims is unique to its tax story.

“Given recent developments, we continue to evaluate our stance on legal challenges to the application of 280E and more generally to the Control Substances Act as applied to state legal operators,” CFO Ed Kremer said.

Jersey story

Curaleaf continues to hold strong in New Jersey as well. The company held the number one market share position in the state, according to BDSA, and grew wholesale 24% sequentially, Jordan said.

“With 90 (independent) dispensaries open as of year-end and more opening each month, we anticipate continued strength in this channel,” he added.

The company decided to retain and fully stock its original Bellmawr grow, which management had previously planned to sell and then shut down about a year ago.

Now, the Jersey arm is fully utilizing the location in addition to leveraging its main grow at Winslow.

Those who flock from neighboring states, especially Pennsylvania, play an important role. But its also a risk and an opportunity, as the Keystone State gears up for its own potential legalization.

“With a population of 13 million and a patient penetration rate of nearly 4%, we could see Pennsylvania increased two to three time upon adult-use conversion,” the chairman said.

But even if that, doesn’t happen, Curaleaf still wins across the Delaware river.

Despite the large capacity from both sites, demand in the New Jersey market is such that the company is operating almost “hand-to-mouth” in terms of meeting it, Jordan said.

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