AYR Wellness, Trulieve Expand in Ohio Despite Cannabis Oversupply

Still, operators are keeping their noses to the grindstone.

Multistate cannabis operators continue to look at expansion opportunities in Ohio, despite a clear glut of cannabis products.

U.S. cannabis operator, AYR Wellness Inc. (OTCQX: AYRWF), announced Wednesday that it plans to acquire Twice the Wellness LLC in Woodmere, Ohio. The details of the deal remain undisclosed, but Ayr expressed optimism about opening the dispensary, along with two more in Riverside and Clermont County by the end of the year, subject to regulatory approval.

“Ayr continues to focus on building a vertical presence in Ohio, a market where we have the ability to build considerable depth and market share,” CEO David Goubert said in a statement.

Meanwhile, MSO giant Trulieve Cannabis Corp. (OTCQX: TCNNF) opened its first medical marijuana dispensary in Columbus on Tuesday, further solidifying the trend of cannabis expansion in the state.

The expansion momentum contrasts sharply with the realities of Ohio’s cannabis market, which currently faces evident oversupply. According to data from the Ohio Department of Commerce, the amount of marijuana flower ready for sale and bulk flower held by suppliers has approximately doubled in the year between June 2022 and June 2023.

The glut is affecting all product categories. Suppliers are selling their products at deep discounts to avoid product expiration and to reduce inventory levels. The oversupply situation has led to a drastic drop in wholesale cannabis prices in Ohio, from $769 per pound in the first quarter of 2021 to $168 per pound by the end of 2022, a staggering 78% decrease.

While lower prices are a boon for consumers, they spell trouble for cannabis businesses. Similar to some other states, a number of these businesses are now selling their products at a loss, with the oversupply situation forcing some to cut production lines and reduce overhead in the face of a stagnating patient population.

Patient count in the state, which stands around 172,000 active participants, has only grown by 6% since last fall, when approximately 162,000 active patients were registered.

Still, Ohio regulators remain unfazed by the current situation, attributing their optimism to the rising number of medical marijuana dispensaries in the state.

Jennifer Jarrell, spokesperson for the Ohio Department of Commerce, told Crain Cleveland that the state’s Medical Marijuana Control Program “consistently reviews key program metrics, including product pricing, product inventory, and cultivation capacity.”

She added that the surge in operational dispensaries should drive up demand by providing patients with better access to products.

The oversupply issue and stagnant patient growth raise questions about the implications of Ohio Senate Bill 9. The proposed legislation could reduce the number of regulatory agencies, loosen some advertising restrictions, and authorize additional cultivation licenses.

Critics argue, however, that the last thing an already oversupplied market needs is an increase in cultivation licenses. Additionally, the bill would mandate new cultivators to wait a couple of years before commencing cultivation. Multistate operator PharmaCann has embarked on a media circuit lately to draw awareness to the issue.

State records highlight another critical reality: Just 25% of the maximum combined marijuana cultivation space of 1.85 million square feet permitted under current law is in use.

But operators are keeping their noses to the grindstone — keeping faith in potential measures such as the SAFE Banking Act, federal de-scheduling, medical marijuana patient pool expansion and potential recreational marijuana legalization in the state.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.

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