Cannacurio Podcast Episode 47 | 2022 Licensing Leaderboard Recap

Cannabiz Media’s Chief Data Officer, Ed Keating, does a recap of the 2022 Licensing Leaderboards and shows you what we've seen in looking back at all the licenses that were issued.

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Cannacurio Podcast Episode 47 Transcript

Ed Keating:

Welcome to the Cannacurio podcast powered by Cannabiz Media. I'm your host Ed Keating. And today we are going to do a recap of the 2022 licensing leaderboard and show you what we've seen in looking back at all the licenses that were issued and answer any questions that you might have.

So to begin, we wanted to start off with some level setting, which is really how many licenses are out there and what categories do they fit into?

Based on our research and analysis, Approximately 100,000 cannabis licenses have been issued in the U.S. by various states since we started tracking in 2015. So almost 100,000 licenses and these are specific to the three categories that we are going to focus on today. So this includes cultivation licenses, manufacturing and retail or dispensary. Of those 99,000, 42,500 are active and by active, we mean they're open, they're not in a pending status or they're not applied, but these are ones that are likely open for business and once again it's for cultivation, manufacturing dispensary in retail.

So now looking back at 2022, how many new ones were issued? Based on our count, almost 10,000 licenses were issued by all the states in 2022.

In today's discussion we're gonna share with you how that varied by the different regions in the U.S. as well as by the different activities, because we've noticed that different regions and different states obviously are going to behave differently since they all have their own licensing schemes.

First off we look at when these licenses were issued in 2022. These three lines show quite graphically how different the timing was. And the frequency of licenses being issued, sort of joke that the green one, which is cultivation, is essentially the “Loch Ness Monster” curve where it continues to have these peaks and valleys throughout the year. On the whole, as we looked across these three sets of lines of the 10,000 licenses, approximately 58% of the new licenses last year were for cultivators. Dispensaries and retailers were at 28%, and manufacturing was at 14%. So definitely a lot of variability in terms of the different types of licenses. But as we've seen in all the tracking, we've done over the years, cultivation really does seem to carry the day, which is sort of good and bad.

So now let's start taking a look at the different regions. You can look across these five columns and it's quite obvious that the West and the Southwest are really the drivers for license issuance. And if you think about the map for a second, the Southwest is where Oklahoma is and the West is where we find California, and then even looking at the Midwest, that's where Michigan is. So if you've read any blog posts, I've written in the last like four years that talks about license counts. Those three states are the ones that issue the most licenses and as a result, those regions are driven up by them, and you can see that the Northeast and Southeast is definitely lower, and as I think most industry watchers know the East is well behind the West. These numbers and data really do support that. We found that 72% of the licenses that were issued last year as new came from the Southwest and West.

So looking at the Midwest, they're actually 12 states in the Midwest, not all of them are issuing licenses. We found just under 1,400 licenses were issued last year, 83% of them were from Michigan and that mid-year spike that you see is 707 new Michigan cultivation licenses. So this is a little bit more like the “anaconda and rat” kind of graph where a lot of the license issuance appeared to happen all at once, or at least over over one quarter.

Looking at the Northeast, so the Northeast has a lot of interest. Everybody talks about it, we sort of, we jokingly refer to it as the “Beast in the East” - it’s where we're headquartered. There are 9 states in the Northeast, and there's just been a lot of focus on it as people talk about New York being the next big market. New Jersey is a large market unto itself and we found that the Northeast in some ways was a lot like the West, because 69% of the licenses that were issued were for cultivation and most of these came out of 2 states, New York and Vermont now this touches on what I think is a fascinating footnote. So when New York started their program in order to get cultivation going more quickly than most states, they issued licenses to existing hemp farmers and gave them the permission to grow cannabis. So they were able to issue several 100 licenses if I remember to get the program up and running. And what's interesting since I'm based here in Connecticut is noticing how the Connecticut farmers who grew him one of the same deal. So they started lobbying, there were lots of articles in the local press as the farmers here hope that that process would be replicated to my knowledge that still hasn't happened yet, don't know if it will, but New York was really unique in issuing licenses in in that way

Going down to the Southeast, definitely an interesting story here - there’s 16 states in this region, only 7 issued licenses and the peaks here were for dispensary/retail licenses in Mississippi and Puerto Rico. The thing that we've noticed about the Southeast, and it's sort of obvious when you think about it, is it's home to many limited license medical programs. So I think of Florida, Arkansas and Georgia where they're just not issuing licenses, let's say at the same pace as in Oklahoma with really no controls. So in this case when licenses are given out, they're often vertically integrated, so you have to do maybe all the activities and in the case of Florida you're then able to open as many stores sort of as you can. So it's not an entire surprise that in in this case it's the line at the top is for dispensaries, it's not for lots of cultivation or not some manufacturing. As we talked about the beginning, the regional approaches are different based on the type of programs that, that are in place.

Southwest is really all about Oklahoma and New Mexico, and the thing that I find so interesting here is that second big spike in September is Oklahoma issuing a whole bunch of cultivation licenses. Now for those of you who are pretty knowledgeable about Oklahoma, you also know what happened on August 26, 2022 when the state finally put in a moratorium saying, yeah, we're slowing down on the licenses and you know, I expected that to be more of a hard stop, it does not appear that that's really the case because lots of licenses continue to be issued - I mean it looks little bit like a ski slope here where there was definitely a decline but licenses continued to get pushed out. Now I think it may have been that the state felt they were gonna honor any licenses that got in or applications that got in before the deadline - I’m not sure if that's the case - but I'm sure there was quite a rush to get licenses in the door before the door shut, and you know, we'll see how it, how it plays out. I think there's definitely gonna be fewer licenses in 2023, but it's, it's certainly an interesting story as other states contemplate more moratoriums. Oklahoma's got one, but it doesn't look like it's sort of fully active yet.

And then looking out to the West home to many legacy markets - Alaska, California, Colorado, Oregon, Washington - a lot of cultivation, 71% of the licenses went to cultivation with retail dispensary only at 19%, and you know, this is a challenge that the West has really struggled. We've done some research as, have our clients on what kind of sentiment do growers feel out in the West and elsewhere - and it's really tough. You know, 1) There's a lot of black market is causing some troubles, 2) There’s taxation and 3) There aren't enough stores. So here we see that there's definitely a lot of grow licenses pushing through, but is it really, is it really enough? Especially when the store licenses only come through in about 19% for this region. So, you know, truly some challenges as these different markets behave differently and issued these licenses and sort of waves. So, as the markets continue to mature, it's something that will definitely have to keep an eye on in terms of what is the future going to be. And are we gonna see what some call extinction events.

Next we're gonna take a look at regions by activity. So, cultivation as a percentage of new licenses across the region, this sort of takes those last slides and combines them and turns them sideways. So here we can see where the focus was on cultivation licenses, and as we said, the west and Northeast look a lot alike where they really focused on grow licenses as opposed to other ones. The midwest and southwest were different here and then finally the Southeast that we talked about where the licenses are limited issued, very few cultivations. One thing that I think is interesting going back to the moratorium discussion, is that other states have started discussions on them, I think often driven by license holders. I've seen articles about it in Michigan, in Colorado, and most recently in Massachusetts, where you know, the price of cannabis is dropping and it's really squeezing out a lot of operators, so some of these license holders are essentially asking for relief. One thing though that looks promising is the decline in the number of grow licenses issued this year in 2022 compared to 2021.

So when we took a look at it, we saw that in 2021, almost a little bit over 9,000 grow licenses were issued, and in 2022 that number dropped by about a third to just over 6,000. Still a lot of new licenses and you know obviously how many existing licenses, you know, state and business or went out of business, so it's not the total number, but it's certainly showing that the rate of increase appears to be declining, which is likely a very good thing.

So looking at manufacturing, you know, quite a different look as you go across the different regions. The southwest is a leader and it's driven by Oklahoma and for us, I'll say this is a harder license for us to track. In some states, the manufacturing activity is stacked as part of a general license that that a company gets and it's just, you know, part of what that license holds. In other states, it's given to a license holder, but then it can almost be farmed out to other groups or LLCs that are under control or affiliated. So it's tougher for us to track. But in the case of Oklahoma, they issue specifically a manufacturing license, it's not stacked and it really leads the way.

So if we look at who issued licenses last year, you're not gonna be surprised when you see that Oklahoma really takes it away, New Mexico, Michigan, California are the other three, but talk about being in a distant 2nd, 3rd, and 4th place. So, manufacturing is certainly a key license in the value chain, but one state is certainly leading the charge there. 

Now, dispensary and retail, something we we referenced earlier, you know, just look at the Southeast in terms of issuing new licenses that are all about stores. In these limited license states, there's really an opportunity here for people to get stores out there. And my favorite example, as I said before, is Florida where you've got some, you know, major MSOs putting out a lot of licenses as they try and blanket the state of Florida, and I think we're gonna see this in other states as well - Mississippi is issuing a lot of licenses to. So in these limited license states where they don't put limits on stores, it's gonna drive that kind of behavior because on the flip side it holds back on the manufacturing and the and the cultivation.

And then, you know, once again, I'm pulling up Oklahoma, one more footnote, the moratorium hit here in end of August beginning of September, every month that came there after they issued more licenses than they had in virtually any month prior that year. So still seems kind of strange to me that they'd be cranking out new ones when I think at one point it was like 2,500 licenses were in the state and it was 1 for every like 1,400 people. So I think there's more work to be done there. Although we do see licenses essentially falling off the list there and that's going to have an impact in the long term. Also there's a lot more regulatory scrutiny happening, I know one of the red In the state has highlighted that they think 2,000 of the grow licenses are essentially illegitimate as they've been sold to people out of state. So there's a lot going on here, and while Oklahoma, I think will continue to be a story for for perhaps years to come, they're certainly trying really hard to, to tighten that up.

Obviously there's a lot of data here. We started with 100,000 licenses, 10,000 actives that that were just issued last year alone. It's an important asset, and it's one that we do a lot of work to track. I run the team that keeps an eye on all the data and we wanted to share how do people actually use this data.

So just using an example here, this is a search that I did to find all the growers in the Northeast. So, if you look on the side here, it's cannabis, it's cultivators that are active that are located in the Northeast and we found 952 total licenses that that fit in that criteria. If you look in the red box up top, you can see some of the activities that our users can engage once they create a list like this, because the list is really where it starts - 1) you can get updates if something happens to any of these 952, like if there's new information or if there's a story or if we add more information, you can get an alert that will let you know that or let your sales team know that. We also have built in a whole email marketing tool that would allow you or your marketing team to reach out to these 952 farms, to tell them what you're all about and to try and use it as a lead generation tool or prospect generation tool for you, and some of our customers have the ability to export this data as well or portions of it so that they can do their own analysis. So once you create a list, there's really a lot you can do and there's a lot of information that we provide to, hopefully enlighten you about these licenses across the US, Canada and elsewhere.

The other use case is about research. So here's a search that was done on a different platform that has the same licenses in it, where we looked at the growth of facilities In the Northeast. So how has it changed since 2020? You can see here there's sort of a gentle slope and then it takes off in March 2022 and down below, we've got a whole table that share some of the states, in terms of how the numbers have changed month-over-month, and these are total active facilities by month, and what we have found is that our customers are using this for growth trends, state-by-state analysis. We also overlay information like patient count, sales data (if the state provides it), and a whole host of other information - so that as people are trying to do the research they can with these tables down here, they're able to just right click, download the data, and then bring it into Excel and build their own pivot table. So we're really just trying to help out that workflow so that our customers can get the information they need and you know, do that sort of time series and and growth trends.

So what we want to do now is see if there might be any questions that people had about the license data that we've just covered. We also have links to our website, and my email, as well as the email to our sales team.

So first question good one is “Why is there no information on distribution? Does retail include delivery, retail or just storefront retail?

So distribution in some states is a specific license and I just chose not to include it in this analysis really for two reasons. In some states, distribution is implied. And by that, we mean if you've got to grow license and a manufacturing license, you can move the product between the two. In other states, that’s not true - you need a specific distribution license, and it's essentially a B2B delivery type service, so we just didn't include that. We do track them, but we don't have them here. In terms of the question about retail or just storefront - this was just retail or dispensary, we did not include, what in California they call “non-storefront retail”, but that is a set of licenses that we track. We've actually written about that and have some white papers coming up that are gonna dig into that because it's an important area, and it's one that in certain markets is crucial, especially like in New York City where it's not really about the stores, everybody expects things to be delivered, so you better have a delivery scheme. So, stay tuned into the blog because we'll be covering more information on that, and it's certainly in the database right now.

This is a comment “A manufacturing license could look after many growers so the overall number isn't all that important, is it?” 

That it's an interesting point. I think it depends on the state. So, in Connecticut, there have been 4 growers and that's been the case since the program rolled out in about 2014, and those growers have been able to meet the needs of what was first I think 6 stores, then 9, then 18, and the state felt comfortable rolling out the adult program when the threshold of like 250,000sqft was met. So you're right, it is a lot about capacity - can the capacity be met? So it's gonna depend on you know sort of what the state is trying to achieve. In Oklahoma as we saw ,they’re just giving out those licenses and you know is the quantity important? I don't know. I would say that that manufacturing license in a place like Connecticut or Florida where it's built into the the existing license is way more valuable than the one that somebody purchased in Oklahoma for $2500. So I think it's a context thing where it depends on the state, but it does support why the overall number just doesn't tell the whole story, so I would agree Brandon.

Is there overlap in our data with manufacturing and process under licenses? How do we differentiate?

We tend to reserve manufacturing for cannabis and processing on the hemp side, so there may be some overlap. I'd have to actually you know pull up the data and see but processing tends to be something that we've tried to say is more about hemp, as opposed to manufacturing. But some states are kind of pushing us a bit where they are differentiating those licenses, licenses and if we do have them and I think there's a couple of states, we'll group them under probably the manufacturing umbrella, but I'd have to check on that Caitlin so we can save that information. We'll get back to you with a more definitive answer.

Alright, well it looks like we've exhausted the questions so far. So I thank you for dialing in today and asking great questions. Our contact information is here, if you've got additional questions you want to follow up with or you think about something afterwards and Caitlin, I'll get back to you with a more definitive one.

Oh wait, looks like we got one more question “Do you ever see any areas where the state is pushing to get people to apply (demand constrained)?”.

I can't think of a case where that has happened. I do know there are cases where people have been surprised at how few applied, but usually it's the other side where, 30,000 applications come in or it starts off really slow and then suddenly there's an on rush. So I haven't seen it happen that many times, but my team may know of some other examples where that may have may have occurred but that seems less likely, unless you've got some examples that I'd love to hear so!

Alright, well thanks again everybody for your time, and as you said earlier if you've got more questions don't hesitate to reach out, and we’ll look forward to doing this again, hopefully in a couple of months.

Thanks so much for joining us on today's podcast. I'm your host, Ed Keating. Stay tuned for more updates from the data vault.

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