At least three national cannabis companies have either departed the California marijuana market this year or are planning to shutter facilities in order to save on costs – the latest signal that profits are not exactly free-flowing for the industry in every U.S. state.
Rather, many nationally-minded cannabis businesses face significant financial headwinds, and thus are being forced to make tough choices about where to focus their resources for expansion, several industry experts told Green Market Report.
California, in particular, has proven tough for many companies to survive in, let alone thrive, due to an immense underground market, high state and local taxes, and plenty of red tape for businesses to navigate.
So far in 2022:
- Colorado-based edibles maker Wana Brands pulled out of the California market entirely, a spokesman confirmed to Green Market Report.
- Florida-based Trulieve (CSE: TRUL) (OTC: TCNNF) announced on Aug. 10 that it plans to close at least some of the retail stores it owns in California and maybe all three.
- Massachusetts-based Curaleaf (CSE: CURA) (OTC: CURLF) this week confirmed to Business Insider that it had laid off staff at a Sacramento facility and plans to close it down.
“We’d been in California for about two years, and we kind of quietly made the decision to wind things down,” said Joe Hodas, chief marketing officer at Wana Brands, which exited California at the beginning of 2022.
The bottom line was that Wana Brands wasn’t turning a profit in the tough California landscape, Hodas said, and so the company pulled the plug.
“It’s a losing market for us in terms of overall profitability,” Hodas said. “And where we looked at where we could put our resources and our time, there were just significant swaths of the country that we’re growing in that felt like the better place to put our dollars and our resources.”
Hodas cited several factors that many within California have long complained about, and added that so-called “slotting fees” – additional charges tacked on by retailers in exchange for valuable shelf space at brick-and-mortar dispensaries – made growth even harder.
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