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Many multi-state operators (MSOs) in the cannabis industry have the sole aim to be the largest cannabis producers in the country.
The common problem with this goal is that many of these large companies either only focus on having a large footprint at the cost of growing lackluster marijuana or offer high-quality marijuana but can’t scale.
One company that has managed to hit two birds with one stone is leading vertically-integrated MSO, Ayr Wellness, Inc (CNSX: AYR.A). The company has made headlines in recent times for strategic acquisitions while focusing on growing craft quality marijuana at scale.
Grabbing the Low-Hanging Fruit
Ayr Wellness has adopted a strategy that involves creating meaningful revenue.
Unlike many other MSOs in the U.S. that try to set up production in numerous states and building facilities in each of those states, Ayr is focused on a specific subset of states that comprise the lion’s share of the U.S. cannabis market.
Usually, when companies open up cultivation in a new state, they have two choices — either they can hire cultivation talent for that individual state or they can shift resources by moving from one city to another. For instance, many Illinois-based MSOs have seen a massive quality drop over the past few years as a result of moving their cultivation talent out of Illinois and into the newly entered state.
By focusing on a more strategic footprint, Ayr avoids diluting its cultivation talent. The company plans to focus on 12-15 states because it believes that those states constitute ~80% of the country's consumer wallet. Ayr’s robust team undergoes specific training programs and standard operating procedures to maintain its boutique approach in every state it operates in and manages to do it at scale.
Ayr has built its footprint in 8 states — Arizona, Florida, Illinois, Ohio, Massachusetts, Nevada, New Jersey and Pennsylvania.
Since October 2020, Ayr Wellness has acquired Liberty Health Sciences (FL), Doc House (PA), CannTech (PA), Parma Wellness Center (AZ), Oasis (AZ), Garden State Dispensary (NJ), Ohio Medical Solutions (OH), NV Green (NV), Tahoe Hydro (NV) and Herbal Remedies Dispensaries (IL).
Of these acquisitions, the most notable include Liberty Health Sciences, a vertically integrated operator in Florida, in a stock-for-stock transaction valued at $290 million, as well as Garden State Dispensary, a licensed New Jersey operator for $101 million. With the addition of Florida and New Jersey, Ayr will have operations in 8 states with combined populations that total nearly 84 million people.
Ayr’s Florida acquisition has added 40 retail dispensaries to its operations, with the company anticipating at least 10 more Florida dispensaries by the end of 2021. The company has overseen a significant increase in biomass, which is being directly reflected in its sales. Ayr believes that its business in Florida could be worth what the whole company is worth today in terms of market cap.
Ayr Wellness is also getting into Illinois by way of its $30 million acquisition of Herbal Remedies Dispensaries, LLC. Herbal Remedies is one of the first cannabis dispensaries licensed in the Prairie State when medical cannabis was legalized 8 years ago. The total consideration for the purchase is set to $30 million and the acquisition should be finalized during Q4 2021. The acquisition is promising for Ayr as the total cannabis market in Illinois is already running at $1.8 billion in annual sales, despite adult-use launching only 18 months ago.
Another notable acquisition is Nevada’s award-winning cannabis cultivation company, Tahoe Hydro. The company is known for its flavor combinations and strain variation in the Nevada market and has honed its craft through years of pheno-hunting and crossbreeding development. With this acquisition, Ayr will add to its impressive roster of cultivation talent and deploy the talent throughout the organization.
Ayr recently announced its plan to acquire the parent company of Levia, which produces branded cannabis-infused seltzers and water-soluble tinctures. Ayr believes Levia has enormous potential for new and existing consumers, as it offers great flavor and zero calories in an infused beverage experience. In just 6 months since its initial launch in Massachusetts, Levia has become the top-selling THC beverage.
The acquisition is expected to close by the end of 2021. Once the acquisition closes, Levia will join Ayr’s national brand portfolio, alongside Kynd premium flower and Origyn Extracts.
Promising Green Future
Ayr’s expansion plan with its recent acquisitions communicates one thing clearly: The company is willing to invest in anything that translates to premium quality. This means that the priority is not only a great asset but great people.
With a growing number of states legalizing the use of cannabis, it seems as though federal legalization is almost inevitable. Although this may take time, Ayr Wellness is well positioning itself for such a time with carefully planned acquisitions in the U.S.
To learn more about Ayr Wellness, visit its website here.
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