Key findings from a recent equity research report by Pablo Zuanic, a senior analyst at Zuanic & Associates, shed light on the challenges and opportunities facing California's cannabis sector, including competitive dynamics, market trends, and the performance of leading cannabis brands in the state.

California's Market Trends

The report highlights that in California, the largest cannabis market in the United States, retail prices have fallen more significantly than wholesale prices.

Growing pressure on retailers, including more licensing and weaker margins, is expected to drive consolidation in the industry. Companies are already acquiring the largest dispensary chains, while others are integrating retail and production.

Leading California Brands

The Zuanic report delves into the performance of the top 10 cannabis brands in California. Among them, only three are experiencing year-to-date growth: West Coast Cure, Gelato, and STIIIZY.

Gelato has seen remarkable growth, while West Coast Cure's sales have surged by 138%. STIIIZY, despite controversy, has managed a 5% year-to-date increase.

"Gelato has seen impressive growth, with a 192% increase, including a significant 114% surge in Q3 2023. It rose from a nominal share to a 3.4% market share in California. Vape sales were up 134% year-on-year, and pre-roll sales increased by 78% in Q3 2023. The flower segment, although small at 0.3% share, grew by 68% in Q3 2023,” Zuanic wrote.

Edibles specialists WYLD and Kiva have faced challenges, with WYLD down 3% and Kiva down 7% year-to-date, respectively.

Additionally, several brands, including Heavy Hitters, Jeeter, Cannabiotix, and Raw Garden, have faced declines of approximately 20% year-to-date.

Market Fragmentation

The report reveals that the California cannabis market is fragmented, with only four companies each holding more than 3% of the total market share. These are STIIIZY, Jeeter, Kiva, and West Coast Cure.

MSOs, on the other hand, dominate the industry, with 14 of them generating over $150 million in sales annually.

Will New York Eventually Look Like CA?

“To be determined. We are keeping a close eye on NY. If the MSOs have limited presence in CA and MI, why should we expect them to succeed in NY if licensing supposedly will ramp in NY like in those states (and like in Massachusetts),” Zuanic wrote.

“Well, NY may be different ... as local red tape and limited capital access (at this time) will likely limit the ability of new licensees to open stores and build new cultivation in the medium term, and that may give the MSO incumbents a first mover advantage.”

Now Read: No More Questions About Past Weed Use For Police Applicants In California

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