Sage-Tips

What is marijuana vertical integration?

In short, vertical integration is when a business owns every stage of its supply chain. When someone talks about a vertically integrated cannabis company, it means they own and control the cultivation, lab and extraction, manufacturing and retail sectors of their business.

What is a vertically integrated company?

Vertical integration is a strategy that allows a company to streamline its operations by taking direct ownership of various stages of its production process rather than relying on external contractors or suppliers.

What states require vertical integration for marijuana?

Florida and Hawaii still require some level of vertical integration of medical marijuana operations. (Florida’s law is subject to an ongoing legal challenge and may be overturned this year.) Washington, on the other hand, takes a different approach with recreational marijuana: it prohibits full vertical integration.

Is vertical integration good or bad?

Well, it is both a good and bad thing. When companies use a vertical integration strategy, they may have control of critical resources that other companies need to be competitive. When there is a lack of competition, companies do not have an incentive to be competitive. This leads to increased inefficiency.

What are the disadvantages of vertical integration?

The Disadvantages of Vertical Integration

• High Capital Requirements. Vertical integration is not a viable strategy for small and medium enterprises in most cases.
• Risk of Increased Organisational Inefficiency.
• No Easy Exits.
• Lack of Familiarity.
• Reduced Flexibility in the Supply Chain.

What are risks of vertical integration?

Risks in Vertical Integration Established distribution channels may be adversely affected. Unprofitable outcome. Obsolescence due to new technologies. Higher cost due to lower volume. Unforeseen labor issues.

What is vertical integration pros and cons?

Vertical integration also allows for less flexibility, so it is difficult to reverse. In the end, you may end up losing money on your investment, and too often an acquisition mistake cannot be made profitable by working harder.

What are the pros and cons of vertical and horizontal integration?

The advantages include increasing market share, reducing competition, and creating economies of scale. Disadvantages include regulatory scrutiny, less flexibility, and the potential to destroy value rather than create it.

How does vertical integration affect the economy?

Vertical integration gives a company better economies of scale. Large companies employ economies of scale when they are able to cut costs while ramping up productions—they take advantage of their size. This increases supply, lowers fixed and variable costs per unit, and makes a product more attractive to consumers.

What are the risks and benefits of vertical integration?

What is the disadvantage of horizontal integration?

How does vertical integration affect society negatively?

Disadvantages. The biggest disadvantage of vertical integration is the expense. Companies must invest a great deal of capital to set up or buy factories. They must then keep the plants running to maintain efficiency and profit margins.

How does vertical integration work in the cannabis industry?

Once products are labeled in compliance with local state laws, products can be sold on retail or medical shelves. In some cannabis-legal states, vertical integration is mandated because it allows for better oversight of the seed-to-sale process.

Should Oregon Growers be required to integrate vertically?

While some Oregon growers integrate through retail, single license holders are common. Boyer says his group is somewhat unusual in that it has multiple licenses. He believes that degree of choice under Oregon’s system fuels free commerce and results in better product. “I don’t feel vertical integration should be mandated,” Boyer says.

What is Wild West growers’ vertical integration?

Wild West Growers could have full vertical integration under Oregon law, but the growers collective chooses to leave retail to others. The group has producers’ licenses to grow cannabis, a processing license to process edibles and extracts, and a wholesale license that allows for distribution, but it stops there.

What is vertical integration and how can it help your business?

Vertical integration allows for faster changes to product offerings. For instance, if Sour Diesel is flying off the shelves, the retail team can let the cultivators know, who can adjust the supply accordingly. Vertical integration is expensive and businesses must raise significant capital in order to do so.