Meet Some of the Brave Companies Building Cannabis Retail Chains
Despite considerable obstacles imposed by operating in a quasi-legal market, the current retail chain landscape is being populated state-by-state and one store at a time.
Sale of legal cannabis is a rare moment in retail history. It’s not often a prohibited substance makes the transition from backstreets to Main Street, but that’s exactly what’s taking place—and on a revolutionary, global scale.
For cannabis companies hoping to build retail chain empires in the United States, the revolution is happening s-l-o-w-l-y. Continued federal prohibition and complicated state and local regulatory schemes present considerable obstacles for setting up one store, much less operating a hundred dispensaries across several states or a geographic region.
“I think the uncertainty makes life more difficult, whether it be banking or retail, real estate, and finding investors,” said CURE Chief Operations Officer Ryan Smith. “The analogy I use is cannabis is a normal business, just like any other business, except everything’s got a twist associated with it. Banking’s more difficult. The regulatory environment is significantly more difficult than any other business I had been in previous to being in cannabis.
“I look at the respective regulations in each state probably a couple times a week to understand exactly how each state’s implementing the regulatory infrastructure,” he continued. “I probably spend 10 to 15 percent of my time on regulatory or regulatory-related items, whereas in my life before cannabis, I think it was about 0.1 percent of my time, and typically on [human-resources]-related items.”
CURE operates one medical-and-retail location in Denver and three dispensaries in Pennsylvania, where licensing is limited to medical marijuana sales. All four shops focus on vape supplies, oil capsules, concentrates, tinctures, and topicals, as well as specialized patient care, services, and education. In Colorado, where recreational use is legal, CURE also offers top-shelf flower in proprietary and curated strains.
Ending prohibition would simplify many key aspects of doing business, Smith said, but legalization wouldn’t necessarily make regulatory compliance any less complex.
“I think the business itself, the inherent complexity in the business, would go down,” he speculated. “The number of players, I think, would go up, and the availability of capital and interest from folks who have decided to stay on the sidelines in the U.S.—whether that be the alcohol industry, the tobacco industry, the pharma industry, or real estate—just other companies that might be interested in the space. They’ll be likely to start to enter the space, whether that is through applications or acquisitions.
“My guess is most of those companies would do it through acquisitions, because they want to be able to capture a certain percentage of the market share quickly. The only way to do that, especially in limited licensing markets, is to acquire existing operators,” he added.
Many market experts and pundits also expect the federal regulatory scheme for cannabis to resemble beverage alcohol’s when cannabis is removed from the Controlled Substances Act’s Schedule I. However, the added complexity of operating vertical businesses creates a multi-layered labyrinth of standards and requirements from which only the most strategically positioned and well-funded are likely to emerge as cannabis retailing giants.
“It’s as if Coors owned the fields, grew the wheat and barley and hops, owned the breweries, owned the transportation to the processors, to their third-party, to their bottling company, and then also owned the liquor stores,” Smith explained. “That would be the equivalent, right? So that’s the nature of this business, right? For example, in some places, we own that whole chain, and lots of other companies do. It’s not like we’re anything special… But there are very few, if any, other industries where you’re really controlling the entire vertical supply chain.”
Despite considerable obstacles imposed by operating in a quasi-legal market, the current retail chain landscape is being populated state-by-state and one store at a time. Some cannabis corporations are accumulating licenses in multiple categories and states in pursuit of wide expansion. Other chain retailers choose to target regionally, offering proprietary and third-party vendor products at multiple retail locations serving major cities or metropolitan areas.
Published: April 01, 2019
Founder & Interim Editor of L.A. Cannabis News