It’s no secret that the cannabis industry is being flooded with venture capitalists and big business interests. It was going on in a limited capacity leading up to the historic 2012 election and has picked up exponentially since then. With every successful reform vote, and the creation of new business opportunities, more and more big dollar entities will hop into the cannabis space. This is likely to continue forever.
The cannabis space is not unique from the standpoint of a corporate takeover attempt. If something makes a lot of money, big business interests are sure to follow. It’s been happening for a long time around the world, so it shouldn’t surprise people to see it happening in the cannabis space. The impact on mom and pop operations has been dramatic, with many people in legal states that long relied on the plant for their financial existence being pushed out of the industry because they simply can’t compete.
Large companies have two really big advantages over small businesses. First, they are able to survive the ebbs and flows of a growing industry, whereas a small business owner has to regularly make money in order to eat and keep a roof over their head. A large company can continue to operate for a long time when no profits are being made. That’s what we are seeing across America right now with large companies losing money on cannabis businesses in the hopes that they will outlive their competitors and reap the rewards down the road.
The second advantage is that large companies can use strategies that involve making long term profits by making a smaller profit on each unit in the immediate, with the goal of making up for it by selling large volumes over the long haul. This is what Wal-Mart does. They don’t beat their competitors by making the most money on each item sold, they beat their competitors by making a little bit of money on each item sold, and selling as many items as possible. The same will be true with cannabis. A small grower needs to maximize every dollar from every gram of their harvest, whereas a large scale grower can sell each gram for much cheaper, helping move the product faster, which helps them gain more market share and therefore make more money in the long run. In the process they push out the small cannabis grower. It’s not exactly rocket science.
I have seen many people complain about corporate cannabis on social media and in blog articles (myself included!), and there’s definitely a consensus that it’s an issue for smaller scale entrepreneurs. But a solution to the issue, or even proposed solutions, are few and far between. There’s plenty of complaining about corporate cannabis in the cannabis world, but what, if anything, can be done to stop the cannabis profiteering winds of change from taking over the entire industry?
The first thing that I see people offer up as a proposed solution is residency requirements. The argument goes that if only people that are residents of a state for a set time period are allowed into the industry, that will keep out-of-state dollars from flooding the state’s industry. The problem with this argument is that all a company has to do is find someone to put on the the cannabis license application that meets the residency requirements, put a crafty contract in place between them and said person to funnel all the profits back to the out-of-state company, and the hurdle is overcome.
The second proposed solution that I see offered up is placing caps on the number of licenses that are issued. This strategy is not effective because it basically creates a licensing process that is only open to large companies with deep pockets. Look at states like New York and Illinois that have a cap on the number of licenses issued. The limited licenses available results in serious competition for those licenses, which drives up application fees and approval requirements. I have met people from New York and Illinois that spent over a million dollars trying to get a license, and they didn’t receive even one license. The only entities that get granted licenses when caps are involved are those that have the wealthiest of backers, and even then it’s not a guarantee.
Unfortunately for those that want cannabis to remain a cottage industry, corporate cannabis is here to stay. The sooner mom and pop operations realize that, the better off they will be in calculating for it and being able to plan ahead. Small cannabis companies cannot beat corporate cannabis by trying to match quantity of units sold. Small cannabis companies can only compete with corporate cannabis when it comes to the quality of the product, and the genuineness of the branding strategy. Smaller players in the cannabis industry need to have values-driven branding strategies that help them build a loyal customer base. Corporate cannabis is obviously only in it for the money, and if consumers know that you genuinely care about the plant, they will choose your product over big business’ products.
Consumers should not want to support corporate cannabis. Corporate cannabis is comprised of jacktivists, cannabaggers, and cannassholes that are only currently in support of cannabis because it is now more profitable to support cannabis than it is to oppose it. These are the same people that likely have investment portfolios that also include drug testing companies and for-profit-prison companies. They could care less about righting the wrongs of decades of cannabis prohibition.
Genuine cannabis companies that are ran by people that have fought for cannabis reform prior to all of the jacktivism need to develop their brand’s history and story, and make it a pillar of their cannabis company’s branding strategy. If they truly love the plant, it will show in the not only the quality of their product, but also how members of the brand conduct themselves in the cannabis community. Cannabis, more than any other product, has a fan base that believes in making the world a better place. While I think that corporate cannabis is going to be around whether cannabis reform supporters like it or not, I also think that the craft consumer base is going to be stronger in the cannabis industry than any other industry, including the beer industry.
Craft beer has increased in popularity, but it still only made up 12% of overall beer industry market share in America in 2016. That figure is increasing, but it will be a while at the current rate before craft beer is beating non-craft beer. I think cannabis can do far better than that figure, but only if the craft cannabis industry focuses more on making their products and brands better, and not spending as much time complaining about corporate cannabis. That’s obviously easier said than done, but it is vital if craft cannabis is ever going to compete with corporate cannabis in a meaningful way. While craft cannabis entrepreneurs are busy ranting and typing in all capital letters on social media, corporate cannabis is doing everything it can to squash the craft cannabis movement.
Craft cannabis companies need to unite their voices too, to ensure that they are heard in an increasing crowded conversation. That’s why I support the Craft Cannabis Alliance and will continue to do so. Just as chain restaurants and crappy corporate beer exists, so too will corporate cannabis always exist. But just as superior small restaurants and craft beer companies exist and people are able to support themselves doing what they love via those industries, the same can be true for cannabis. Consumers need to refuse to buy corporate pretendica, and only support companies that are good stewards of the plant. If you are a consumer, do your homework before purchasing. And if you run a small cannabis company, give those consumers a reason to support you!