Retail licenses for the medical cannabis program in Oklahoma decreased 8% in 2020. This was the first drop in the open license market since MMJ sales began in 2018.
Despite rising sales and patient numbers, Oklahoma ended 2020 with 181 fewer retail licenses than 2019 – even after receiving 565 new approvals in 2020, according to Cannabiz Media, a Connecticut-based cannabis license database and marketing platform.
Industry insiders say the decline was to be expected and is the inevitable result of speculation, increased competition and market saturation in a state that has no license caps for cultivators, processors and pharmacies.
“Oklahoma has more licensed pharmacies than Walmart, McDonald’s and Starbucks combined,” wrote Bud Scott, executive director of the Oklahoma Cannabis Industry Association, in an email to Marijuana Business Daily.
“To say there is retail saturation is an understatement.”
Despite the drop in 2020, the state led the country in the number of retail licenses, ending the year at 2,057.
The total U.S. pharmacy license market grew 12% while other large, mature markets like California, Colorado, and Oregon added more retail licenses in 2020, Cannabiz Media reported.
No other state issued more retail licenses than Oklahoma, with Colorado, its closest competitor, standing at 1,047 by 2020.
Ed Keating, chief data officer at Cannabiz Media, said the decline came as no surprise.
“Ever since we saw the Oklahoma licensed juggernaut, we knew there was going to be a rights issue at some point,” said Keating.
“The market can only support so many companies.”
Keating expects the contraction to continue as the state begins rolling out a compliance program for the sale of seeds in April.
“This new compliance burden can make these licenses less attractive if they’re not a thriving business,” said Keating.
Scott of the Oklahoma Cannabis Industry Association blames some of the decline on first-time license buyers who speculate that the market would restrict permits or make the process more difficult.
That never happened, so many chose not to renew.
Although Scott said he doesn’t have a complete picture of pharmacy ownership, he believes that as franchisees and new nongovernmental brand partners become more dominant, making it difficult for single-location independent owners to compete.
The development is predictable and reflects the development of other state markets such as liquor stores, grocery stores and pharmacies.
Denise Mink, who co-owns Med Pharm at Broken Arrow with her husband Christopher, has seen the satiation firsthand.
Denise Mink doesn’t think the Tulsa subway area, including Broken Arrow, is as full of retail stores as Oklahoma City.
Even so, Med Pharm has several competing pharmacies within a mile or two of its location, and Mink has closed some of them since 2019.
“One pharmacy is going to close,” she said, “and within a month a new one will show up in the same place.”
But the low cost of entry can be deceiving. The royalties are manageable for most people, but the cost of getting started often overwhelms new owners.
“You have to fill this business with products, pay rent or mortgage, hire employees. Add in the tremendous competition and it’s a tough business to be in, ”said Mink.
Keeping track of inactive licenses can provide insight into competition and saturation even if those permits are released for other reasons.
In three years, according to Cannabiz Media, more than 830 retail licenses for Oklahoma across the state have become inactive, 21% of that in 2020.
The largest markets, including Oklahoma City and Tulsa, had the most licenses inactive, but small markets across the state also saw declines.
However, stiff competition does not seem to be holding back the type of pharmacy density seen only in Oklahoma.
Oklahoma City and Tulsa together host more pharmacy licenses than Washington State.
Analysis of the Oklahoma Medical Marijuana Authority’s license data by MJBizDaily found that Oklahoma has 23 zip codes, each containing 20 or more retail licenses.
Postal code 73010, southwest of Oklahoma City and Norman, has the most at 47.
That equates to one license per 4 square miles, or 2.4 licenses per 1,000 people.
But competition doesn’t seem to be affecting sales.
Medical marijuana sales in Oklahoma more than doubled in 2020, reaching a record high of more than $ 831 million.
Patient numbers also rose to 365,000 in December from 220,000 in January 2020.
Oklahoma City cannabis attorney Sarah Lee Gossett Parrish believes businesses can thrive despite the competition.
To do this, however, they need to differentiate themselves by focusing on helping the consumer.
Attorney Ronald Durbin of Viridian Legal Services in Tulsa also suggests continuing to focus on efficiency.
“Our market is growing by leaps and bounds, but the market in any industry will always fluctuate in such a way that most companies are most efficient with resources, pricing, etc.,” Durbin told MJBizDaily via email.
Andrew Long can be contacted at [email protected].