More than one-third of United States residents live in states where recreational cannabis consumption and sales is or will soon be legal as a result of elections this week.
Voters in New Jersey, Arizona, Montana, and South Dakota gave their green light to legal weed, joining 11 additional states with recreational programs. South Dakota voters also approved a medical program, as did Mississippi.
While the industry awaits presidential and senate control outcomes that may advance banking normalization and national decriminalization, a number of Midwest-based and vertically-integrated cannabis operators have existing licenses to sell medical marijuana in the more populous markets to approve recreational sales this week.
“The new rec laws in New Jersey and Arizona create some of the most appealing adult use markets in the US as both states have limited licenses, large populations, and strong tourism industries.” says Alex Gastevich, portfolio manager at ANO Gastevich Management, which invests in early-stage cannabis companies.
While the Garden State has had a medical program, licensure of recreational cultivation, retail and manufacturing remains in an embryonic period. The “thorny” process is just getting started, according to the New York Times.
New Jersey is part of four East Coast states with medical programs, which includes New York, Connecticut, and Pennsylvania, that were on pace to legalize recreational cannabis earlier this year but postponed those efforts during the onset of Covid-19.
When Illinois passed its recreational program in June 2019, industry insiders and advocates were suggesting the state’s social equity provisions for licensure could serve as a blueprint for the next wave of recreational programs, particularly in blue states.
Chicago-based Green Thumb Industries currently operates one dispensary, one cultivation facility, and one manufacturing facility in New Jersey.
In February, Chicago-based Verano Holdings obtained a permit by the New Jersey State Department of Health for cultivation and retail. It occupies a 120,000 square foot cultivation and retail facility, formerly a Walmart, and operates a Zen Leaf Dispensary in the town of Elizabeth.
Justice Grown, also based in Chicago, has the license to build a 72,000 square foot cultivation facility in Ewing Township and a 5,000 square foot dispensary.
As many as 115 medical dispensaries operating in Arizona hope to begin selling product to recreational consumers by April 20, 2021. There are 26 additional “social equity” licenses that will be awarded throughout the state, as well as licenses of dispensaries in regions in that state where there are currently fewer than two dispensaries.
Chicago-based Cresco Labs operates one dispensary in Phoenix with a grow facility attached, as well as a standalone cultivation and processing facility. Cresco products are sold in 56 Arizona dispensaries.
In September 2019, the company agreed to acquire Tryke Cos, which has cultivation and retail operations in Arizona and Nevada, for $282.5 million. That deal was nixed the following March amidst a cash crunch for cannabis businesses that preceded Covid.
Wellness Group Pharms, which specializes in aeroponically grown cannabis, has cultivation operations in Illinois and Arizona.
In March 2019, Verano agreed to be acquired by Phoenix-based Harvest Health & Recreation for $850 million. That deal was mutually terminated in March 2020.
Wakefield, Massachusetts-based CuraLeaf, which acquired Chicago-based Grassroots Cannabis in July for $830 million, currently operates one cultivation facility and nine dispensaries in Arizona, and one dispensary in New New Jersey.
“We are looking at New Jersey in particular to be the next Illinois,” says Gastevich, as there is an abundance of well capitalized Chicago-based MSOs with licenses there and limited competition.”