US cannabis MSO revenue surges in 2021, fueled by expansion, acquisitions

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Table showing 2021 financial performances of marijuana multistate operators

(This story has been corrected to reflect that Trulieve’s debt increased substantially from 2020 to 2021.)

The top cannabis multistate operators in the U.S. posted huge revenue gains in 2021 over the previous year as they expanded in high-growth markets and filled gaps in their geographic footprints through small and large acquisitions.

In many cases, revenue nearly or more than doubled from 2020 while MSOs continued to take more of the overall U.S. market share of marijuana sales.

Two big companies – Chicago-based Green Thumb Industries and Florida-headquartered Trulieve Cannabis – managed to turn a profit in 2021.

By contrast, several companies – led by Chicago-headquartered Cresco Labs and New York-based Columbia Care – reported large losses as they increased production, opened new stores and acquired additional licenses or operations in key markets.

Hefty income tax bills – reflecting Section 280E of the federal tax code – also undercut companies’ bottom lines.

Despite the revenue boom for all of 2021, marijuana sales grew only modestly in the last three months of the year, continuing a trend from the previous quarter, with some industry officials noting that consumers have less disposable income to spend.

The slower pace follows a coronavirus-driven sales boom in 2020 that was fueled by federal stimulus checks and consumers turning to marijuana for stress relief, among other factors.

Two megadeals

The watchword for 2022 is continued industry consolidation after a pair of megadeals announced in the past year.

Trulieve kicked off the marijuana shopping spree last May, acquiring Arizona-based Harvest Health & Recreation in a deal initially valued at $2.1 billion.

And two weeks ago, Chicago-based Cresco Labs unveiled a deal to acquire rival Columbia Care for $2 billion in stock.

“We expect the (mergers and acquisitions) trend will continue and even accelerate in the near term,” Jonathan DeCourcey, Viridian Capital Advisors’ director of equity research, wrote in a report after the Cresco-Columbia Care announcement.

He added that New York-based Viridian expects other large operators to look to “acquire smaller established players in order to increase scale in an arms race to excite investors and attract any institutional investment that is possible.”

In addition to expected M&A activity, there are three key takeaways from the last three months of 2021 and the year as a whole, based on company financial filings and analyst reports:

  • Retail sales growth has been more difficult to come by, and wholesale pricing is feeling downward pressure amid an oversupply of marijuana.
  • While many MSOs reported large losses in 2021, cash positions strengthened as several raised capital via lower-cost debt.
  • Cannabis stock prices have declined sharply since May 2021, with investors looking but not finding signs of progress in federal marijuana reform.

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Massachusetts-headquartered Curaleaf Holdings maintained its top position among U.S. multistate operators, posting revenue of $1.2 billion in 2021.

But Trulieve’s annual revenue run rate now rivals Curaleaf’s, based on fourth-quarter revenue of $305.3 million.

Cresco is expected to emerge from its deal with Columbia Care at or near the top in revenue among U.S. multistate operators.

Smaller mergers ahead?

While the recent Cresco-Columbia deal reflects two top tier rivals merging, Viridian expects many future deals will involve smaller operators.

“For us,” DeCourcey wrote, “the most likely takeout candidates are operators with a leading position in a specific state (or few states) that can be complementary to the acquiring company’s existing operations.”

Those comments came just before last week’s announcement that Toronto-based Riv Capital agreed to acquire Etain Health in New York for $247 million.

That mostly-cash deal is an example of an investment group eyeing an operator in a specific market – in this case, New York – as an entry point into the U.S. marijuana industry.

A subsidiary of Scotts Miracle-Gro largely bankrolled the acquisition, effectively giving the lawn and garden giant a foothold in New York’s upcoming adult-use marijuana industry.

Viridian cited a number of smaller MSOs that could be in play in the next round of M&A dealmaking: New York-based Ascend Wellness, Florida-headquartered Ayr Wellness and Jushi Holdings, Toronto-based TerrAscend and Arizona-headquartered 4Front Holdings.

Ascend and Ayr have surged into the top eight of all U.S. multistate operators with revenue more than doubling from 2020 to 2021.

The Cresco-Columbia Care deal proves that redundancies in limited-license states don’t rule out acquisitions, DeCourcey wrote.

“In fact,” he noted, “the redundancies where licenses or operations can actually prove to be beneficial as providing additional capital through sale in the future.”

Analysts have estimated that Cresco could sell overlapping operations for as much as $500 million.

Slower sales growth

Since last summer, many MSOs have seen sizzling, double-digit pandemic sales slow to single-digit growth or even flat sales or small declines in some stores.

Wholesale revenue also has declined in many instances because of downward pricing pressures fueled by plentiful supplies of marijuana.

For example, Cresco experienced a nearly 8% sales decline in its wholesale business in the last three months of 2021 compared to the previous quarter.

“Wholesale revenues were clearly under pressure from wholesale price deflation,” New York-based investment firm Cowen noted in its research report about the company’s fourth-quarter performance.

A number of MSOs also reported large bottom-line losses in 2021.

Green Thumb was the most profitable of the MSOs, netting a $80.4 million profit for the year.

Trulieve, which once had a string of profitable quarters, posted a $71.5 million loss for its fourth quarter and wound up with a profit of only $17.4 million for all of 2021.

Cresco’s whopping $296.8 million loss in 2021 can be attributed mostly to a previously reported $291 million impairment charge connected with a shift in strategy in California.

The company has said in regulatory filings that it is discontinuing certain third-party sales to focus on company-owned sales.

Although Trulieve is now rivaling Curaleaf for the top spot in revenue, investment analyst Pablo Zuanic of New York-based investment banking firm Cantor Fitzgerald raised concerns about a lack of “catalysts” in the year ahead.

Trulieve doesn’t break down its revenue by state, but Zuanic calculated that close to 95% of the company’s sales in the fourth quarter came from three states: Arizona, Florida and Pennsylvania.

The medical marijuana markets of Florida and Pennsylvania are becoming more competitive, Zuanic noted, and it’s uncertain how soon either state will legalize adult use.

Cash and Debt

Company financial filings show that the cash positions of the top marijuana operators improved dramatically in 2021 but that the long-term debt of many also rose from 2020.

For example:

  • Curaleaf’s cash increased from $73.5 million in 2020 to $299.3 million by year-end 2021, but its long-term debt increased from $285 million to $434 million during the same period.
  • Green Thumb’s cash went from $83.8 million in 2020 to $230.4 million in 2021, but the company ended 2021 with $239 million in long-term debt, up from $99 million in 2020.
  • Cresco’s cash increased from $136.3 million in 2020 to $223.5 million in 2021, but the company finished 2021 with $465 million of debt, up from $255 million the previous year.
  • Trulieve’s cash increased from $146.7 million to $230.6 million from 2020 to 2021, but the company carried debt of nearly $470 million as of year-end 2021, up from $121 million in the previous year.

There were notable exceptions.

For example, Nevada-based Planet 13 Holdings, an up-and-coming multistate operator, had no appreciable debt. Planet 13 executives have talked before about their aversion to taking on debt.

Meanwhile, there’s not much good news on the marijuana stock front.

The AdvisorShares Pure US Cannabis ETF, trading on the New York Stock Exchange Arca under the ticker symbol MSOS, declined by nearly 20% during the last three months of 2021 and dropped another 18% in the first three months of this year. The fund includes U.S. multistate operators.

Recent history has shown that cannabis stock prices are driven more by the prospect of federal marijuana reform than by new states legalizing marijuana – even though the latter results in tangible industry growth.

On April 1, the U.S. House of Representatives for the second time passed the comprehensive federal marijuana legalization bill known as the MORE Act.

Shares of MSOS closed up for the day, but only by 15 cents – to $21.01 a share – perhaps because Senate passage of the MORE Act is unlikely.

Even cannabis banking reform, which could give small marijuana businesses a shot in the arm, looks challenging right now unless it passes as an attachment to a spending bill, experts said.

Jeff Smith can be reached at