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The article below is an excerpt from the Monthly Playbook.
Letter From The Team – June 2021 Monthly Playbook
In the past, this piece has been used to discuss current events and how they’ll influence the future of the cannabinoid space. By cross-referencing conversations with industry leaders with both new and ongoing monthly trends in the
market, we identify the important nuggets of wisdom that are crucial to finding success.
This month, the Eighth team thinks it’s crucial to take a slightly different approach and focus solely on
the announcement of Trulieve’s acquisition of Harvest Health. This Florida kingpin has made waves by taking over the largest operator in Arizona in an all-stock deal, bumping its national presence from six states up to 11. Now, analysts speculate that the combined revenue of Harvest Health and Trulieve “will surpass $1.2 billion by the end of the year.”2 In other words, it will become one of the biggest operators in the game.
Trulieve’s business model
For those who are unfamiliar with Trulieve’s business model, they operate according to something called the ‘hub-and spoke’ model. Simple in concept and perfect for reaching such segmented markets with unique, state-determined obstacles, this approach leverages several regional offices, as opposed to operating in one headquartered location. Companies like Trulieve are using this approach to strategically build large-scale operational functionality right out of the gate, and while this isn’t the best approach for the companies looking to pinch pennies in the short term, the long-term benefits of immediately building solid structures in each key state are vital to continued growth.
The upfront cost involved might deter some operators, specifically those with a short-term mindset. When long-term possibilities are neglected, assets that were once built on a solid foundation begin to shatter. This is especially true when taking federal legalization into account. Trulieve CEO Kim Rivers explains it best, stating that the company “think[s] about it more as a distribution play,” and that this is the first step toward creating “national distribution models” that will “help drive efficiencies in each region.”2
Now, it’s clear that Trulieve has made a move that strategically, financially, and geographically benefits them, but the next big question revolves around the execution. How will Trulieve integrate Harvest Health into their operations?
Though the acquisition is a massive win by Rivers and her team, it isn’t a home run until all the bases are cleared. Before they can dominate, Trulieve needs to figure out how to combine the different SOPs, tech stacks, and employees, all while striving to improve upon efficiencies, as Rivers previously stated.
As the space continues to shift and consolidate, it’s important to monitor situations like these so that they may provide a model for you and your own business. This type of cannibalistic expansion will continue to occur as the industry works through its growing pains, but as always, we’ll keep you updated along the way so you can feel armed with actionable knowledge.