Benzinga - by Nicolás Jose Rodriguez, Benzinga Staff Writer.
Considering the significant growth potential in New York's cannabis market and the strategic positioning of Multi-State Operators (MSOs) highlighted in Zuanic & Associate's latest report, how might investors capitalize on these burgeoning opportunities?
New York State's Cannabis Market: An Overview The state may open more than 1,000 recreational stores, considering the current 31 stores, 400 Conditional Adult-Use Retail Dispensary (CAURD) licensees and additional applications.
This expansion offers substantial opportunities for entities with the resources and capacity for wholesale trade.
Current medical incumbents, comprising 10 MSOs, can enter the recreational market by paying a total of $20 million.
Estimations in Zuanic’s report suggest New York could house up to 600 stores based on California's density, or potentially more than 3,600 stores if it follows Colorado's model.
The Potential for MSOs in New York The outlook for Multi-State Operators (MSOs) in New York presents a complex scenario, as explained by Zuanic.
While oversupply and tough economic conditions in markets such as California and Michigan could temper enthusiasm, the unique regulatory environment and current challenges in capital access in New York may work in favor of MSOs.
Pablo Zuanic, senior analyst, explained that MSOs will face negotiations with landlords and regulatory hurdles, but so will other retail licensees, potentially giving MSOs an advantage.
However, the short-term outlook for wholesale opportunities appears less promising, given the well-stocked nature of existing recreational stores and current cultivation capacity.
Medical Cannabis Market Dynamics Registered Organizations (ROs), which are medical incumbents permitted to operate four medical stores each, are preparing to enter the recreational market.
This transition involves varied costs and strategic decisions, with companies like Goodness Growth (OTC: GDNSF), iAnthus (OTC: ITHUF) and MedMen (OTC: MMNFF) currently financially constrained.
Other public MSOs like Curaleaf (OTC: CURA) and The Cannabist (fmr. Columbia Care) (OTC: CCHWF) are gearing up to offer recreational services at selected stores.
Medical Wholesalers and Retail Dynamics The medical wholesale market is dominated by a few large suppliers, with Curaleaf leading in product listings. The analysis of medical store menus indicates a concentration of supply among a handful of providers.
As for the retail landscape, New York currently has 31 recreational stores, with the possibility of hundreds more opening following recent legal rulings.
Recreational Wholesale Prospects for MSOs The success of MSOs in the recreational wholesale market will depend on the pace of new store openings and their ability to meet the demands of a well-supplied market.
Companies like Columbia Care, Curaleaf, and Green Thumb Industries (OTC: GTBIF) are positioned favorably in this space, with existing cultivation and manufacturing capacities.
"In terms of the wholesale opportunity, we are less bullish in the short term. Just looking at store menus, it would seem the current 31 rec stores are quite well stocked in SKUs and brands. Also, we understand rec cultivation is at 380 acres, and 400 acres are needed for every 100 stores,” Zuanic wrote.
"Still, if the store pace ramps (a factor to monitor, but not a certainty), and capital access limits the ability of new recreational grower licensees to expand, then in that instance MSO incumbents could benefit Curaleaf, Cannabist, Green Thumb," he added.
However, Zuanic warned the market seems adequately supplied for the time being, both in quantity and quality.
Current State of Recreational Stores The existing recreational stores in New York, which have generated sales of $83 million since late December 2022, showcase a well-supplied market with a diverse range of products and brands.
These stores face competition from both legal and illicit markets, with the latter estimated to include over 1,000 outlets.
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