When the recreational marijuana industry was launched in California, the trend was for every company to be vertically integrated. This meant that everything was handled in-house from cultivation and manufacturing to packing, retail sales and distribution. As the industry has matured, the shortcomings of vertical integration have become all too apparent, and companies are divesting themselves of many divisions and operations in order to focus on their key competencies.
NorCal Cannabis is one example of a marijuana company that has taken the route of shedding excess weight from its operations. In the beginning, NorCal went the vertical integration route, operating everything from cultivation facilities to retail locations and even a huge home-delivery operation.
However, the company noticed that it was bleeding money on each delivery run its vehicles made, so the logical thing for NorCal to do was to divest itself of marijuana delivery, so the company let its delivery license expire.
NorCal CEO Jigar Patel says that things have been looking up ever since the executive team made the hard decision to concentrate on cultivation as well as building the company brand. With 400 dispensaries now carrying NorCal products, the path to sustained profitability is clear and there are no regrets for concentrating on what the company does best.
Eco Farm is another cannabis company that also opted to divest itself of some of its operations. The company’s hand was somehow forced when wholesale marijuana prices in California collapsed in 2021. To survive, the company decided to let go of its cultivation-related operations so that it could focus on tech development, cannabis distribution and its online marketplace.
So far, says Danielle Dao, Eco Farm cofounder, the company has leased two of its three farms and are actively looking for a taker for the third. It wasn’t easy to make this decision, but Dao says “picking their lane” was a matter of business survival, and the company went for it.
The moves made by Eco Farm and NorCal Cannabis are by no means isolated incidents. They reflect a growing realization that long-term business success hinges on not spreading oneself too thin. Rather, a company has to identify its core competencies and concentrate on those if it is to survive the competition that is increasing every day. This is the norm in most industries, and the cannabis industry probably opted for vertical integration in order to ease the work of regulators who are charged with overseeing this industry, which is still illegal at the federal level.
But as more states establish their own marijuana markets and pressure mounts on Congress to end prohibition, it may not be long before all sector actors, including Cannabis Strategic Ventures Inc. (OTC: NUGS), choose which aspects to retain and which ones to let go of when a national market is finally opened.
NOTE TO INVESTORS: The latest news and updates relating to Cannabis Strategic Ventures Inc. (OTC: NUGS) are available in the company’s newsroom at http://cnw.fm/NUGS
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