MAY 2022 Cannabinoid Monthly Playbook
As it stands today, the cannabis industry is incredibly challenging. Operating in the cannabis industry requires a skilled understanding of how the game is played and the foresight to balance how it is played today vs. in the future.
Given its current federally illegal status, large outside titans have taken on creative partnerships when placing bets on organizations within the business.
We’ve seen it with Molson Coors & Hexo, Anheuser-Busch & Tilray, and Altria & Cronos group.
Recently, we had Troy Datcher, CEO of The Parent Company on The Dime Podcast to discuss the industry and legalization.
When asked about federal legalization and how the status alters the viewpoint of the cannabis industry for large titans like Clorox, Pepsi, etc, he said:
“They’re going to acquire companies. Look, they want the benefit of owning it, but they’re not going to integrate. So, they’ll leave them on the sideline.”
He added: “I think none of them will integrate these companies into their portfolio right away.”
Why do they hesitate to integrate them into their portfolio? Is it because of the “cannabis stigma”?
On the flip side, the longer cannabis operates in a bubble, with limited licenses in key markets with massive potential, the longer the big fish continue to build their current moat without the potential fear of new, big challengers to the space.
Think about that… The way cannabis operates today, Curaleaf, Trulieve, Green Thumbs and other large MSOs are the biggest fish in the pond. Like the rockstar athletes at small private schools, they mostly compete amongst themselves with limited capacity. The markets they are expanding into are completely untapped. On day one, they are growing market share with massive upside. Some seem to believe that the leaders are working towards the greater good of the industry, while others argue that it essentially makes more business sense to work against it. For example, what may be best for the Curaleafs of the world may be counterintuitive to what is best for the cannabis industry.
When federal legalization occurs, their small private school will be sucked into the public school system with all of the biggest/strongest forces that run global empires with endless resources.
Some seem to believe that the leaders are working towards the greater good of the industry, while others argue that it essentially makes more business sense to work against it. For example, what may be best for the Curaleafs of the world may be counterintuitive to what is best for the cannabis industry.
Boris Jordan, Chairman of Curaleaf, doesn’t work for the cannabis industry. He works for the Curaleaf shareholders. Same idea applies to Kim River, Ben Kolver, etc. They likely want to improve the industry and right the wrongs of the war on drugs, but they also want to grow their moat and organization.
At the end of the day, aligning with those interests isn’t necessary. This is exactly how all other industries operate in which the CEO of a publicly-traded company doesn’t work for their respective industry. Instead, they work for the shareholders.
Do CEOs of vertically integrated cannabis companies want federal legalization? We know for certain that they want to continue to expand operations with limited competition, leveraging their advanced understanding of the industry’s nuances.
The next time that you go on Twitter to reply to one of them, as you are frustrated with their share price, or to respond to a question about federal legalization, remember they work for their shareholders and no one else.
“Does this drive shareholder value?” is likely the question that they are thinking when lobbying for a change in this industry.
Bryan Fields can be reached at @ [email protected]
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