Few, if any, industries have investors more excited right now than cannabis. Depending on your preferred source, the global weed industry could see sales grow from $12.2 billion in 2018 to perhaps $50 billion to $75 billion annually in roughly a decade's time.
But at the heart of that growth is the United States. In Bank of America analyst Christopher Carey's utopian model, whereby the marijuana industry reaches $166 billion in yearly sales, the United States is responsible for generating 34% of this annual revenue. The U.S. is, for all intents and purposes, the crown jewel of the cannabis movement, which is what makes U.S. pot stocks such a potentially hot commodity.
There are a number of popular vertically integrated dispensary operators in the United States that you're probably familiar with, including the relatively upscale MedMen Enterprises, which is attempting to normalize the cannabis-buying experience, or Curaleaf Holdings, which snagged a deal a few months back to get its topical cannabidiol (CBD)-infused products into CVS Health stores. You might also be familiar with Acreage Holdings, the multistate dispensary operator that agreed to be acquired for $3.4 billion by the largest pot stock in the world by market cap, Canopy Growth, if and when the U.S. ever legalizes cannabis at the federal level.
However, it's an under-the-radar pot stock that's really changing the dynamics of the U.S. retail industry, and investors should start to take notice of what Planet 13 Holdings (PLNH.F 2.13%) is up to.
This U.S. dispensary operator is changing the game
Planet 13 Holdings is a vertically integrated dispensary operator like these popular U.S. cannabis stocks mentioned above, but its retail approach is completely unique. The company's off-strip SuperStore in Las Vegas, Nevada, is already the largest cannabis store in the country, and will grow even further by the time it's fully built out. Currently spanning 16,200 square feet, the Planet 13 SuperStore will eventually feature a coffee shop, pizzeria bistro, events center, and consumer-facing production facility with about a dozen windows for viewing, all of which should be complete by the third quarter of this year. When fully complete, Planet 13's flagship store will span 112,000 square feet. For added context, the average Walmart spans 105,000 square feet.
This past April, while on vacation in Sin City, I had the pleasure of stopping by the SuperStore for a visit. What I saw was an exceptionally busy and personalized experience with a boatload of technology integration and margin forethought.
For instance, the Las Vegas SuperStore featured around three dozen computers throughout the store (at checkout stands and at the numerous wall-based counters), and also featured a handful of self-pay kiosks. These kiosks allow consumers the opportunity to explore and purchase cannabis products on their own, although they'll still need to wait for a store budtender to grab and package their product. Nevertheless, it can save plenty of time relative to the perpetually long checkout line.
The Planet 13 SuperStore also did a fine job of arranging its product throughout the store. High-margin derivative products (e.g., oils, edibles, infused beverages, concentrates, topicals, and vapes) are predominantly located near the front of the store and by the main registers, with traditionally lower-margin dried cannabis flower (of which there were probably eight dozen varieties) in the back of the store. Just as supermarkets hope you'll make plenty of high-margin discretionary purchases on your way to the milk in the back of the store, Planet 13 is hoping you'll see derivative products that catch your eye before you reach the dried-flower case displays.
The big question has been: Can Planet 13 replicate this incredible experience elsewhere?
Well, folks, we're about to find out.
The Disneyland of cannabis stores is setting up shop near the happiest place on Earth
Last week, Planet 13 Holdings announced that it would be acquiring a cannabis dispensary license and lease for a dispensary from Newtonian Principles in Santa Ana, California, for the sum of $6 million in cash and 2.04 million restricted shares of stock, valued at $4 million. This is all contingent upon Planet 13 receiving regulatory approvals from the state of California and city of Santa Ana.
Why Santa Ana? Aside from being near the highly trafficked South Coast Plaza Mall, the 40,000 square foot dispensary that Planet 13 envisions in Santa Ana, the presumed second-largest weed store in the U.S., behind only its Las Vegas location, would be a mere 10 minutes from the "happiest place on Earth"... Disneyland. It's sort of interesting that the so-called "Disneyland of cannabis stores" is tackling the California market by parking itself near the actual Disneyland. But if it leads to higher foot traffic, then it'll be a smart decision.
According to the company's press release, it'll introduce a number of its in-house and top-branded cannabis products to the California market, but ensure that its new 40,000-square-foot location blends with the unique experiences of Californians (and the many tourists who visit the region).
If the Las Vegas SuperStore is any indication of what's to come, investors should be rightly excited. The SuperStore currently accounts for more than 9% of Nevada's total marijuana sales, and in May it saw more than 3,400 visitors per day, 71% of which were from outside the state of Nevada. For comparison, the SuperStore had a little over 1,800 visitors per day when it opened in November. It's clearly become the go-to cannabis destination in Las Vegas, and is developing a storyline that could be quite valuable over the long run.
Still, Planet 13 has work to do before it wins over Wall Street. With just seven months of SuperStore sales under its belt, and now a 40,000-square-foot dispensary to develop, it's unclear when the company might be profitable on a recurring basis. Since most major pot stocks will be pushing into the green next year, it could continue to keep Planet 13 off the radars of most investors.
Then again, with a novel retail experience that's clearly resonating with Nevadans and tourists, this lack of near-term profitability might be overlooked.
I, for one, am I excited about this company's long-term potential and will be monitoring it closely. I suggest you do the same.