Cannacurio Podcast Episode 59 | 2023 Licensing Leaderboard Recap

Cannabiz Media’s Chief Data Officer, Ed Keating, does a recap of the 2023 Licensing Leaderboards and shows you what we've seen in looking back at all the licenses that were issued.

Press the Play button below to listen to the podcast.

⇨ Follow the Link to Listen to Previous Episodes of the Cannacurio Podcast.‍

⇨ Follow the Link to sign up for the newsletter to get Cannacurio Podcast alerts.

‍

Cannacurio Podcast Episode 59 Transcript

Ed Keating:

Good afternoon. I'm Ed Keating. I'm the co-founder and Chief Data Officer at Cannabiz Media, and today I'm gonna walk you through our Year-End Licensing Leaderboard and Recap.

We've been doing this for a couple of years now and it's just a good way to look back and see, you know what happened in the year-end licensing and what it means for all of us who track that information.

So I like to start with a little level setting just to make sure we're all on the same page. Some of the things we'll do is really focus for the most part on active licenses because these are the ones that are actually open for business and either growing or manufacturing or have stores open. So with that, let's put up a couple of numbers here and, and dig in.

So first off, we estimate that there have been about 108,000 cannabis licenses issued in the US on the state level, a pretty big number. And we think that's up about 10% from last year, 9.6%.

Going to the active point I referenced before. At the end of the year, just under 40,000 licenses were active. And that's, you know, with the focus on cultivation, manufacturing, and then dispensary in retail. And that number is down from the end of the year 2022 by about 7% when there were approximately 42,300 licenses, so we're seeing a shrinkage in active licenses doesn't mean necessarily cause for concern. But anybody's been watching, the industry knows that there's been oversupply in many markets and the numbers and graphs will show will, will prove that out.

And then something that's always been a focus for Cannabiz Media and for our customers are the new licenses. So looking back on last year, how many new active licenses were issued, we know that there were other issues that may have been pending or they're still in the applied stage. This doesn't include this. So just the number of new licenses that have gone active and that's numbers only 5,200, which is down a lot from 2022 when the number was closer to 9,800. So, quite a bit of a decline in terms of new license issuance. And there’s lots of reasons for that. In some cases, programs have been slow to start or there have been lawsuits, and more lawsuits, and a third round of lawsuits. So, yeah, there's definitely a lot of things that can get in the way to see what the new license issuance looks like graphically. This is one of my favorite kind of ways to display this information where you can see that the grow licenses are really the biggest area and they always have been cultivation licenses seem to be the biggest. And you can see that really everything is in decline. There is a spike in the middle there where a lot of licenses were issued. We'll see this in future sites too. A lot of it has to do with a bunch of Michigan grow licenses. I had the team look into it and just help me understand it. And it wasn't so much that there were lots of new farms created. It was mostly people doing canopy expansion. So they got essentially add-on licenses to their existing farms or facilities, but still, it's an increase of canopy and that is,, and that is significant.

So moving on to, looking at sort of, you know, all the licenses by month. So a lot of licenses were issued in January and February, interestingly, these came from Oklahoma, the state that supposedly has had a moratorium for the last almost 18 months, 16 months, took a while for it to sink in and we'll see that in future slides. And then once again, we see that spike in the middle of the year which has to do with those Michigan licenses.mBut then you know, once you get through the middle of the year, sort of July, it really drops off across the board slower license issuance end of the year, you know, programs not getting off to a rapid start. So, you know, definitely a decline in this new license activity that we've been tracking for many, many years.

So let's look at the leaderboard in terms of the states where the magic did happen. Michigan! They really accounted for, you know, 1,100 of those new licenses. That's a ton. Most of those licenses were cultivation (783), 96 were manufacturing and 243 were stores, so kind of a 70% 8.5% 22%, so grow was the big area. In terms of California, similar cultivation was at 61%, manufacturing at 9%, and stores at about 30%. One interesting note to keep in mind as you look at California, and I've written about this really throughout 2023, was a year ago they enabled farms to get large licenses and these have definitely had an impact, I think about 40 have been issued, and it allows people to essentially consolidate these smaller licenses that they had to get posted stamp style to really represent the farm. So, you know, that's, I think one of the issues too, in terms of what we're seeing in California.

So let's dig into Oklahoma because it's just such an important market. It's one that the industry kind of, you know, almost perseverated on in, in some years because there was so much going on. But looking at this slide, we have two data points to look at here. The big green columns are simply the total number of active licenses, and this is just over the 12 months of last year. And, you know, you can see that it's just under 12,000 at the start of the year and then it moves all the way down to, I'm gonna estimate this probably like 8,500. That's a big declination. You know, one of the, one of the charts we use internally and, and for our customers shows the net, you know, are you plus or minus this month and it looked like every month they were dropping 400- 500 licenses and there's a lot of reasons for that. It's, you know, has to do with a lot more enforcement and, and other activities going on with the regulator. But take a look at the blue line, this shows the number of new licenses issued for the month, and in the beginning of the year, they were still killing it - 580, 277, and then 80, 18, this is like from an economics class, you know, to show the perfect curve of something going to zero well, they're pretty much a zero now and, they will not be at the top of the leader board. I think the state doesn't want them at the top of any leaderboard. It's really a big change and the regulators are doing a lot of work there, they are checking essentially the veracity of all these licenses who the owners are. We know that a lot of those licenses are being shut down. There were sham licenses, the money came from overseas and the regulator is spending a lot of time, effort and money to, to really crack down on that. So that's really changing the complexion of that market. There's still a lot of licenses there, but from what we've read, heard and seen, a lot of them do seem to be kind of leaving the industry or getting shut down by the regulator.

Let's take a look at some regional snapshots and, and we're doing this regional just as we were presented it last year because with, you know, 39 odd markets, it's a little hard to dig into each state in a presentation like this. But if you have access to the database, you can see a lot of this, a lot of this data. So regional snapshots first off, how did 2023 compared to 2022 in terms of license issuance by region?

So this is kind of interesting in that two of the regions really had giant changes, in the Southwest and the West, you know, big blue spikes from lots of licenses. You know, for the one in the Southwest, that's all Oklahoma, they were the ones kicking that one up. And then in the west, I think it might be California. But look at the other three regions really not much different from year to year. Like in the Northeast, the beast in the East never happened. New York didn't come flying through with tons of licenses. New Jersey kind of did, but New York didn’t. Vermont kind of stepped up, but a lot of those other regions stayed pretty steady.

So let's take a look at specific regions kind of by month, like what did the curve look like over the course of the year?

So first off Midwest, big spike in the middle, that was that issuance of all those grow licenses where people were expanding their expanding their grow. It's also important to note that out of the 1,328 licenses that, you know, we found is going active in the Midwest, 88% came from Michigan and Michigan has been at the top of the leaderboard for a long time with Oklahoma, California. Not a real surprise but really kind of sucking up all the oxygen in the Midwest in terms of a real active market. It's interesting, I was talking to an industry professional yesterday asking her which state has gotten licensing right, and she picked Michigan. She said she thought they did a good job and it certainly looks pretty healthy and robust now.

Jumping over to the Northeast, definitely some sort of like peaks and valleys, but a lot of consistency from, like June almost to the end of the year. They certainly dipped down as we saw in that graph that showed the whole country, but just not as many licenses. And the Northeast includes like Connecticut, Mass Maine, New Hampshire, sort of all of New England, Vermont. So, you know, licenses are definitely getting issued, we’re all waiting for the 1500 supposedly that New York are supposed to be kicking out.

So now to the Southeast, not a lot of licenses here, there's only a small spike here, I think this is when we either added, discovered or put in a lot of Puerto Rico licenses that came in, but on the whole, not a lot of activity here. And these include states like Arkansas, Mississippi, Virginia, West Virginia, Maryland. Now, some of these states have programs coming on where we're gonna get more licenses, but they have just not kicked through.

Here we have Southwest, this includes Arizona, Oklahoma, Texas. And you can see here that all those licenses that I referenced Oklahoma issuing earlier, once you take those out and they go to zero, look what happens to the rest of the region, I mean, they're under 100 for, for the whole region. Now, you know, places like Texas are just, you know, essentially a low CBD type market. There's only three licenses, it’s not really the same kind of market as others. But, you know, still we've got, you know, other states like Arizona and New Mexico and, you know, there's definitely opportunities for, you know, somebody else to jump to the top of the leaderboard now that Oklahoma is disappearing.

Finally, let's go out to the West and, you know, here we've got Alaska, California, Colorado, Montana, Nevada, Washington, Oregon and others, you know, these are kind of the stalwart states that have been around for a while, most of them, and, you know, they've seen a decline, you know, from mid-year on as you know, states have had moratorium. Like, you know, Oregon has continued under a moratorium for a long time. So, you know, there's definitely issues, sometimes regulatory, that impact what the licensure is gonna be like in terms of new licenses coming on board.

So now that we've looked at some of the regions, let's take a look at some of the activities because we know that a lot of people really focus on those types of licenses that maybe they sell to or they research or they care like how many doors are open, et cetera. So first off, we're gonna look at cultivation and these are the new licenses issued and this is just, I think, fascinating because it shows how much cultivation has contracted in terms of new licenses. So in 2021 the number of new cultivation licenses issued was 9,010 - that’s a big number. The following year it dropped precipitously 6,010, and then last year it dropped even more to 2,200. So obviously, a lot of states have shrunk their licensing down for this, they realize there's oversupply. The farmers are decrying that there's, you know, too many licenses, too much canopy, not enough stores to sell it. We're hearing in New York, where a lot of cannabis may get essentially thrown away because there are only about 50 stores open to sell even though a lot more grows were, were licensed. And meanwhile, in my state of Connecticut, we don't have enough cannabis but don't be bringing it across the border, or you're, you know, big, big risk and penalties, but a lot of newspaper articles have been written on that. But anyway, for, for this one on the grow, we just see it shrinking and shrinking. And a big part of this obviously is that Oklahoma Moratorium, but also Oregon and even Vermont, which in sort of researching this, I realized that that was a big piece where they started to restrict large commercial grow licenses really to help out the craft growers. So, Michigan issued almost 35% of these licenses this year out of that 2,253, and you know, that, that, that that's a big number for them to really bulk up their, their market and their canopy.

In terms of what cultivation look like on a month-to-month basis, you know, bounced around a lot. There's that big July Spike we talked about in Michigan.

Let's take a look at some highlights for manufacturing. So there weren't a lot of licenses issued last year. I think the total was about 744 which was down from 1,398 in 2022 Oklahoma led and issued 246 licenses or ⅓ of the total. Michigan was a distant second but the interesting thing and I just did a post on this last week is that the number of manufacturers nationwide was really stable. It was, I think it changed like 0.03%, not like grow or stores which, you know, certainly has seen different dynamics, and we think that has a lot to do with the capital intensive requirements of, you know, running some businesses that are gonna, you know, handle manufacturing.

The next slide is about stores that says licenses and facilities, but this is about stores, essentially dispensaries and retailers. One of the ways that Canada's media tries to keep track of businesses is not just by looking at licenses, which is a good, you know, a proxy for the health of the industry and whether it's growing or shrinking. But also looking at the facilities because in some cases, a facility may have multiple licenses at one location. So yeah, here with stores they track pretty tightly. A couple of states still require a business to hold a medical license and an adult-use license to sell to those two different populations or customer segments. A lot of places don't, but still, you know, and, and they'll require a, you know, a separate license which makes the license count slightly higher in those states, but it sort of masks how many stores are there. So, the blue line is the number of stores that we've been tracking, and the green line are the total number they track very tightly where this is much more pronounced is in cultivation where we have hundreds of licenses in some case cases, just one facility or one farm. So it's important to know if you're doing market sizing total addressable market, et cetera. So, you know, and this one with the stores, you know, four states issued 60% of the licenses, you know, 11,375 stores, that’s a, that's a good number. It's not gigantic or ridiculous. And we know that a lot of people are trying to get hold of stores and sell them things. So it's a it's a very popular segment. New York is still the market that everybody I think has an eye on because there's this promise of so many, so many licenses. Although I will tell you that, you know, we've been doing research at Cannabiz to look at sort of the substitutes in the market, and there are over 8,000 licensed Vape sellers in the state. And we know that a lot of them are probably selling more than nicotine in those vapes, and that's creating a lot of challenges for the state.

Sticking with the stores just to wrap that up. These are the companies that added a lot of stores and, you know, we, we tracked it down to, you know, who issued or, or who secured these licenses and anybody with an asterisk was on the list last year. So a lot of people managed to continue to open stores which is a good that they're able to do that year after year. Some of them are obviously MSOs and are very familiar names.

So just to tie this back to our intelligence platform, we have customers using us for a lot of different activities. Marketing and sales is one here is sort of a list of licenses that was created. I think it's Mississippi list of dispensaries, and we've got a whole suite of tools that help you reach them, you know, for email marketing for your CRM as well as a lot of business intelligence tools as well. So this is a part of the product that you might not have seen if you're just on the normal sales marketing piece. But we've been building dozens of dashboards to really help bring a lot of this data to light and to provide insights into these businesses that you're tracking and researching. So, you know, the first one up here is real estate Investment Trust, which licenses are under a reach where they've, you know, have a note that they have to pay in order to, you know, run that business. And how many square feet is it, how many years does it go to? Who owns the note, et cetera? We've even begun to track violations and recalls. We've taken 6,000 violations and categorized them so that they're easy to research and see which stores or businesses have had challenges as well as looking at recalls to see what are the causes of recalls. So there's a lot more here. And I'll give you some contact information at the end in case you have questions on that.

Just a couple of key points I wanted to hit. So looking at all this information over the last 20 minutes, it's obvious that new license issuance is down overall doesn't mean it's gonna stay down. Other states have programs that are coming on board others have promised, you know, new licenses. I know Governor Hochul in New York is not too happy with the cannabis board there, and looks like there might be some changes, issuing three licenses when people are expecting hundreds…probably not a winning strategy. So I do expect more licenses. I don't know if it's gonna grow in 2024 compared to 2023 or if it stays stable. I think on the cultivation side is definitely slowed down. I will also say kind of obviously, Oklahoma has stopped issuing licenses and they're regulating very heavily. I just really see that as a shrinking shrinking market, probably not one to invest heavily in. I mean, obviously there's still needs there, but the number of licenses has been just way off the charts. Related to that I've seen a lot of articles and we've tracked a lot of, you know, black market issues in both Oklahoma and Maine where the regulators and the legislatures in those states have raised the issue of foreign investment in, you know, both the licenses and in real estate and they're kind of sham licenses because they'll put down some paralegal from the law firm that is supposedly the local owner, but the money is coming from overseas. So, there's been a lot of scrutiny on that and I expect that may continue in other states where there's cheap farmland and people can run these businesses and, you know, have access to highways and other things to, to move, cannabis around the country and across those borders.

And then lastly just putting the big number out there that, you know, stores at about 11,375 - this is a number that, you know, people ask how many doors are there, how big is the market? And it's an important number and I think it is one that shows the health of the industry. It will be curious to see how that one changes as new businesses come out to try and make it in places like New York where we know they're vastly under serviced, versus Oklahoma that, you know, has too many in California, which could still add a lot more.

So, with that in mind, just contact information, you know, here's how you can find Cannabiz Media, reach our sales team, you know, reach me with any questions. We're happy to answer any questions and, you know, help spread all the information that we've gathered over these last 10 years.

Thanks very much for your time today.