Cannacurio Podcast Episode 71 | 2024 Licensing Leaderboard Recap

Cannabiz Media’s Chief Data Officer, Ed Keating, does a recap of the 2024 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 71 Transcript

Ed Keating:

Hi, this is Ed Keating with Cannabiz Media, and I'm back again to give the roundup of what happened in licensing, uh, looking back over the last 12 months. 2024 was an interesting cannabis year, just like every cannabis year that preceded it. We had a presidential election, we had state referenda, slow moving rescheduling process.

And, uh, through it all, the regulators continue to issue licenses, fines, recalls, et cetera. So we're going to take a look at some of the key things that we thought happened, uh, last year.

So just to do some level setting every year, we'd like to take a look at some of the elemental stats of our space. So in the cannabis media world. We have 154, 000 cannabis licenses that we have found have been issued over the last 10 years. Now, to nobody's surprise, there aren't that many that are active.

That's a much smaller number, which is just under 40, 000. And it's been in that range for a while. When people speak of, you know, how many businesses are there, that's usually the number that We quote war are quoted on. Um, and it's staying relatively steady and looking at how many new ones were issued last year.

We counted almost 6800. And what's slightly significant about that is it's slightly up from last year. Um, although. Way down from 2022 where almost 9, 000 licenses were issued. So last year was, uh, just over, um, 132. So definitely, uh, what you call a bit of a bounce back. So yeah, that's a, that's a good thing for the industry.

Uh, although different states issued certainly. at different rates. So, uh, next I want to cover just a few, what I call sort of overview stats and backgrounds to help everybody see ideally what, what we've seen here at cannabis media. So one thing that we've noticed and part of how we track the industry is for these reports, I tend, and my team tends to focus on the big three license categories of cultivation, manufacturing, and store slash dispensaries.

Those account for, I think, at least 90 percent of the licenses that are issued. Some states, that's all they issue. Other states may have a whole laundry list of other specialty things that they thought were important to license. And, you know, as you know, each, um, Each state is kind of a sovereign nation when it comes to cannabis, and they get to choose their own adventure, so they'll create lots of different, um, lots of different types of licenses to track.

So here, looking at 2023 and 2024, we can see that cultivation was way up. It accounted for 54 percent of the new licenses that were issued. Last year was 46%. With stores, uh, it was only 30 percent this year. Last year, it was 36%. And then lastly, with manufacturing, it was, uh, 15 percent this year, 18 percent last year.

So, obviously, when everything sums to about 100%, When something like cultivation zooms up, it's going to shrink, uh, everything else that, that, that we see. Now, what's interesting is to look across the calendar, which we do on this next slide. So there's that purple mountain in the back. That would be the cultivation licenses.

And we dug into this, and we talked about this in future slides, that A lot of this happened in Michigan this summer, and it's just a little surprising given that, um, the moratoriums oversupply and price pressure are in play here, yet you still see, uh, markets like Michigan adding a lot of licenses. The, um, manufacturing as always stays pretty steady and there's certainly some peaks here for, um, for the, for the stores.

So digging into the geography a little bit more. These are the regions that, um, we have, um, just a way to sort of simplify the world a bit, and while every state really is its own market, um, it is useful to look at regions because sometimes you'll see trends there that are helpful from, um, just an analytical standpoint, like, you know, the southeast is pretty unique compared to other regions, and we'll see that ahead.

So. This shows the new licenses that were issued by region by year, so we can see some of these giant spikes here. And, you know, a little bit of it is, uh, you know, every dog has his day. Every region has its day. So here in the southwest, that big spike is really driven by the early days. of Oklahoma, which we all know, um, issued more licenses than really any, any other state.

But you know, I'll come back here and there was a lot going on in the West. That was probably California. Now, as we look at Uh, you know, the Northeast, we can see that things have started to take up. That's probably driven largely by by New York State. And then here in the Southeast, which is mostly compromised or comprised of limited licensed medical markets, you know, they're not issuing a crazy number of of licenses.

So, you know, just a different perspective in terms of, you know, how, um, how the markets. Um, in terms of where new licenses are coming in. So, taking a look at, you know, the leaderboard of new licenses, based on how, you know, cannabis media has tracked these, Michigan was at the top and right behind. We've got, you know, New York, Oklahoma.

A lot of these are really actually kind of renewals, but they show up is essentially a reissuance. So that's why there's so many there. You know, Oklahoma's total licenses have continued to shrink, and it looks like they're adding a lot, but they're also. Taking a lot out. Um, what I did want to share, though, is the license composition.

So, Michigan, as we talked about driving that big spike we saw on that slide, 70 percent of their licenses last year were cultivation. Only 14. 5 percent were stores and then the rest were manufacturing. New York was a whole different animal. Only 17 percent cultivation, a ton of stores, uh, 17 percent manufacturing, and then 26 percent all sorts of other activities.

They've got lots of different types of licenses that cover different activities that some states don't license, or they might be like an implied license. So, you know, once again, a little bit of the choose your own adventure, um, element there, but You can see how each state is different, and it's certainly one of the challenges of being an operator, and also a challenge of, I'd say, being a multi state operator, too, where you've got all sorts of different pressures as you go across these state lines.

So, um, let's move on to take a look at some specific activities. Earlier I talked about, we look at the big three and that's where we'll focus here. So this is a graph that we've done, I think, for the last four years of how many cultivation licenses have been issued. And that big purple one was, uh, you know, way back, uh, when lots of states were issuing tons of licenses.

That was back in 2021. You can see it's somewhere close to 9, 000 cultivation licenses. The next year, I think it, uh, it definitely, uh, dropped here in the yellow, uh, down below 4, 000. And then, uh, the year after it was, uh, even lower. And then finally we sort of bounced back a bit here in 2024. Not a surprise.

I mean, anybody who's been reading industry research will, uh, will understand this. I think, um, Whitney Economics summed it up well a few years ago when they said, There's enough canopy in California and Oregon to cover the whole United States in terms of need. So, in some ways, you know, everything else may seem superfluous.

Um, so that's just another perspective on this, but obviously there's, there were a lot of licenses that were issued in the past and, um, probably more than we need. And that led to some of those moratoriums and whatnot that, um, that I spoke about, uh, before. In terms of cultivation licenses issued, you know, here's some of the, you know, the big numbers in the big states.

So it was Michigan, those Oklahoma renewals, but also California, New York, and others, uh, you know, issuing license licenses as well. I will point out this bottom point. Is that cannabis media tracks the licenses, and we also do our best to track the facilities. So by what we mean, or how we define a facility is, it's a business that has more than one license.

It's owned by the same company. So, for example, some of the farms in California back when those first licenses. were issued, many were racking up 100, 200, even 300 licenses because they were relegated to small licenses. So it looked like the license count was enormous and it was, but the number of farms was a different story.

Like if you had a salesperson and you were sending her out to sell them, you know, fertilizer, that big giant 300 licenses wasn't 300 leads for them. It was one. It's one farm. You could reach it ideally with one phone call, one email, or one drive by in the car. So we've tried really hard to, to track that and it's especially true in, in, in the area of cultivation where you do see more, uh, situations where people are just adding more, um, more licenses or, or more canopy.

Jumping into manufacturing. A lot less, uh, licenses were issued or fewer licenses were issued. It's just, you know, not as volatile an area, if you'll excuse the pun there, in terms of number of licenses issued. It definitely tends to be much more steady state here in New York as they're pushing to get their program up and running really, uh, generated.

Um, a lot of licenses from from last year with, uh, in Michigan, the only other state that hit triple digits and the number of facilities hardly changed at all. I mean, I think it's like a fraction of a percentage. So, um, so definitely a, um. a stable part of the value chain. Um, I see, uh, Bryce just asked a question.

It would be nice to see a contrast graph between licenses issued versus operating. I, I agree. Uh, it's hard to get operating information. Stores, it's way more prevalent, you know, where that can be tracked. You can see if their menus are up and running, et cetera. But trying to find out if, for example, all the cultivation that people have is in use, is, uh, is very challenging because maybe they have licenses that they're just sort of holding and not using.

So, uh, we have not found a good source for that, but, uh, I'd be happy to have a conversation with somebody who could, you know, give us some suggestions for better ways to, to track that, uh, on the stores. I, I think, you know, we're all doing a good job. The further you get away from, Customer touching licenses, the harder it is to determine who is, um, actually operating.

But, uh, but definitely a great question. And if you will sort of an area for future for future research. So, stores and facilities. This is another area where we see states issuing two licenses for the same activity. Uh, this is, you know, stores and facilities. It doesn't happen in every state. I think most famously, we've always seen this happen in, um, Colorado because they were an early, um, license program.

And. They created two licenses, like a 403 R, 402 R, you get the idea, the R is recreational. However, we're seeing states move away from this approach. Anybody who's digging deep into this is seeing this notion of dual use licenses. And I think it does a couple things. It simplifies things for the regulator a bit because there's one business, it has a license, as opposed to one business having two licenses.

I think it may also, in some cases, reduce some of the licensure headache and cost of compliance for businesses to not have to juggle, um, multiple, Licenses and those challenges. So what we're seeing here over the course of a couple of years is that the ratio of facilities to stores is shrinking. So, uh, back in 2023, early 2023, there were approximately 108 store licenses.

For every 100 stores, so like an 8 percent overage. Now that has narrowed to 105, um, stores, uh, licenses to 100 stores. So it's slowly shrinking as states do away with this, um, this double notion. So. That is happening also in states that, um, are doing it across other activities. So I think it's New Mexico and Nevada, where we've seen this happening of late, where they're sort of like retiring licenses and combining them.

I think this is interesting, but it's also history repeating itself. Um, last week, the, the press out in, in, um, California. Did this pearl clutching article on? Oh, my goodness. Look at the number of inactive licenses in California compared to active ones. You know, it's an extinction event. Bad things are happening.

Well, in looking back, we have 28, 000 inactive licenses in California to whatever the active is now. And it's because California has been doing this for a long time. This is just part of the licensure process and the business maturation. They had a whole slew of licenses that they issued at the outset at the very end of 2017 and like the last two weeks of December and into 2018 where they required people to get a medical and an adult license.

So they, they sort of bloated their license counts up and then they realized after time, well, that's kind of silly. And then they allow them to shrink back. And, you know, everybody's like, Oh, you know, we're, we're losing licenses. Licenses are disappearing. Well, a license is really only one proxy. Of the industry.

It's an important one and you know for cannabis media It's what we've been tracking forever But you have to keep in mind that it's not the end of the world that some of these changes are are are happening so Anyway, just it pays to dig below the surface to understand what's going on and we think with this 108 to 105 licenses it's a small point, but we're going to get closer to a one to one match where I can't imagine why a lot of states are going to want to have what I would call sort of that, that double licensure and more will follow in the footsteps of Nevada, New Mexico and California, which I think was probably the one that sort of first did it.

In terms of stores on the leaderboard or states on the leaderboard, New York, once again, uh, at the top, they issued a bunch to nobody's surprise. I mean, they've been touting this every week, Friday evenings around five o'clock. They put out a press release, essentially, that's like, Hey, here's what happened, but it's good.

It's great transparency. They're working really hard to try and get this industry up and running in a state that has a really, really strong, um, legacy market. Um, What's interesting, second point here is, four states accounted for 57 percent of the licenses that are new this year, but that's not entirely a surprise.

As I showed in that graph earlier that shows the spike by region or by year, every state, every region has their day or days where, or years, where they issue a lot, as the license structure is building itself. Up and more stores, let's say, are coming online. So, um, final point on this one is that we count just over 12, 000 stores in the US, uh, holding about 13, 000 licenses.

So I think we're going to continue to see more stores as, uh, as, as time goes on in, uh. In in the states that are trying to build out their programs So the the interesting part is looking ahead. So, you know, what does cannabis media see? um And you know, these are always dangerous their predictions because who the heck knows especially now um But from what we've been watching we think new england the northeast the beast in the east is going to continue to issue licenses I think new york still has a lot of work.

They want to do other states That really everybody's been keeping an eye on is kentucky kentucky delaware We're The process is already in place. I just certainly on Minnesota. Uh, I remember correctly, they are doing more lotteries. I think it's in the summer. So they're trying to get their program, you know, more up and running Washington, D.

C. This is a more of a press report, but. Some experts have said that they may be able to do up to 270 licenses. Rhode Island has this interesting notion of 24 licenses, but, um, they're trying to do a lottery that's allows people who have the ability to run a business to get the license. So that seems like it could be a challenge.

And then Nebraska is also on the dock. That's the only state that made it across the finish line last November. And it says that their Office of Cannabis Management or whatever the name is, is supposed to be issuing licenses by October 1st. That's not that far away. So we'll see if that really comes to play.

But, um, it's it's certainly a, uh, you know, one more state that's gonna gonna gonna come along. So, um, so, you know, we'll we'll see how that plays out in terms of some other topics or issues. I think that lawfare is still going to be part of the licensing process. It hasn't changed really in 10 years. Um, I once wrote a blog post about how state programs are like how teams form it in businesses.

There's, uh, you know, sort of this starting process of, um, norming, storming, performing, etc. But there's that there's that storm part in there where, you It gets pretty messy, and I think most states still have that. I believe some even put it into their process where they know that that law for law fair is going to be part of this process.

2nd point I talked about earlier this notion that called license dehydration where I think we're going to continue to see a collapse. or adjoining of medical and adult to become dual use licenses. It's just easier, but I think we all have to be careful because anybody who's just looking at the license count is going to be like, oh my goodness, you know, the market is shrinking.

Not necessarily. The number of stores may be growing or it may be the same, but looking at the licenses is just one thing to keep an eye on. Third one really important is substitutes and compliments. Um, you know, we already have the legacy market that's not going away, but we also have a lot of activity in the area of hemp beverages.

I was at a conference, uh, last week, um, put on by Delta Emerald called Canada data con, and it was all about beverages and it was fascinating. Some of the, some of the research around this whole phenomenon of beverages. speaks of how well the hemp side of the industry or part of the industry has paired up closely with the alcohol industry.

And, um, I think the hemp beverage alliance points out that it's a very easy union because these beverages sort of fit into all the rails that alcohol already knows. A lot of these products come in cans. Just like beer, they fit on the trucks, they fit on the shelves, they fit in the refrigerators, you know, all these things are in place.

It's just a different set of ingredients in that package. So we heard a lot about how this is really a growing. phenomenon. One chain in Texas did a test in 30 of their stores and then rolled it out to all 230. I think he said after about two weeks because they became so popular. So we're gonna see more and more of that.

And I think it is a fascinating thing to keep track of. And we've actually added it to cannabis media where when we see states that are issuing licenses to sell these types of products We're gathering that information because we think it's really important from a market modeling standpoint. So, you know, here in Connecticut, all the liquor stores or package stores, as they call them, can get the permission to sell low THC beverages.

So far, about 430 out of the 1330 have done that. I imagine more will. So, um, so fourth point, will any new states come on board in 2025 and six? I don't know. There aren't any left, as my colleagues have pointed out. I mean, we have Wisconsin, Kansas, Idaho, um, Indiana, not seeing a lot of activity there, but a little bit, but I just don't see a big onslaught.

And then Sort of sadly, we've got a rescheduling descheduling based on everything that I've seen coming out of Washington and talking to people. I don't have super high hopes for really anything happening in the short term as one of the analysts who covered the space pointed out in an article.

Probably about two weeks ago, he said that, you know what, most people in the country who want access to cannabis can get access to cannabis. All this other stuff that we deal with as insiders in our, in our green bubble here in the, in the cannabis world, like 280E and rescheduling and de scheduling and whatnot is not a big problem for people in Congress or in the White House.

They've got a lot bigger issues to deal with. And I think that the point in the article too, was that nobody's getting voted out. For the position on cannabis, there's just way too much else going on. So, you know, sort of started in on a downer of a note there, but I thought it was sort of an appropriate point of, you know, just reminding us that as businesses in the space, we all have to buckle down.

We're going to have to really continue to work on profitability and really support each other as well as we, uh. Navigate the next couple of years, which I think are probably gonna be pretty challenging. So I'm happy to take any more questions. I know a couple have come in. I do appreciate the kudos here from those of you who have thrown those out.

And, um, and, uh, Delene, thanks for weighing in from, uh, from Oklahoma, a state we love and have been tracking for a while through its ups and downs. Um, and let's see, um, let's see a couple of good points that came in here. Thank you. Um, uh, Ruth Fisher brings up a great point and she and I were actually at that conference together a few weeks ago about seeing a breakup between mature markets and which are expanding.

And I totally agree. Some of that may get caught in those regional things, but you're right to break those out in a more distinct way is a good idea. And we can do that for, um, You know, future reports, because that is, um, sort of a harbinger of what some of these new markets have to look for, I think, because while it's all fun when new licenses are coming on board and they're standing, um, standing the, uh, the, the business up, uh, it's, it's going to be much harder when suddenly you've got too many licenses and, uh, The existing license holders are asking, please give us a moratorium.

Please don't issue any more cultivation licenses, et cetera. So, so, uh, a great point and a great, uh, a great suggestion.

See, um, once while we wait for other questions to come through one other project that the team has been working on is the area of violations and recalls, looking back at those, uh, from last year. And the one final data point I'll share is that. Uh, a firm in Florida was issued a fine last year of about, I think it's 2.

1 to 2. 5 million dollars for, um, selling seeds, which is, uh, a big no no. So, they got hit with I think a hundred dollars for every one they sold or something like that. And, uh, I don't know if it got tracked through track and trace. You know, we'll have to do more reporting on that one, but, uh, that was certainly one of the more interesting points.

Uh, I've seen this, we've been doing some of this research into, you know, how are these businesses being regulated and, and, and what is that? Um, And what is that looking like going forward because we've certainly seen more in the way of recalls. California's done a great job of reporting on that. And, um, you know, also just keeping track of, you know, which businesses may be running afoul of the rules and regulations.

Okay, um, let's see. Tammy Parker rates would be helping see charts by state. Yes, and we have them in our product, actually. So all the data that I do comes out of Cannabis Media's platform, and it allows everybody to jump in on what state they want to see and what activity so you can drill down and go a little bit crazy.

And it also covers a much larger time frame than I put here. I think we go all the way back to like May 2020 to the present. So you can really see how the licenses have moved and and whatnot. Um, but, uh, yeah, definitely, you know, drop me a line. I think the next slide is, uh, is, um, my contact information. So, yeah, people have questions.

Um, love to hear from you and, uh, you know, if we may have some of the information that, uh, you know, may give you some insights, um, as you are doing your own research and strategizing, um, in this wonderful and crazy industry that we found ourselves in.

Okay. Connecticut will not release enforcement action details, not even when FOIA'd. 85 to 90 percent redaction. Um, hmm. Maybe we've had better luck. We get some data, I think, uh, but it's few and far between. Um, that's a pretty heavy amount of redaction. Um, but in the past we've gotten them. We don't have a lot from Connecticut though, but, uh, you know, definitely, uh, DM me or email me and, uh, uh, I'll, I'll take a look and see what we have.

Cause maybe the data that I've got just isn't current because of the. of the redaction. Um, the place that we've waited the longest from what, um, my team has told me is New York State. I think they took close to 240 days to get back to us on a, on a FOIA. So, um, whereas other states just post this information.

I mean, you know, look at the state of Washington. They've been doing this for a really long time and they posted. Thousands of violations. So there's, you know, different states. Uh, I think approach this differently, but we'd love to hear more about your Connecticut experience.

Hey, thanks. Uh, Teresa or Teresa about the violations. Yeah, we think it's really important. We know that some people look at these violation notifications as, um, as leads, especially like if somebody has a, uh, Let's say a metric problem or an inventory problem or security problem. It's just a way to really sort of help people, um, uh, make sure that they are staying out of harm's way, because a lot of these are probably.

Avoidable and you know from what we've seen and you know from work I've done in other industries like in you know safety and ocean whatnot. You really need to have good standard operating procedures and things like that to make sure that you're not running into problems and even like I know in the safety space they have.

Things that they track like accidents, which nobody wants to happen, but they also track near misses where something almost occurred. And that's just as important as, uh, or, you know, highly important like an accident is because it's something that can be hopefully improved upon. And, uh, you know, I know with all the great firms out there doing, you know, SOPs like, uh, like, uh, Simplify and others, you know, people can really keep an eye on, um, Ideally, what may be best practices so that they don't run a file of the regulators, um, and the inspectors.

So, uh, so, so great point. And we will keep those coming as long as our, you know, the license holders out there continue to, uh, cross that line and, you know, unfortunately get, uh, get, get caught for running a file. All

right. Well, we may have, uh, run out of questions at last, but listen, I want to thank everybody for tuning in. We try to keep it. brief today. Appreciate the suggestions for other ways to present the data. If you do have specific questions, thoughts or ideas, or you just want to nerd out on cannabis like me and my research team does, uh, don't hesitate to reach out.

Uh, that's my direct email and, um, would, would love to connect or see you at, uh, an upcoming show. We'll be at Nikan in Boston and what, five, six weeks. So, uh, come by and see us there and, uh, I'll look forward to connecting. Thank you.