Arizona’s new leisure hashish corporations see sturdy gross sales and potential provide points on the horizon

Vertically integrated cannabis companies in Arizona’s emerging recreational market are reporting long customer lines and robust sales after a lightning-fast time to market less than three months after voters approved adult legalization.

Dispensary operators who were first cracked on recreational licenses report that initial adult sales were two to three times the usual sales of medicinal cannabis, underscoring the strong demand for newly available recreational products, especially flowers.

With dozens of Arizona’s existing medical marijuana dispensaries open to recreational shoppers, there are few signs of the initial supply problems that have plagued other emerging markets like Maine or Illinois.

However, a number of operators told Marijuana Business Daily that bottlenecks could arise in the coming weeks and months.

73 of the state’s 130 licenses were first approved for recreational sales on Jan. 22, and that total rose to 95 approved licenses by Wednesday.

MJBizDaily Projects Arizona’s recreational market could be valued at $ 375 million to $ 400 million in the first year and $ 700 million to $ 760 million by 2024.

However, sales figures for recreational activities at the state level are not currently available.

Marijuana tax payments will be remitted a month later, Arizona Treasury Department spokeswoman Michelle Carella told MJBizDaily in a statement explaining the lack of initial sales data.

“We’ll have a better look at sales in March and April,” Carella wrote in an email.

Strong consumer demand

The Arizona pharmacy operators described a brisk first weekend of sales for adults.

The Mint Dispensary announced that it will be open to recreational shoppers at its Guadalupe and Mesa locations shortly after approval on Jan. 22.

“I don’t know how you got here so quickly – the line was around the building in literally 20 minutes,” said Raul Molina, co-founder and chief operating officer.

Molina added that the mint’s two stores had more than 7,200 customers Friday through Sunday, with an average basket size of around $ 78.

Curaleaf, the second largest operator in Arizona with nine licenses and eight pharmacies currently open, saw early recreational sales worth two to two and a half times its previous daily medical product sales, according to Steve Cottrell, president of Curaleaf Arizona.

The average basket value was roughly $ 85, with flowers accounting for about 65% of initial sales and vapes 22%.

Harvest Health & Recreation is Arizona’s biggest marijuana player. 19 licenses and 15 pharmacies are now open for recreational sales.

Steve White, CEO of the publicly traded company, was unable to release initial sales figures, but said the early rush had “tested” the capacity of stores in some locations, particularly with regards to public health restrictions related to coronavirus and company policies.

“We have done a good job of making sure our inventory is where it needs to be so there are no premature supply chain disruptions,” he said.

The Flower Shop, a medium-sized operator with three pharmacies, achieved three to three and a half times its usual medical sales from the afternoon of January 22nd through the weekend, said President Greta Brandt.

The cannabis flower made up at least 55% of early sales, Brandt added, with an average basket size of about $ 100, or two to three products.

“We have been preparing to sell Rec for the past four months. Our inventory was increased three times just to anticipate pedestrian traffic, ”said Brant.

Concern about possible supply problems

New grow facilities should be on the way to Arizona: The Department of Health said recreational licensees will be able to apply for additional off-site cultivation approval starting April, which the Arizona Marijuana Industry Trade Association has identified as an unexpected and exciting opportunity.

But although Brandt is well stocked for the time being, Brandt assumes that the situation in the recreational provision of Arizona could soon change.

COVID-19 delayed the construction of new acreage, and the leisure market started earlier than expected by some operators.

The new cannabis testing requirements enacted in November added to the supply chain residue even before the adult use market was launched, Brandt added.

“We anticipate a supply bottleneck. … I think the (wholesale) cost per pound will skyrocket in the next few weeks, ”she said.

Lilach Mazor Power, founder and CEO of the one-license operator Giving Tree Dispensary, offered a similar outlook.

“I have a feeling we will be fine for the first month or six (or) seven weeks,” she said. “But after that we will see some supply problems.”

Some operators in Arizona’s vertically integrated market are not selling to others in order to prioritize supplying their own businesses, Power added.

Curaleaf Arizona’s Cottrell said potential bottlenecks are “definitely a problem,” which is why Curaleaf has invested in new growing capacity.

“Of course, when you move from an addressable market of 300,000 people to an addressable market of 6 million people, you are going to have a shock to the supply chain,” said Samuel Richard, executive director of the Arizona Dispensaries Association.

However, Arizona’s potential supply challenge is not a problem of insufficient cultivation licenses, Richard said, as any vertically integrated license allows for cultivation.

“To the extent that there is a problem or a challenge, it is a big problem,” he said.

Richard estimates that between 50% and 75% of Arizona’s 130 licenses “are actually fully expanded and operational.”

“If we can hold out these (first) months, I hope that the investments (made) will go online in the second half of 2020 in time to feed the market,” he said.

White, CEO of Harvest, said the company had been stocking up on third-party vendors for months prior to launch and watched the wholesale market tighten over that period.

But White said those expecting a supply shortage may not be responsible for cannabis companies from other states that enter Arizona and cultivate or produce under someone else’s license.

“The people who have taken these steps or are considering taking these steps will affect what I think will be supply in the wholesale market,” White said.

“I hope that they will at least partially make up for the rise in demand.”

Limited number of new licenses

Arizona’s marijuana licensees have the benefit of a limited number of licenses, with the 130 existing licenses tied to the number of pharmacies in the state at the ratio of one license per ten pharmacies.

Arizona is expected to grant 26 additional licenses under a social equity program and a smaller number of licenses in so-called “empty counties” with zero or only one pharmacy.

Samuel Richard of the Arizona Dispensaries Association expects a grand total of 165 to 170 licenses.

After that, no additional licenses will be issued until the number of pharmacies in Arizona increases significantly.

“It will always be the 10-to-one ratio unless voters decide to change it,” Richard said.

Curaleaf Arizona’s Cottrell said the new licenses are needed to meet market demand.

“I know we’re only a week into that time, but there’s a line in every Curaleaf store all day from 7am to 10pm,” he said.

“It’s a great opportunity for anyone who is licensed.

“We are very privileged to be in this position.”

Solomon Israel can be contacted at [email protected]

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