Cresco Labs Inc. on Monday announced plans to exit the California market as part of a “strategic restructuring” as part of a larger strategy by the company “to strengthen its balance sheet, increase cash flow and prioritize markets with the highest margins and long-term growth potential.”
In a statement, Cresco Labs CEO and co-founder Charlie Bachtell said that “While California is the largest cannabis market in the world, the structural challenges – ranging from fragmented retail to price compression and the illicit market” combined with the company’s “lack of scaled footprint in the state,” have made “it extremely difficult to generate sustainable profitability.”
“Capital is increasingly precious in this environment, and our focus is on deploying it where it earns the strongest return. … Exiting California allows us to reallocate capital and resources to our core markets and build out new markets where we see clear pathways for growth and shareholder value.” — Bachtell in a press release
The Chicago, Illinois-based company indicated that it is “in active discussions” with potential buyers for its cultivation, manufacturing, and “select distribution operations” in California and expects to finalize a deal “within the next several quarters.”
Cresco said it plans to retain full ownership of its FloraCal brand.
