Oregon and Oklahoma Are Best Placed to Benefit From
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Intro-Blue, LLC | 617-454-1088 | [email protected] | www.intro-blue.com | Volume 40 | 4/22/20 OREGON AND OKLAHOMA ARE BEST PLACED TO BENEFIT FROM CANNABIS’ ESSENTIAL STATUS High per capita marijuana dispensary density means that cannabis markets in Oregon (OR) and Oklahoma (OK) are in the best position to benefit from its essential industry status. In the last few weeks, we have discussed how cannabis’ essential designation is driving sales higher and why COVID-19 is a net positive for the marijuana industry. This week, we try to identify the states that have the retail infrastructure required to service the growing demand for cannabis and benefit from its essential designation. The two states that come out on top are Oregon and Oklahoma. According to data from Verilife and state departments, Oregon is home to the most marijuana dispensaries per capita – the state has more than 660 dispensaries or 16.5 per 100,000 residents. Oklahoma, which legalized medical marijuana in 2018, is the second leading state with 15.6 dispensaries per 100,000 people, followed by Montana (15.1), Colorado (14.1), and Alaska (12.7). Oregon and Oklahoma account for 17 of the top 30 cities by per-capita marijuana dispensary density in the U.S., with Medford, OR (17.0) the best city in which to buy marijuana. Click here to view the ranking of U.S. states and cities based on per capita marijuana dispensary density. The dominance of Oregon and Oklahoma over bigger state markets like California (CA), Florida (FL), Washington (WA), and Illinois (IL) implies that regulatory support is more important than opportunity size for development of the legal cannabis industry. According to our analysis of data from New Frontier Data, CA, FL, WA, and IL will be the four biggest state markets and will account for 47% of the ~$30 billion legal sales cannabis in the U.S. in 2025. However, the marijuana dispensary density in these states – CA (1.6), FL (1.1), WA (6.2), and IL (0.4) – is much lower than Oregon (16.5) and Oklahoma (15.6), and no city from these four states is featured on the top 10 in the country. We believe that the key reason for this trend is the regulatory environment in each state. Oregon was among the first to legalize marijuana in the U.S. This, coupled with low barriers to entry and a favorable regulatory environment, meant that cannabis supply and retail outlets grew rapidly in the state. And with demand remaining strong and prices rebounding, the cannabis industry and retail outlets in the state are looking at a strong 2020. Oklahoma’s medical cannabis market surpassed all expectations and recorded ~$350 million in retail sales in 2019. The medical cannabis launch in the state outpaces that of other markets – including Illinois, Maryland, and Ohio – with sales figures more akin to a recreational launch. Driving this surge are the following factors: 1) there are no caps on the number of business licenses that can be awarded (3,000+ so far); 2) doctors are allowed to recommend the product for any condition they see fit; and 3) municipalities are prohibited from enacting zoning restrictions to prevent dispensaries from opening. These favorable regulatory conditions are in contrast with those in the nation’s biggest state market, California, where suspension of retail licenses, high taxes, strict product testing, and local bans on the adult-use industry throughout the state have resulted in below-par growth of the cannabis industry. Cannabis sales have not lived up to expectations in Washington either, primarily due to poor access of products for consumers as marijuana cannot be purchased with a credit card, insurance companies do not cover the cost, and there are restrictions on home delivery by retailers. Overall, the trends in these state markets suggest that while a large opportunity is a good to have, favorable regulatory conditions are more important for investors to make money in the cannabis industry. Next week, we will look at the two stocks that are well placed to benefit from strong cannabis retail markets in Oregon and Oklahoma, respectively. Chart 1: Marijuana Dispensaries per 100,000 Residents – Oregon (OR) and Oklahoma (OK) Are the Leaders Source: Intro-Blue, Verilife Chart 2: State Ranking – Marijuana Dispensaries per 100,000 Residents Source: Intro-Blue, Verilife Chart 3: City Ranking – Marijuana Dispensaries per 50,000 Residents Source: Intro-Blue, Verilife Chart 4: City Map – Marijuana Dispensaries per 50,000 Residents Source: Intro-Blue, Verilife CANNA NEWS COVID-19 Could legal marijuana dollars be the boost the U.S. economy needs during a pandemic-triggered recession? Despite the havoc COVID-19 continues to wreak upon our lives, communities and the economy, some believe cannabis could provide an avenue for recovery. Jackie Cornell, chief of health and policy innovations at 1906, said legalizing adult-use cannabis would create thousands of jobs in the leaf-touching industry and through auxiliary services — “construction, security, materials, marketing, legal...the list of work created beyond the license holders themselves is sizable.” “While an outbreak of this size and scale is a once in a lifetime event, COVID is highlighting the fragility of our collective safety net,” Cornell told NJ Cannabis Insider. “Unemployment is soaring, the strain on our healthcare system is unrelenting and we still have a long road ahead of us before we return to ‘business as usual.’” Read More (NJ.com) How COVID-19 is affecting marijuana legalization efforts across the U.S. The coronavirus crisis has hurt marijuana legalization efforts in the short term, with state legislatures pivoting to focus on more pressing issues and citizen groups struggling to collect enough signatures to place initiatives on November ballots. However, several recreational and medical marijuana initiatives already had qualified for the November election before the coronavirus outbreak. Looking ahead, some experts believe legalization could accelerate once the coronavirus is contained. Read More (Marijuana Business Daily) Chart 5: Important States to Watch as Cannabis Legalization Prospects in 2020 Source: Intro-Blue, Marijuana Business Daily How the coronavirus crisis is reshaping the cannabis industry for the long term. The COVID-19 outbreak has exacerbated fault lines in the rapidly evolving market and led to number of new outcomes, including: 1) Retailers adapting to changing consumer behavior by offering delivery, curbside pickup, etc.; 2) State-by-state legalization movements hitting major obstacles; 3) Businesses hoping for post-pandemic real estate deals; 4) An acceleration of acquisitions and business failures, specifically in California; 5) Canadian companies making the best of market uncertainty and changing regulations; and 6) Firms reevaluating the viability of the international supply chain. Read More (Marijuana Business Daily) Marijuana has been deemed ‘essential’ — but essential for whom? As the coronavirus spread across the country in March, and stay-at-home orders began to go into effect, every state with a regulated cannabis system allowed weed sales to continue in some form, deeming medical-marijuana businesses essential during the pandemic, along with groceries and pharmacies. However, the patchwork of emergency orders during coronavirus has been confusing and difficult to navigate for recreational, or adult-use, cannabis businesses, projected to hit $12 billion in retail sales in the U.S. this year. Massachusetts Gov. Charlie Barker issued an order allowing medical-marijuana dispensaries to stay open, but halted recreational sales. In Colorado, recreational pot shops are limited to curbside pickup, while medical dispensaries can stay open. In Nevada, adult-use sales are only allowed through home delivery. It’s tough to keep track, since laws vary widely from state to state. Read More (Rolling Stone) D.C.’s medical dispensaries can temporarily deliver marijuana because of the pandemic. D.C.’s seven medical marijuana dispensaries can now deliver to patients and offer curbside and at-the-door pickup, according to an emergency rule from the D.C. Department of Health that went into effect on April 14. “It’s definitely a step in the right direction,” says Norbert Pickett, owner of Deanwood dispensary Cannabliss. “It’s good that we’re doing this now, but it should have been done a long time ago. This patient- centric, emergency rulemaking is necessary to protect the health, safety, and welfare of District residents, and is similar to what other states are putting in place to continue access to medical marijuana,” the city said in a press release. Read More (dcist) Coronavirus fuels marijuana industry’s push for online sales, delivery in Colorado. Colorado has made online sales of recreational marijuana legal during the coronavirus pandemic, fulfilling one of the pot industry’s biggest wishes and fueling its argument for more concessions that could be made permanent when the crisis eases. It’s one of several signs emerging from the virus outbreak of just how far ingrained marijuana has become in mainstream life in several states. Dispensaries are being designated “critical businesses” and are allowed to operate through statewide stay-at-home orders. Large markets such as California, Washington state and Oregon are allowing curbside pickup during the crisis. Now under Colorado’s emergency rules, customers can pay for marijuana online and then pick up their purchase at the store. Read More (Cannabis Business Executive) Members of Congress seek marijuana industry inclusion in coronavirus relief. Almost three dozen members of the U.S. House of Representatives have signed a letter to congressional leaders urging that cannabis companies be included in future federal relief packages aimed at stimulating the economy during the COVID-19 outbreak. The letter was spearheaded by the bipartisan Congressional Cannabis Caucus, which is led by Democratic U.S. Reps.