Any industry that’s just transitioning from its infancy is bound to undergo big changes, and the cannabis business is no different. Even as many states continue to grapple with questions of legalization and/or medical use, we’re seeing a trend of larger players sweeping in to scoop up mom & pop operations.
Industry giant Curaleaf recently announced a series of agreements to provide convertible financing to several operations in Maryland. That financing will become equity upon receipt of state and local regulatory approvals. Other large firms have entered into management agreements with smaller Maryland concerns, moves that state regulators and legislators say are thinly-disguised efforts to circumvent regulations promoting local ownership in Maryland’s medical cannabis industry.
The Maryland cases are just the tip of an industry-wide iceberg, with the biggest deals happening in Canada, no surprise given the number of large concerns competing there. And there’s even evidence of a shakeout in the number of big-boy firms, with Aurora Cannabis acquiring MedReleaf for $2.3 billion in July of 2018.
So as big firms grab up smaller ones and acquire each other, is this a good thing or a bad thing for the industry? There are well-founded concerns about reduced competition and increasing speculation in the business, but whether that’s a good or bad thing is really secondary: like it or not, it’s happening.
Consolidation will occur in any profitable industry because that’s how business works. Just as not all of the dizzying number of cannabis brands on the shelves of any dispensary will survive, nor will every business in the cannabis or any industry. There will be a shaking out of players both large and small, and the strongest and best will survive.
We believe the best strategy for an operation of any size is to be efficient and scalable. For larger concerns, systems that can easily grow with new acquisitions are vital. And for the independent operator, the efficiencies brought about by integrated solutions can mean outlasting less-efficient competitors … or being a more attractive option than those competitors when the big boys come shopping.
That’s why we’re in this industry: to help operators of all sizes operate more efficiently from seed to sale, navigating the murky waters of compliance the whole way.
