Florida-based giant Trulieve Cannabis Corp. is bowing out of two mature cannabis markets – California and Massachusetts – citing turbulent conditions for legal cannabis businesses.
The company said in a press release that the decision is part of a wider plan to save money and improve financial health. Since mid-2022, Trulieve has taken significant steps, such as closing select California stores, exiting the Nevada wholesale market, and adjusting production levels to match consumer demand.
In line with the approach, Trulieve is closing its retail location in Grover Beach, California. The move comes after last year’s closures in Palm Springs and Venice. The company also plans to wind down operations in Massachusetts by the end of the year, with stores in Framingham, Northampton, and Worcester set to close by June 30.
“These difficult but necessary measures are part of ongoing efforts to bolster business resilience and our commitment to cash preservation as we continue to focus on our business strategy of going deep in our core markets and jettisoning non-contributive assets,” CEO Kim Rivers said in a statement Thursday. “We remain fully confident in our strategic position and the long term prospects for the industry.”
The move is in line with the company’s adopted roadmap, which has focused on growing within current markets and using its “hub” model to its advantage. The model emphasizes building cost-effective operations in regional markets near “pillar” states such as Pennsylvania, Florida, and Arizona.
CEO Kim Rivers at one point suggested there could be as many as five hubs, setting the stage for effective interstate travel if approved by the federal government.
Still, Trulieve plans to enter more developed markets through mergers and acquisitions when it finds more attractive opportunities. But until federal legislation is passed and implemented, navigating the patchwork of emerging markets will remain a challenge for even the largest players, especially as inflation and rising interest rates slow down activity.
Despite these potential challenges, a 2022 report by Pink Horse Capital Research noted that Trulieve has historically outperformed its competitors in revenue generation, while expanding its presence in key emerging states.
The report also pointed out possible hurdles. For instance, Trulieve’s heavy reliance on retail could be hit by federal laws that restrict cannabis companies from owning all parts of their supply chain. Also, it’s still uncertain whether Trulieve can replicate its success in Florida in other states.
Trulieve’s operations in Massachusetts have been under scrutiny since a worker died at one of its manufacturing facilities in January 2022. The company reached a settlement with the Department of Labor’s Occupational Safety and Health Administration in December related to the investigation.