A new niche sector within the marijuana distribution plan is developing in California: independent distribution businesses that don’t produce their very own cannabis products. Such companies – which often work as inventory clearinghouses for existing dispensaries as well as other plant-touching businesses – are a relatively new phenomenon in California.
“It has ramped up in a formal sense,” said Lauren Fraser, the founding director of the Cannabis Distribution Association (CDA), which had been established in 2016 being a wing in the California Growers Association.
The distribution sector has emerged due to changes for the state’s cannabis market that were in the works since the legislature approved a medical marijuana regulatory system in 2015.
A proverbial light went on for entrepreneurs after lawmakers approved the initial MMJ regulations in 2015, Fraser said.
“Distribution was this type of big element of the language which had been used – and they also actually experienced a license type established for this – so following that, businesses began to appear and say, ‘This is the business I’m going to pursue in this particular industry,’” she added.
We already have lots of distribution businesses focusing on shipping, marketing for your brands they carry and – depending on the company – even drying, curing and packaging of flower. The CDA, for example, now represents about 50 distribution companies, Fraser said.
“In some other industry, distribution is an important component,” said Lucas Seymour, co-founder of Old Kai, a California distributor that serves about 250 dispensaries. “Whether you’re selling neckties or beer, your distribution is crucial.
With business models focused on serving the existing market, many distributors simply serve as third-party shippers for growers, edibles makers, concentrate producers and the like.
Some distributors specialize in raw flower, selling to both dispensaries and manufacturers including concentrate producers. Others carry a wide range of products and can be a one-stop shop for retailers looking vcgtbq fill their shelves.
And a few companies, with the eye on the future, have started diversifying their services and work just with brands they’re certain will be able to obtain state licenses when California’s fully regulated MJ market launches in January.
Underneath the state’s impending system, plant-touching companies will be able to obtain distribution licenses and, thus, be spared the cost of hiring an outside party.
But many industry experts don’t feel that will lessen the necessity for third-party distributors, if only because some companies won’t want to deal with the extra work.
“If you had been to map out your complexity of all the different types of companies inside the supply chain, distribution sits in the center,” said Azam Khan, co-founder of California tech company Distru. “Because in order for flower to go from cultivators to manufacturers … you have to go through a (licensed) distributor once 2018 comes.
“These distributors are both likely to be a sales and marketing engine – especially the bigger guys – and in addition there are going to be distributors that do solely transportation,” Khan continued. “What’s likely to give distributors an advantage can also be how many other services they can do.
“We see a lot of people which are distributing that also have processing facilities. Not only can they pick up all of your plant … but they’ll dry it and cure it at their facility, in addition to bottle it up and sell it for you.”