Despite cannabis being fully legalized in nearly half of the US states and counting with several more planning to vote for legalization in the 2024 elections, nearly all states that comprise the industry have been suffering tremendous financial and economic hardships. Most notably, California suffered a total sales loss of about eight percent, which in the California industry equates to a loss of a staggering $473 million. While in neighboring Nevada, a much smaller state cannabis industry and one heavily fueled by tourism, the Silver State experienced a deficit in sales of approximately $115 million. In Colorado, one of the first two states to legalize cannabis back in the archaic year of 2012, their state industry is experiencing similar costly hardships. From 2022 to 2023, total cannabis sales in the Colorado cannabis industry decreased by nearly $51 million, and this is an issue even occurring in a state industry with over a decade of experience in the matter.
And unlike other industry shortfalls, these widespread issues and deficits aren’t impacting only smaller and independent operators either. Many of the American cannabis industry’s biggest multistate operators and power players, from Curaleaf to Cresco Labs, have been impacted by these economic and financial woes to the point where the company is divesting from and exiting certain state’s legal cannabis industries entirely. The Florida-based MSO Truelieve, which claims to have 180 dispensaries under its umbrella according to their website, fully exited the state of Massachusetts in June of 2023, closing three dispensaries in the state and laying off a total of 128 employees and announced the subsequent downsizing of their California operations and the ceasing of their Nevada operations.
Back at the beginning of 2023, Curaleaf themselves announced the closure of a majority of operations from a total of three troubled state industries, those being California, Colorado and Oregon. Simultaneously, the juggernaut of the cannabis industry made the decision to consolidate all their Massachusetts operations to a single cultivation facility in Webster. Even historic mergers of two large companies are being impacted, as the estimated $2 billion merger between the aforementioned Cresco Labs and Columbia Care that was mutually called off. In the state where legendary guitarist Jerry Garcia was born and raised, the cannabis brand named after him has left the state of California’s state industry.
For one of America’s most illustrious and ubiquitous cannabis companies, these widespread hardships that result in entire corporate exoduses from legal states have become all too common a reality for the cannabis retailer MedMen. Towards the end of December, the company announced that they have entered into a series of definitive agreements in which MedMen will be selling all of its “non-core business operations” in the state of Arizona and drastically scaling back operations in Nevada.
Apparently this major decision was a strategic move, as MedMen themselves had hinted at possible future divestments all the way back in February of last year. In the initial announcement, the company even directly mentioned their operations in both Nevada and Arizona and designated them as assets that were “under review”.
“The transactions consist of the sale of MedMen’s wholly-owned operating subsidiary in Arizona and its two operating dispensaries located in Clark County, Nevada.” the press release explained. “These sales are the result of MedMen’s previously announced strategic review and evaluation of divestiture opportunities of its non-core assets. The transactions are subject to customary closing conditions, including, among others, the receipt of applicable regulatory approvals.”
The assets are being sold to an affiliate of Mint Cannabis, a privately-owned multi-state operator that is actually headquartered in Arizona, so the acquisition was certainly geographically advantageous. Strangely, despite losing the overwhelming majority of their business operations in two very otherwise lucrative cannabis states, the executives of MedMen are remaining as optimistic as they can be in these economically troubling times.
“MedMen is pleased with the outcome of our strategic review and has made good progress in our restructuring efforts. These transactions will bolster liquidity in the short term, reduce liabilities, and enable the Company to focus on operating efficiencies and executing our long-term asset-light growth strategy in our core markets,” said Ellen Deutsch Harrison, MedMen’s CEO.
While it’s certainly alarming to see this many cannabis MSO giants experiencing financial issues so severe that they wholly exit from a state’s market, it’s not too much of a blind-sided surprise in the case of MedMen. Before the definitive agreements, MedMen was in an unsustainable flurry of financial issues. In February of 2023, Fortune reported that MedMen was a staggering total of $137.4 million in debt and the Los Angeles-based company delayed the filings of their annual financial report from FY2023 in November.
With some very important states voting for legalization in 2024 and states such as Nevada increasing their daily purchasing limits, the cannabis industry does have some avenues to bounce back from tremendously detrimental deficits. Yet, the ripple effects of the economic hardships for the cannabis industry in 2023 will continue to be felt, even by the once biggest power players in the industry.