Steve, CEO and Co-Founder of Confident Cannabis, is now a contributing columnist to Entrepreneur.com in their Green/Entrepreneur section. This is his first piece to the publication, and it covers how the current cohort of cannabis companies benefit, in an odd way, from the lack of federal legalization. Due to the abstinence of national or global corporations participating in the cannabis industry, the companies in play now can be big fish in a small pond. However, when that federal change does inevitably happen, what will those companies need to look like or prepare for to remain competitive?
“Rather than verticalize and own the supply chain, businesses in other industries tend to specialize in one thing and do it well. Grocery stores don’t grow their own vegetables or make their own ketchup but we see cannabis businesses combining cultivation, processing, distribution and retail into one organization. The rationale is that oversupply causes falling prices. Producers can secure higher prices, and steady demand, by merging with retail stores that exclusively carry their products. The merits of such moves are often short-lived. Retailers who pay more for their own flower than what they could otherwise buy on the open market either end up squeezing their own margins or over-charging their consumers. In the instance of the latter, consumers have plenty of other options if one price gets too high. This means vertical retailers must lower their prices and absorb the loss. A few months of this and operators will realize they traded one problem for many problems.”
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