Making the Grade
Curaleaf Is King in the U.S… for Now
“If you ain’t first, you’re last.” That’s the motto race car driver Ricky Bobby lives by in Talladega Nights.
And it appears to be the motto of the cannabis industry for much of 2019.
Pot stocks have popped on one record-breaking deal after another.
At the moment, growth is the name of the game. Merger and acquisition (M&A) activity has been the engine of expansion for cannabis companies this year. And deals are being inked at a frenzied pace.
Some ask, will there be fewer than a dozen cannabis companies left standing when the dust finally clears? I don’t think so.
But I do believe we’ll continue to see the marijuana sector head count dwindle as M&A activity stays red-hot.
To illustrate how transformative M&A can be, I looked under the hood at dispensary counts of American multistate operators (MSOs).
Keeping Up With Curaleaf
The growing number of takeovers is shifting the fortunes of weed retailers across the U.S.
Most recently, the big headline grabber was Curaleaf Holdings (OTC: CURLF). It acquired Grassroots parent operator, GR Companies, for $875 million.
Curaleaf was already a sizable player in the U.S. market. But the takeover shot it to “lead car” status.
So I wasn’t surprised to see Curaleaf way out in front here…
Following the Grassroots takeover, Curaleaf now has 68 operational dispensaries.
Now, in an era when we normally talk about traditional, physical retail locations numbering in the hundreds or even thousands, 68 might not seem like much.
But in the nascent cannabis space, it’s an impressive total. It’s almost unfathomable in an industry that’s still illegal at the federal level!
More importantly, that 68 is equal to the combined number of dispensaries of Curaleaf’s two closest competitors – MedMen Enterprises (OTC: MMNFF) and Trulieve Cannabis (OTC: TCNNF).
But as I so often cover here, MSOs like MedMen, Trulieve and Liberty Health Sciences (OTC: LHISF) are largely building a foundation in one market. For example, MedMen is primarily in California, though it’s expanding into Florida. And in the Sunshine State, Trulieve and Liberty Health have drawn battle lines, and that’s essentially where all of their dispensaries are located.
At the moment, we can also see that Harvest Health & Recreation (OTC: HRVSF), Green Thumb Industries (OTC: GTBIF), Acreage Holdings (OTC: ACRGF), iAnthus Capital (OTC: ITHUF) and Cresco Labs (OTC: CRLBF) are nose to tail in the middle of the field in terms of the number of dispensaries.
After that, there’s a major step down to Liberty Health’s 15 dispensaries, and then Terra Tech Corp.’s (OTC: TRTC) seven. And of course, there are MSOs with dispensary totals in the single digits, including Golden Leaf (OTC: GLDFF) and Planet 13 Holdings (OTC: PLNHF).
The logic here for Curaleaf isn’t complicated: The larger its retail footprint, the more revenue it can bring in… unless Amazon ever decides it wants to take a shot at cannabis!
So now we’ll likely see other companies step on the gas to try to catch Curaleaf.
It’s really putting pressure on the competition.
Curaleaf not only has more dispensaries than anyone else but also has a combined pro forma revenue for 2018 of $256 million following the Grassroots acquisition. That’s almost double what Canopy Growth Corp. (NYSE: CGC) sold last year.
Can Curaleaf Remain King?
Looking ahead, can Curaleaf continue to outpace its competitors?
Though it has the most operational dispensaries, Curaleaf isn’t holding the most retail licenses. That distinction belongs to another…
Harvest Health & Recreation ekes past Curaleaf with 142 retail licenses. But the company has only 26 dispensaries open at the moment.
Acreage, Green Thumb and MedMen also have less than one-third of their licensed retail locations in operation.
For now, Curaleaf is the cannabis company to beat.
More locations mean more revenue. And it already has massive advantages financially – as well as physically – over the rest of the American MSO field.
But that pole position didn’t come without a price. And that price wasn’t cheap.
Now we’ll be keeping an eye out to see who’ll try to “shake and bake” past Curaleaf to win the checkered flag in the race to be first… not last… in American cannabis.
Here’s to high returns,
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