Retail license caps in some states and limited capital are forcing marijuana multistate operators to focus on wholesale cannabis sales growth in 2024.
“It certainly was a focus in ’23, and I think will become even more of a focus in ’24,” said Jamie Mendola, chief business development officer, national head of wholesale/purchasing and the Western Region general manager at Florida-based MSO Ayr Wellness.
Mendola said Ayr and other MSOs are prioritizing wholesale for two reasons:
- Many vertically integrated businesses have reached or are approaching their maximum number of retail licenses in key states such as Illinois, Massachusetts and New York.
- Limited capital available to the industry means fewer companies will grow through mergers and acquisitions – or by obtaining more licenses.
“I think the vast majority of cannabis companies are more focused on organic growth,” Mendola said.
“The vast majority of the growth is expected to come from wholesale as opposed to retail – particularly in those markets that aren’t undergoing some type of medical to adult-use transition.”
One issue dampening wholesale growth efforts is the low price of cannabis in mature markets.
In Ayr’s case, for example, Mendola said the volume of wholesale marijuana the company sold in 2023 grew by double digits while prices decreased by double digits.
“We ended the year with growth, but it was certainly masked by a lot of that price compression,” he said.
According to Mendola, lack of vertical integration among the newest retailers could help stabilize prices, since those stores will need product to offer consumers and won’t be generating any supply.
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