How Large Corporations Are Changing The Cannabis Industry
Corporate Recreational Shops and Independent Stores: How Recent Growth Is Changing the Landscape of the Cannabis Industry
Gone are the days of little pot shops hidden off the beaten path. Chain retailers and investors are cashing in on the green rush by “cashing-in” on a very lucrative market (which doesn’t come without some sort massive change). We have arrived at the year 2017 and legal recreational cannabis use is rolling from state to state with tantalizing results. There is no avoiding the fact that, this is not a fad.
Clever marketing and corporate business models are influencing the landscape of the cannabis industry. Data from Colorado’s market shows that one in three dispensaries are chain retailers as of June 2017. [1]
In Washington and Oregon, many worry the increase of chain retailers could phase out “mom-and-pop” shops. While most of the attention is focused on chain versus independent stores, there is an underlying current fueling this trend.
Where is all the money coming from to fund these large chain franchise stores? Corporate money and its influence are running deep in 2017.
All you have to do is take a look at some of the investors and where their money is going. On the New York Stock Exchange, you will find companies like Scotts Miracle-Gro Company (NYSE: SMG) who are making big investments in hydroponic companies.
Scotts Miracle Gro spent $136 million for Gavita, a grow lighting and hardware company, and has invested heavily in Boulder’s AeroGrow indoor gardening company. They also have acquired Arizona-based Botanicare, a plant nutrient and hydroponics products provider, which has had over $40 million in sales.
We can see why the CEO Jim Hagedorn believes legal marijuana is a billion-dollar opportunity for the lawn and gardening industry. [3,4] Investors and maximum shareholder profits are the driving force in capitalism and remind us of boring economic class lectures.
However, this drives companies to push and grow for the sake of market share profits in order to have the highest payouts for board members and stockholders. They are driven by profits alone and often why independent businesses are more often associated with an owner’s value which may not always be profit-driven.
Companies expected to be earlier investors would be pharmaceutical companies and they are certainly in the mix. INSYS Therapeutics Inc. (NASDAQ: INSY) is one and they are commercializing two FDA-approved cannabis-based drugs with seven more in the pipeline. Another is GW Pharmaceuticals (NASDAQ: GWP) is a global biopharmaceutical company that has many subsidiaries. They discover and commercializing cannabinoid prescription medicines. [3]
Products that have a direct tie to the cannabis industry are fueling growth and can be seen with mCig Inc. (OTC: MCIG), they manufacture and sale electronic cigarettes, vaporizers, and accessories under the mCig and VitaCig brand names. This company also provides marijuana grower services including commercial grow room design, personal home grow room units, and general marijuana business consulting. 3
Lastly, there is the powerhouse MassRoots, Inc., one of the largest and most active technology platforms for cannabis consumers, businesses, and activists — currently boasting over 900,000 registered users!
They are affiliated with the leading organizations in the cannabis industry including the National Cannabis Industry Association. MassRoots provided individuals and companies advertisement alternative to Facebook & Google, which still won’t allow cannabis ads. [5]
Are THEY forgetting us consumers?
Chain recreational shops mean:
- Better product consistency
- Competitive pricing
- Customer-centric products.
While others prefer smaller retailers that traditionally provide:
- Personalized service
- Unique offerings
- Often are not driven purely by the maximum profits model.
The pros and cons are twisting with each chapter of the green rush saga. The offerings for more commercialization are something out of a Hollywood movie.
Trends that seem to be catching on are home delivery services. Some highly evolved stoner have come up with ideas of combining both pizza and pot delivery AT THE SAME TIME. What’s funny is these kinds of things are coming very soon. And in some places, in particular the Pacific Northwest and British Columbia, these kinds of things are already happening!
Other trends that seem to be catching as a result of commercialization are what many business insiders are bracing for what they call the Vegas effect. Chain and corporate recreational stores are popping up in legal states and there is an interesting phenomenon happening, that can be seen in Nevada. Tourists soon will have the ability to purchase up to an ounce of marijuana but will have no place to use it. [7]
Designs are in place for the nation’s first legalized cannabis social club chains, even one adjacent to the Vegas Strip. Is this going to spill over into other markets? Time will certainly tell but it is the next big trend prediction.
Wait, there are even Marijuana-Themed Chain Restaurants showing up in close proximity of dispensaries in recreational legal states. One example is Cheba Hut which sells subs, salads and cannabis apparel merchandise. This franchise started at 30k per year and grew so fast they have put a hold on selling them.
Now that chains and franchises recreational shops are here to stay, the question becomes: what’s next?
Some say Cannabis tourism is the next big boom, while others claim smoking clubs are the next rage. Regardless who is right, the increasing capital that corporate entities bring to the marketplace will certainly continue to shape the landscape, good or bad.
Independent retailers will face similar challenges that Walmart forced on local mom and pops shops. Some will stay and some will go out of business. What we do know is that small shops serve a population that will ultimately reject BIG cannabis business. As corporate influence grows beyond dispensaries and retail shops, independent players will have to work HARD to firmly root their brand in this rapid marketplace.
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Citations:
1 http://www.denverpost.com/news/marijuana/
3 http://www.foxbusiness.com/markets/2017/01/29/3-marijuana-stocks-ready-to-soar-in-2017.html
4 http://www.bizjournals.com/columbus/news/2016/08/03/scotts-miracle-gro-spends-136m-on-dutch.html
5 http://www.otcmarkets.com/stock/MSRT/news?id=143006
7 https://www.reviewjournal.com/news/2017-legislature/nevada-pushes-ahead-with-marijuana-clubs/
8 https://chebahut.com/cheba-hut/