Ohio, which has had medical marijuana sales since 2019, could pass legislation approving adult-use sales this year. Secretary of State Frank LaRose reintroduced an act to permit adult-use cannabis sales in the nation's seventh-largest state. If its state house doesn't adopt the measure by May 9, it could go before the ballot as a voter referendum in November.
Adult-use cannabis sales in Ohio could be a game-changer for several cannabis companies. Of the remaining 18 states that haven't yet adopted adult-use sales, only Texas, Florida and Pennsylvania are larger and the last two states are eyeing adult-use sales as well. As it is, medical cannabis sales are booming in the Buckeye state, reaching $658 million in 2022, a rise of 72.8% over 2021 sales.
Ohio is a limited-license state, so the companies that already have dispensaries would likely have an edge once it goes to adult-use sales, including three multi-state operators (MSOs) with vertical operations in the state worth watching: Cresco Labs (CRLBF 4.15%), Green Thumb Industries (GTBIF 1.28%) and Curaleaf (CURLF 4.67%).
Cresco Labs has plenty of exposure in Ohio
Cresco, thanks to its acquisition of Verdant Creations in 2021, has the maximum allowed five dispensaries in the state, with locations in Cincinnati, Chillicothe, Newark, Wintersville, and Marion.
Cresco has 55 dispensaries but with its $2 billion merger with Columbia Care, which will be completed in the first quarter of this year, it is gaining an additional 130 dispensaries, though it will have to divest itself of some of them because of various state regulations. In Ohio, it would have had nine dispensaries with the addition of four from Columbia Care but will have to divest itself of four.
Cresco CEO Charlie Bachtell said, when Cresco announced its purchase of Verdant, that Ohio's situation is similar to the early years of medicinal marijuana sales in Pennsylvania and Cresco's home state of Illinois. The company, anticipating growth in Ohio, is spending $45 million to expand its production facilities in Yellow Springs, Ohio, to 145,000 square feet.
Green Thumb Industries has a full footprint in Ohio
Green Thumb Industries, like Cresco, is an MSO with the maximum of five dispensary locations in Ohio, including two dispensaries in Lakewood and one each in Cleveland, Toledo, and Lorain. It also has a cultivation facility in Toledo. Overall, Green Thumb has 77 locations in 15 states and is financially strong enough to expand operations in Ohio and other states that are open to adult-use sales. It has had 10 consecutive profitable quarters and grew from $7 million in revenue in 2016 to just over $1 billion in revenue in 2022.
It also has a balanced revenue mix with more income from the combination of vapes, pre-rolls, dabs, edibles, health, and beauty products than from dried flower sales. Through the first nine months of 2022, the company reported revenue of $758 million, up 17% year over year, and net income of $10 million, or $0.04 in earnings per share (EPS).
Watch out for Curaleaf
Curaleaf is the top U.S. cannabis company in terms of revenue. In the first nine months of 2022, it reported $986.7 million in revenue, up 11%, year over year, though it also reported an $0.14 loss in EPS, compared to a loss of $0.10 in EPS in the same period a year earlier.
The company has 147 dispensaries across 21 states. That includes two dispensaries in Ohio at Newark and Cuyahoga Falls, plus a growing facility in Johnstown, with 15,000 square feet for cultivation and 7,500 square feet for processing.
Though it doesn't have the full limit of dispensaries, the company's willingness to acquire licenses and its growth pattern makes it worth keeping an eye on in Ohio. It makes sense for Curaleaf to expand there as it already has 19 dispensaries in neighboring Pennsylvania and three next door in Michigan.
