The Multi-State Operator Exodus From Certain State Markets Continues in 2023

The Multi-State Operator Exodus From Certain State Markets Continues in 2023

To streamline their operations and help maximize bottom lines, large cannabis companies are exiting specific states at a rapid rate.

It has been an eventful and challenging year in the American cannabis industry. Two more states, Minnesota and Ohio, passed marijuana legalization measures this year. Likewise, several more states are contemplating ballot initiatives or state legislative action to legalize adult-use cannabis in 2024.


In addition, the Department of Health and Human Services (HHS) made a recommendation to move marijuana from Schedule I to Schedule III on the federal government’s Controlled Substance List earlier this year. And Senate leaders are hoping to pass the SAFER Banking Act before the end of the year, enabling cannabis companies to legally begin utilizing banking and financial services from federally insured institutions.


However, not all the news from the marijuana sector was positive in 2023. Sales remain sluggish or stagnant in more mature markets like California, Colorado, and Washington. And according to multiple media outlets, 2023 was also the year that many of the largest and deep-pocketed multi-state operators (MSOs) began swiftly exiting state-legal cannabis markets.


Two of those MSOs, Florida-based Trulieve Cannabis and Chicago-based Cresco Labs have left several of those marketplaces over the past five months to bolster their balance sheets while the industry eagerly awaits much-needed federal reform and a turnaround in investor attitudes toward the sector.


With the global economy still in the doldrums after the catastrophic economic collapse brought on by the COVID-19 lockdowns, the cannabis industry has not been immune to the financial challenges brought on by the "mini-Depression" earlier in this decade. Because of the trying macroeconomic environment and the glacial speed of federal marijuana reform, many MSOs started leaving challenging state markets over the past year to optimize operations in the nation's more lucrative markets.


Cresco Labs' CEO Charlie Bachtell christened his "Year of the Core" initiative earlier this year to improve operational efficiency and maximize profits within the company. Part of that plan included Cresco Labs' exit from Arizona and Maryland over the past few months. As a result, Cresco now operates retail dispensaries in seven states, generating over $191 million in revenue for the third quarter, according to Cresco's latest earnings results.


"Our third-quarter results demonstrate our ability to drive solid performance, with strong gains to our margin and operating cash flow, by continuing to execute on a strategy where we win in our core markets and with our core stores, core brands, and core products," Bachtell said.


"Our third-quarter results demonstrate our ability to drive solid performance, with strong gains to our margin and operating cash flow, by continuing to execute on a strategy where we win in our core markets and with our core stores, core brands, and core products."

- Cresco Labs' CEO Charlie Bachtell


During that same period, Trulieve sold off its three remaining California retail outlets and ceased all operations in Massachusetts, according to legal and financial filings made by the company.


"By taking proactive steps to strengthen our balance sheet, streamline operations, and reduce inventory, we will exit 2023 as a leaner organization. With strong cash generation and a clearly defined strategy, Trulieve is best positioned for the coming wave of meaningful growth catalysts," Trulieve CEO Kim Rivers said during the company's third-quarter earnings call.


"By taking proactive steps to strengthen our balance sheet, streamline operations, and reduce inventory, we will exit 2023 as a leaner organization. With strong cash generation and a clearly defined strategy, Trulieve is best positioned for the coming wave of meaningful growth catalysts."

- Trulieve CEO Kim Rivers


The moves on the part of MSOs like Trulieve and Cresco Labs are indicative of the constantly changing and highly competitive adult-use cannabis industry in America. The consolidations are also a harbinger of things to come if the federal government and industry leaders do not decisively determine cannabis' legal status at the national level. However, one thing is clear. Americans want legal marijuana, and they want it yesterday. Every uncertain day that goes by, opportunities are squandered, and money is lost.