Cannacurio Podcast Episode 51 | Q1 2023 Licensing Leaderboard Recap

On this Cannacurio episode, Cannabiz Media’s Chief Data Officer, Ed Keating, does a recap of the new store, cultivation, and manufacturing licensing activity & leaderboards by state between January-March 2023. He also discusses what the heck is going on with Oklahoma.

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Cannacurio Podcast Episode 51 Transcript

Ed Keating:

Good afternoon, everybody, this is Ed Keating. I’m the co-founder and Chief Data Officer at Cannabiz Media, and thanks for tuning in for our Q1 Licensing Leaderboard. This is where we look back at the last three months, or the first three months of the quarter, and share with you what we've seen in our database as new licenses have been issued and others have perhaps not renewed. So we're gonna start off with some just quick and easy stats, that’ll help you get a sense for what we've been seeing as we've researched Q1.

So first off, you know how many store, cultivation, and manufacturing licenses were issued in Q1.

So we found that there were 1,619 new licenses issued for just those activities. We obviously got a lot more licenses than that if you looked at all the other activities that we're tracking, but those are the three main ones in the value chain where we've got growing, manufacturing and then selling.

So what was the distribution like? We found 602 on the cultivation side, 337 on manufacturing, and then 680 store and or dispensaries - you know, sometimes in certain states, it might actually be both.

So the the ratio, as we see it is 37% were cultivation, 21% manufacturing and 42% issued licenses for stores.

Digging in in terms of the number of states that issued. This is kind of interesting given what we're seeing with some of the collapses in the price of wholesale. So a lot of states issued stores, not really a surprise. There's certainly been a lot of scrutiny here in the east coast where I base everybody's looking at New York - ‘How do they get more stores? How do they get more stores?’ But it appears that, you know, 27 out of, you know, all the states with cannabis programs did issue more stores, manufacturing not quite as many, only 15, about half and then cultivation way lower. And, you know, for anybody who's an industry observer, probably not a surprise. I can't imagine there's as much demand.

A lot of the other research that we've been doing on sentiment with Wells Fargo, shows that growers are really having a hard time. So there are licenses that are not getting renewed, and I think that also turns into simply new licenses not being issued.

So overall, this looks at not just the new license issued but the total active ones that we're tracking the database. We found that licenses are down 0.9% in the quarter. So this compares March 31st, how many licenses did we have for those three activities, versus December 31st, 2022. So a slight declination, but what's interesting is to see how that ratio comes into play in terms of where we were up versus where we were down.

So dispensing of retail as we sort of saw in the previous slides was up 5% big focus on stores. A lot of states need more stores, especially New York.

Manufacturing up only 3% you know, not that much, but where we really saw the decline and I think it's to nobody's surprise is in cultivation, which was down almost 5%, and because there's so many cultivation licenses, 5% of that total is different than 5% of the dispensary retail. And you can see that here on the next slide where we graphically show what does it look like over the last 12 months, not just a quarter, because you want to have a good longitudinal view here.

So as you look at these three lines, you can see sort of this subtle shift over the trailing 12 months. So cultivation by our estimates and our data went from just about 23,600 a year ago, to 21,500 - so pretty good size drop. Manufacturing grew from 5,647 to 6,236, and then retail grew the most from 9,790 to 11,720. So not a surprise, I think for any industry watchers.

I didn't really know what was gonna happen with manufacturing as much because those licenses as we've seen in some of the research that we've done, are not as volatile as cultivation and retail in terms of movement and they're just less of them across the industry. So once again, not a giant surprise there, but let's look at these three activities on a state leaderboard side.

So these are sorted by most licenses to fewest. First we'll start with is cultivation. So as we said earlier, 602 new cultivation licenses were issued in Q1 by 14 states, 56% of these were from Oklahoma, but look at the rate of issuance in terms of how that number has changed. It went from 230 in January all the way down to 18 in March. And even though we're focusing on Q1, if you look at April, only six new cultivation licenses were issued in Oklahoma. So that is a giant change.

I mean, all these numbers in decline are really hard to argue with. Oklahoma has been at the top of the leaderboard almost since we started doing leader boards back in like 2018/2019. And here looking just to January, 230 out of 330 new licenses in that month, all came from Oklahoma - but in March, it was only 18 out of 85…big giant drop. So that's significant. And I think for anybody who is marketing or selling, you know, across the US and looking at where licenses are, there's definitely a big change of foot here in Oklahoma and it continues in manufacturing. 

So similar story here, Oklahoma accounted for 70% of the newly issued licenses for manufacturing. But as with cultivation, the number declined every month. So if you look at the trend in January, they were responsible for 85% of the new January licenses, only 62% of the licenses in February, although that's still a giant giant number and then 33% in March. In April there were only four new licenses that were issued for manufacturing coming out of the state. So definitely some, some changes here as Oklahoma winds down it's program really, and a moratorium really takes shape.

So let's see, looking ahead lastly to retail, a lot of licenses here, 680 new dispensary/retail licenses were issued in Q1. Oklahoma was responsible for almost half, and as with cultivation and manufacturing, definitely a drop off. The downward trend continued as we went into Q2, there were only six licenses issued in April. So the trend continues and we'll show that as we move forward - but just to give you a sense of scale, Oklahoma was responsible for 60% of those new licenses in January, 53% in February and 24% in March. So obviously, there's been a big, big change in terms of the impact that Oklahoma is having in terms of license issuance.

What I'd like to do now is show you what we see the moratorium looking like over a quarter and actually into April. So the moratorium for any of you who aren't familiar with, it was issued last summer and it was supposed to start August 1st (2022), and then it was kicked out to the end of August (2022), Quite simply it said we're not going to issue any more licenses for a two year period, and we could cut that off earlier if we choose to. But, you know, we have the ability to do, you know, those kind of changes and it appears that they had a big backlog to work through because September 2022 was one of the biggest issuing months for Oklahoma. Definitely a ton of licenses were issued and we saw that continued right through, you know, January looking at this, stack here, there were 561 licenses issued in January of this year (2023). So they were still kicking it out, but obviously, it's come all the way down to April 2023 where there's only 16 licenses issued. So definitely a giant giant change for the state in terms of what they have been able to make available. And I think they've really tried hard to manage the problem that they've seen in the state with having too many licenses. So, you know, we're gonna continue to keep an eye on it, but it's definitely been a, a big change for, for Oklahoma. And I think for the industry as a whole.

Digging further into the state, it's interesting to see how Oklahoma's licensing ratios are different than what we've seen in some other states. So, for example, if you look at the percentages, you can see that the state of Oklahoma had a very different percentage of licenses where cultivation was 37% but retail was also 37%. And if you look in the middle where we take Oklahoma, essentially off the charts, you can see that the rest of the country, half their licenses were new stores. And then if you look at the bottom, we can see that, look at the whole country that it's only 42%. So it just shows really the swing or the impact that, you know, one giant issuing state can have. And now that that state is kind of going away, what, what's that gonna look like. How will these ratios change? You know, I also think it's interesting that it's manufacturing cultivation, essentially the production side of Oklahoma where all these licenses were issued. It's almost as if, you know, they were looking or people were looking toward perhaps an export market, which we've heard a lot of in Oklahoma where licenses were, you know, being used to ship product out of state.

And, you know, I can't say that those licenses were used for that, but there's definitely some challenges that that state has been going through. And I think now with some of the new regulations that have been floated out, including a longer moratorium, higher fees for licenses, I think the state is gonna really drastically change and it's definitely still a state that we're gonna keep an eye on.

But as I publish these posts, for the next 8 months to the end of the year, I don't think we're gonna see Oklahoma at the top of the leader board anymore because if they're only issuing 16 licenses in a month instead of 600 that's a just a ridiculous difference.

So, in terms of looking at licenses and data, I did wanna point out that there's a lot of ways that our customers use this data. So, you know, here's an example of somebody who built a collection of licenses. I think it's New York cultivation and with our tools, they're able to download the list, do emails, manage it in our CRM so that they can keep track of the licenses that they care about. So it's a way that, you know, we help our customers track the licenses that are most important to them. Similarly, we've got a whole business intelligence product for our customers who are really tracking the data about the licenses. So this is an example here of all the licenses in the Northeast and how they're growing over time. And with this tool, our customers can come in right, click on this table down here, download all this information into Excel, and really do whatever they need to in terms of research to manipulate and and use that data. So just wanted to make sure that people had an understanding of more of what Cannabiz Media does.

So in wrapping up, there are really three key points that I took away in putting together the the data for this and what we've noticed over the quarter. So there are 1,619 new licenses issued just for those three activities. The total licenses have actually declined, you know, not by a lot, but just under 1%. And I expect that to continue, I think that we've seen this in a lot of states where the supply of cannabis is vastly outstripping the demand. And I think we're probably gonna see more of these grow licenses come under even more pressure. So it's gonna be still, I think a hard time as we go through this contraction. And then finally, you know, we see that Oklahoma's moratorium is definitely now having an impact. I mean, that graph that shows it coming down from 600 down to 16. You really, I think, speaks volumes because since they started their program in, I think it was 2018, it's really been, a licensing powerhouse. And now I think the regulators have really stepped up and they're making changes to that program that is gonna impact the state. And I think also a lot of the ancillary vendors that have done a lot of work in Oklahoma.

So wanted to provide some contact information in case anybody had follow ups they wanted to do. We'll keep that up on the board. And also see that there's been a couple of questions that have come through.

So Kaliko Castile asks a comment…

So the state of Illinois, Illinois was a little on the issuance list for Q one. Could you give more insight into that state? And this is actually a question that was asked by Brittany.

Illinois has been an interesting state for us to follow because there have been so many lawsuits there that have really held things up. So even though it looks like license issuance is slow. One of the things that we've picked up on is it may be that there's a lot of pending licenses in there and that's not been part of our analysis, Brittany, but that could be one of the reasons why it looks low. But we know there's, you know, it's a big market and there's been a lot of, a lot of activity there on the licensing front and, we know the regulators have been working really hard there to sort of update their program and make sure that, you know, they're doing all the work they can do to get the licenses issued.

And, Kaliko Castille asked, “Do you know that there are similar between Oklahoma and the Oregon market (including a moratorium)? and it's a great consumer state, but lots of operators stepping out of the market these days.”

I mean, in some ways Kaliko, I wonder if Oregon is gonna show Oklahoma what happens when you put in a moratorium? Because to my recollection, this is not the first moratorium that Oklahoma has had, they had one, they shut it down for really a short time and then they brought one back. So I think we're gonna see more of this. I know I've written about this, earlier in the year where we saw other states where the license holders were asking about the possibility of a moratorium including Massachusetts, which is a bordering state to where I am in Connecticut, because they have a lot of cultivation licenses and they have, a price that is dropping. And even in Connecticut where I'm based, we've seen reports that the price seems to be dropping and there's been a movement to allow hemp farmers to be cultivators of cannabis as they've done in New York. And that would obviously drive the, would drive the quantity up and probably the price down. So, we'll have to see how that how that plays out. But great question.

Ok. Alright, well, if there are no other questions, we'll call that a wrap. As I said, you've got ways to reach us here at cannabiz.media, sales@cannabiz.media, and also ekeating@cannabiz.media.

So thanks so much for joining me today and I'll look forward to speaking with you all next quarter when we do this and see what really happened, as this moratorium takes hold in Oklahoma.