With Florida’s recreational cannabis vote looming, Pablo Zuanic of Zuanic & Associates anticipates a high-stakes shakeup in the state’s cannabis market. His latest analysis reveals a volatile mix of market deflation, rapid retail expansion and an active M&A landscape as key companies position themselves to capitalize on post-election shifts.

For operators ready to seize these dynamics, the coming months following the on November 5 elections could bring significant growth opportunities…or intensified competition.

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Market Deflation As Sales Drop Despite Volume Growth

According to Zuanic, Florida’s medical marijuana (MMJ) market is experiencing a deflationary trend. Q3 2024 sales were reported at $418 million—a 13% year-over-year drop, despite a 13% growth in flower volume and 6% in non-flower products reported by the Office of Medical Marijuana Use (OMMU).

This volume-sales disconnect points to a 23% year-over-year price decline, reflecting a more competitive landscape. “Price declines show that Florida’s cannabis market faces intense pressures,” Zuanic noted.

Expanded Retail With Varying Store Productivity

The state’s dispensary count reached 690 in October, up from 615 in 2023. Trulieve TCNNF leads with 155 stores, followed by Verano VRNOF (79) and AYR AYRWF (67).

Yet, store productivity differs significantly: Trulieve averages 4.06 ounces of flower and 9.71 million mg of non-flower sales per store quarterly, well above the industry average excluding Trulieve. Meanwhile, Verano and Curaleaf CURLF post lower figures, lagging notably in both flower and non-flower productivity per store.

Diverging Operator Growth And Market Dynamics

Florida’s operators have followed diverse growth paths. Smaller players like Sunburn and Green Dragon have seen remarkable growth – 903% and 605% increases in flower volumes over two years, respectively.

In non-flower sales, Green Dragon expanded by 1,500%, while Sanctuary grew by 576%.

Conversely, Cannabist CBSTF and iAnthus ITHUF reported declines in volume, with flower sales dropping 22% and 36%, respectively. “These disparities reveal how strategies differ between new and established players,” Zuanic observed.

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M&A Landscape: Potential Buyers, Sellers, Strategic Realignments

Florida’s cannabis sector is primed for M&A activity, with some operators facing financial challenges and others expanding strategically.

Zuanic identifies AYR and iAnthus as likely sellers, citing “stretched balance sheets” that could position them as acquisition targets. Cannabist has already sold its Florida assets to a joint venture between MINT Cannabist and Shango.

For potential buyers, Green Thumb GTBIF, Curaleaf and Cresco are well-capitalized to acquire distressed or underperforming assets in the state.

SNDL‘s SNDL recent acquisition of Surterra suggests it will maintain its Florida operations, while Sunburn’s owner, who previously sold a business to Cresco CRLBF before re-entering through MedMen‘s Florida assets, may continue expanding or divest strategically.

“If recreational sales are legalized, M&A could further accelerate as financial pressures reshape the market,” Zuanic noted.

Projected Upside

If recreational cannabis is legalized, Zuanic projects the market could triple, reaching $6 billion. Cansortium could see an estimated 700% increase in market cap, with iAnthus and AYR potentially gaining 360% and 270%, respectively.

His methodology applies a 30% EBITDA margin and an 8x EV/EBITDA multiple to estimate value creation in a recreational market scenario. While the potential upside is promising, Zuanic advises caution, noting uncertainties around future regulations.

Changes in licensing or lobbying efforts from hemp advocates could impact the market’s growth trajectory. “Florida presents substantial opportunities, but investors should remain vigilant,” Zuanic concluded.

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