The Next Pot Hot Spot

Written By Jimmy Mengel

Posted June 13, 2019

There are two undeniable trends in investing now: big data and big cannabis.

Companies like Google, Facebook, and Yext have made fortunes by sifting through and mining our data.

Cannabis companies like Canopy Growth and Aurora have returned thousands of percent to investors over the last few years.

So, it was only a matter of time before the two sectors came together…

That’s why I sat down with Ed Keating from Cannabiz Media — a company that pulls together cannabis licensing data from the U.S. and Canada so that businesses and investors can identify trends in the growing cannabis space.

I brought you the first round of my interview last week.

Here’s part two, where Ed and I unveil some rather shocking data showing where the next big U.S. cannabis market is developing…

Jimmy Mengel: Ed, it’s fascinating to look at these figures. As an investor, I can already see the opportunities to use this data to determine where the next big markets will be — and which companies are staking their claims.

Have you seen any major spike in licenses? Maybe in places where you wouldn’t have expected it?

Ed Keating: Well, one state that’s just gone crazy is Oklahoma!

Jimmy Mengel: Wow, really? I was quite delighted when I saw that they passed medical marijuana. That did seem out of the blue for a very red state.

Ed Keating: Yes, Oklahoma has been issuing more licenses than anybody in the last six months, even more than California.

And with the price tag of only $2,500 a license, it’s not a real big barrier to entry. And the applications are not as onerous. We track applications to when the states released them or we get them through open records requests.

We put them in our system and you can see some interesting patterns…

Jimmy Mengel: I guess seeing the data flash “Oklahoma” is a pretty big deal for businesses and investors. I don’t think many people have that on their cannabis radar.

Ed Keating: It’s really interesting when you look at it. Oklahoma has made it pretty easy for people to get licenses. I mean, reasonably easy. If we look at the data right on our screen, you can see 4,400 licenses and they’ve only been issuing them since September.

So it’s remarkable and notable that they’ve been able to get that many out there. And our clients are happy to know that fact.

Jimmy Mengel: When cannabis started being legalized in places like Oklahoma, that’s when I kind of realized that this really is going to go all over the country. Have you seen any surprises in the other direction?

States you would have thought were selling tons of licenses but have stalled?

Ed Keating: Yes, we are also seeing the opposite — other states that are slowly coming on board.

But the fascinating thing for me is to look at the different models that states choose. And this obviously ties into sort of the investment side because in a lot of cases you get states deciding, “We are going to have X number of licenses based on how well we can regulate.”

Are there no theories of supply and demand?

I mean, it just seems a little ridiculous to me that we still have that kind of thing happening in this day and age where we’re creating essentially oligopolies in somebody’s state.

So that’s where Oklahoma said “We’re not going to do that. We’re going to let the market decide.”

Oregon has done the same thing.

The downside is you sometimes run into oversupply and it drives the price down to close to zero. But, is that better than, say, what Arizona has done? They pegged the number of dispensaries to the number of pharmacies in the state.

But why?

So, every state really is different in terms of how they come up with their determinations, especially if they’re a medical state. So it’ll be interesting to see as these other states are coming on board. Every state is sort of peculiar in how they do that and how they collect the funds.

Jimmy Mengel: Yeah, absolutely. And I think that’s what’s so confusing, at least for people starting businesses, is that there’s so much of a learning curve depending on where you are.

And then you have companies that are working in several different states and have completely different regulations for each state.

I imagine it starts to get complicated quick and it’s easy to make mistakes.

Ed Keating: I think you’re probably right about that, Jimmy. The multi-state operators are the ones that are best poised to do it. Because think about it, they’re going to need a lot of capital.

You can’t just jump around from state to state Willy Nilly. You’re going to need boots on the ground. It’s just like when companies try to figure out how to go international in any industry.

They export competencies, brands, and people. And I think that’s what a lot of these MSLs (multi-state licensees) are doing. They’re looking for states that are similar to ones that they’ve seen success in.

I think the ones that are successful are the ones that have the resources and really have a battle plan….

Jimmy Mengel: Speaking of battle plans, I can see how larger companies would love to have a tool like this for acquisition targets. We’ve seen the Molson Coors, Constellations, and the Mooseheads going in and scooping up these smaller companies.

I’m sure they were looking at all sorts of companies. It looks like a database like this would streamline all that.

Ed Keating: Yes, people can use those criteria that we talked about before you know, where are these licenses and you know, which ones might we want to acquire.

These last six or seven months the market has matured and more money has started to flow in, and we’ve had more people coming in looking at it with more of a way to do market sizing: where are the licenses, where’s the licensed growth?

That’s good to know if you’re trying to figure out where to go next. And businesses really can rely on that information because we’re getting it straight from the regulators and putting it into our system so that they can track and see.

Jimmy Mengel: Long live the power of data. Thanks so much for your time, Ed. It’s been illuminating.

Ed Keating: My pleasure, Jimmy. Take care.

Now, you’ve heard the phrase “Just follow the money.”

I’d like to add three more words: “Just follow the data to the money.”

If you’d like to check out Ed’s Cannabiz Media company and explore its database, here’s a link to their website.

If you’d like to see our data on which cannabis companies are the next big acquisition targets, you can do so here.