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The growing number of states with legal cannabis has experts optimistic that the market will reach $100 billion by 2030, reports Business Insider.
But many wonder what the industry will look like in the future and who will profit most from the emerging multi- billion dollar market.
Is it Easy for Large Corporations to Dominate the Cannabis Market?
The price of entry into the industry is high, which puts small operators at a disadvantage. As a result of factors such as federal prohibition and costly state regulations, large companies have more access to the market because they can afford it.
Government regulations create order and precautions, including product testing standards. While regulations can benefit both operators and the consumers they serve; they are expensive.
The price of opening a dispensary is high. For instance, the documentation alone for licensing can cost up to $50,000. Additionally, there are other sets of fees ranging from $4,000 to $120,000 — depending on the state, and type of the operation.
According to Forbes, states with legal cannabis provide a limited number of licenses for growers, and the value of those licenses varies. This creates a competitive environment.
In states with millions of residents, each is granted an average of 13 licenses or less — except Colorado, Forbes adds. For example, Florida and New York whose population exceeds 20 million people, each grant seven and five licenses, respectively.
Small operators cannot afford to compete. However, it is not an issue for big corporations who have access to hundreds of thousands, if even millions, of dollars in capital.
What Does Corporate Cannabis Bring to the Table?
Patrik Jonsson, president of Curaleaf’s Northeast Region, explained that small businesses do not offer the same capabilities and opportunities that large firms do.
“If everybody started from scratch, you’d be lucky if you see something by the end of next year,” said Jonsson. “But we have the infrastructure in place and the compliance figured out to take off sooner.”
In other words, major players can spend money on research and development that can offer a variety of unique products. Moreover, this could benefit the economy, he explained.
However, many worry that corporations are overtaking the market. Some of those big players are MedMen, Curaleaf, and Canopy Growth. The latter of which has many celebrity brands in their portfolio, including Seth Rogan and Martha Stewart. As the market grows, these companies are getting bigger and bigger.
Three Large Companies Expanding their Footprints in the Market
Canopy Growth serves as a three-in-one operational business where it is the grower, distributor, and the seller. It is one of the largest cannabis companies in Canada where it has over 100 shops throughout the country, said Stocknews. Additionally, the company primarily focuses on recreational users/products.
Canopy Growth also has its foot in the U.S. market. The canadain company is partnering with American companies such as TerrAscend, and Acreage Holdings.
Canopy Growth Corp mentioned that the proposal granted them 100% of shares of Acreage Holdings, which “earned national visibility in the United States when it listed its common shares on the New York Stock Exchange.”
According to Forbes, the partnerships include selling Quatreau CBD-infused beverages in the states and Canada. The 12-ounce beverages contain no THC, and come in a variety of flavors.
MedMen is a cannabis retailer with headquarters in California and 45 stores across six states. Its net worth is $1.6 billion, according to CNBC.
MedMen, however, faced several challenges that illustrate how government regulations affect a company’s performance — no matter how rich they are.
According to CNBC, cannabis regulations in California are costly. As a result, legal products are pricey. These high prices drive consumers to the illicit market, leaving MedMen in a financial crisis.
That said, small businesses are also struggling to compete with both the illicit market and corporations.
Because MedMen experienced profit loss from disadvantages — such as the illicit market—they decided to take their business to the next step. In 2018, MedMen opened its first medicinal shop in Manhattan, New York in hopes of recreational legalization to take place in the state, CNBC reported.
Now that recreational cannabis is legal in New York, MedMen’s CEO Tom Lynch aims to set up a new dispensary that “can be a representative of the plant’s new future.”
Curaleaf, a vertically-integrated U.S. cannabis company, has a presence in 14 states. It owns 100 dispensaries nationwide, making it the company with the highest number of owned shops in the states, according to a press release from the company.
Moreover, Curaleaf is not only focused on expansion in the U.S, but globally. For instance, Yahoo Finance reported that Curaleaf — a vertically-integrated, multi-state cannabis company — earned $53 million per quarter in 2020. Now, Curaleaf is planning on expanding its domain to Europe. This year, they acquired EMMAC Life Sciences for $286 million. The move gives the company access to European markets, including Germany and Spain.
In 2020, the company assembled an office in Tel Aviv, Israel. The move allows Curaleaf to contribute to cannabis research, said Insider.
Israel is now the largest importer of medicinal cannabis, reported The Jerusalem Post. This further gives Curaleaf a foot into the European market.
Cheddar News interviewed the company’s former CEO, Joe Bayern, who said that the opportunity to grow sales [in Europe] is far greater than in the states, which “gives [them] an unparalleled platform to be able to build on.”
The Bottom Line
Some of these corporations are eyeing U.S. markets — others, the global market. As they continue to grow and expand their presence, they draw more partnership opportunities with other brands — especially celebrity cannabis companies. Celebrity brands have much to gain from these corporate partnerships. For instance, it grants familiarity among fans, and allows their brands to reach more individuals.
But this leaves small operators with far less capital — no celebrities connections — little room to make their way into the industry.