Cannabis popularity continues to grow at staggering rates, which is great news for those who have come to rely on it for the various potential physical and mental health benefits it offers. Larger numbers of cannabis customers means that more eyes are on the industry, which can help ensure that cannabis companies are providing quality products and ethical work environments. As such, one popular trend in the cannabis industry is buying from vertically integrated cannabis companies.
Learn more about what this term means, how it affects the way business is done in the cannabis industry, and how this business model impacts cannabis customers below.
What are vertically integrated cannabis companies?
Vertical integration is a common business term across various industries and means that a company owns and operates every stage within its supply chain. In the cannabis industry, this means that a single company handles the cultivation, extraction, manufacturing, and retail stages.
The cultivation stage consists of harvesting fully mature cannabis plants, which must be done carefully by skilled employees to prevent damage that can negatively impact the plants’ properties. Extraction involves processing the plants in a laboratory to extract the desirable compounds for edibles, concentrates, or vape cartridges.
Cannabis manufacturing can be defined as the stage where the cannabis extracts are made into products, such as edibles or tinctures, and are placed in labeled packages. Dry flowers are weighed, packed, and labeled in the manufacturing process too. Finally, the vertically integrated cannabis company takes the packaged cannabis products and places them in their dispensary for recreational or medical customers to purchase.
How are vertically integrated cannabis companies different from regular cannabis companies?
At first glance, it may not seem like the vertically integrated cannabis business model differs much from the way most cannabis companies operate, but most cannabis companies focus on one or two areas of the cannabis supply chain instead of all of them. There are, for example, numerous companies that only plant and grow cannabis plants, then ship their cultivated cannabis to extraction labs or packaging firms. From there, products are sent onto the next step then eventually land in a marijuana dispensary.
When numerous companies handle cannabis over a span from seed to sale, it becomes much more difficult to regulate for quality assurance purposes. In this business model, numerous entities have to adhere to quality and legal guidelines, so wires can easily cross, leading to inferior products. Some speculate that vertically integrated cannabis companies have less expertise being a jack-of-all-trades rather than a master of one, but that’s a difficult argument to make when product quality suffers due to mishaps by one or more companies in the supply chain.
What are the consumer advantages of buying from vertically integrated cannabis companies?
There remain numerous misconceptions about cannabis consumption in the United States, which is largely why it has not yet gained federal legalization. Vertically integrated cannabis companies can ensure that cannabis production from start to finish adheres to regulations because they are involved in every single step. This allows them to have better quality control over the products being sold in their cannabis dispensary, instead of having to trust a cultivator or packaging company that may or may not adhere to the strict standards customers want.
Another advantage is the fact that vertically integrated cannabis companies may have an opportunity to provide the highest quality cannabis products at a lower price, due to their capacity to save on overhead costs such as utilities and rent. Having all of the stages occur in one building can reduce costs at each stage substantially, especially since there is no need to ship the cannabis plant from one business to another just to undergo extraction and get packaged before heading to a California dispensary.
Vertically integrated cannabis companies have the distinct advantage of being able to keep up with customer demands faster than other cannabis business models. If, for example, a certain strain of flower is suddenly selling in larger volumes than ever, the retail branch of the company can get in touch with the growers right away to increase the amount of that strain they grow to keep up with customer demand.
Are there any drawbacks to this business model?
Like anything in life, there are a few cons to this way of doing business in the cannabis industry, but they primarily have to do with the costs for the businesses themselves. Vertically integrated cannabis companies have a much higher startup cost than regular cannabis companies, which may place this business model out of reach for some aspiring cannabis business owners. For this reason, many cannabis companies start out in one area of the cannabis industry and transition toward a more vertically integrated model as they grow and gain more capital.
Another drawback is that businesses will have to be conscious of their vertically integrated practices if they operate in more than one state. Following regulations in multiple states at once can be tricky and costly, which can lead to higher prices for consumers depending upon the company’s areas of operation. In most cases, however, the advantages of vertically integrated cannabis companies far outweigh the drawbacks.
Visit Planet 13 Dispensaries Today!
Vertical integration is a fascinating and beneficial way to do business in the cannabis industry for both the business and the consumer.
One of the best ways to cast a vote for business practices you support is by shopping with companies that use vertically integrated business models, such as Planet 13 Dispensaries.
Planet 13 offers numerous ways to get your favorite cannabis products, whether you prefer to shop in-store and consult our knowledgeable budtenders, do curbside pickup, drive-thru, or take advantage of our delivery option. We pride ourselves on ethical and quality cannabis manufacturing practices, and it is our mission to help everyone discover the joys and benefits that incredible cannabis products can bring.
If you’d like to learn more about who we are, or if you have questions about which products can best suit your needs, please contact us today!