In less than two months, the gates to Virginia will be opening wider for cannabis companies when possession of up to one ounce of marijuana will be legal as of July 1. One of the companies looking to take a fast track toward expansion in the state, where medical cannabis is already legal for some conditions, is Columbia Care (CCHWF -1.88%).
With established operations and management experience across 11 U.S. states plus the District of Columbia, and one medical dispensary already located in the southeastern portion of Virginia, Columbia Care has the base to expand its footprint successfully. For investors, this expansion could lead to riches in the near future.
At the tail end of 2020, Columbia Care announced an agreement to acquire Green Leaf Medical, a fully integrated cannabis multi-state operator in the mid-Atlantic region. In doing so, Columbia Care gains access to the largest cultivator in Virginia, retail exclusivity in 20 counties in central Virginia, licenses to operate a co-located cultivation/dispensary, and five stand-alone dispensaries in the region.
Virginia Gov. Ralph Northam expects the state to begin allowing sales in 2024, which could amount to a market worth $1.5 billion, based on a population size of 8.5 million. That many people, in a state that houses two of the wealthiest counties in the entire country, bodes well for Columbia Care. The state offers an opportunity not only to reach a large population, but also to partner with excellent medical facilities. It also shouldn't hurt that the northern part of the state is centrally located between Maryland, central Virginia, and Washington D.C., where Columbia Care already has a dispensary presence. Once the closure of the Green Leaf acquisition takes place -- planned for summer 2021 -- it will add West Virginia, to strengthen a core Mid-Atlantic base.
With a heavy concentration of dispensaries and newly obtained permits in West Virginia, Ohio, Pennsylvania, and Maryland, Columbia Care is further strengthening an already formidable mid-Atlantic presence. And in an effort to keep its foot on the pedal, the company is making moves in other regions of the country. Following the Green Leaf acquisition, Columbia Care expanded its California presence through an acquisition of The Healing Center San Diego, known for its consistent revenue growth in a limited-license market as well as its statewide distribution and wholesale relationships with more than 100 dispensaries.
What to watch out for
But its expansion may not come without competition. Green Thumb Industries (GTBIF 3.48%), also in the process of building a presence in Virginia, is making acquisition moves of its own. It recently acquired Dharma Pharmaceuticals, owner of a vertically integrated license in Virginia, including an operating facility and retail location, along with the potential for five additional retail locations.
In addition to competition brewing in Virginia, Columbia Care competes for market share across the U.S. with top rivals including Curaleaf Holdings, Cresco Labs, and Trulieve Cannabis, in addition to Green Thumb.
A pawn or a king?
The cannabis market is becoming its own game of chess, with each player trying to stay a few moves ahead at all times. So far, Columbia Care is taking that approach in stride. It recently acquired a 34-acre cultivation site in New York's Long Island, from which it expects to be able to harvest and sell medical marijuana as soon as the fourth quarter of this year, adding to what some estimate to be a $5 billion cannabis market in New York by 2025.
Columbia Care has also taken action toward international growth. In April, the company announced the launch of a proprietary solid-fill cannabis capsule in the U.K. -- the first of its kind in the country.
All of these moves add up to something, and prospective investors will want to know if that something could mean money in their wallets soon. If 2020 is any indication, the outlook is bright. Year-end revenue reached $198 million, up 151% year over year, including a record $81.8 million in the fourth quarter for a sequential increase of 51% and a year-over-year quarterly increase of 234%. The company outperformed its 2020 outlook and now boasts a footprint in 17 U.S. markets, three of which will become operational in 2021, a year during which Columbia Care's guidance suggests it will generate revenue of $500 million to $530 million. If even the lower end of that range is reached, it would mean a second consecutive year-over-year increase of 150% in revenue.
With revenue, gross profit, and gross margin all increasing for the past three consecutive quarters, and a strong 2021 outlook, the upcoming May 17 earnings call -- a first glimpse at whether it may achieve that outlook -- could be just what cannabis investors need to make their own moves toward portfolio riches.