Squid Games of Cannabis
The house may have moved to decriminalize Marijuana on April 1st but the Squid Games of Cannabis is just getting going.
The house is only the first step. The senate is the real gate keeper and will be much more complicated to get aligned. So until that day, sacks of cash continue to be the currency of a 24 billion dollar industry. 24 Billion moved and traded without a banking and financial system. It can only last so long before the big players are let in on the game.
Meanwhile, dispensaries are a target for robberies with their sacks of cash at the end of every night. No Credit card transactions and simple things like writing checks to meet payroll or even paying taxes is overly complicated. Not to mention, the gap between large and small cannabis businesses keeps getting larger — A small business doesn't get to be large without investment or a business loan. Pressures are building up for a multitude of reasons in the industry.
A recent survey by Whitney Economics of 396 licensed cannabis companies reported that over 70 percent of respondents cited a “lack of access to banking or investment capital” as their top business challenge.
The industry will remain in fringe legitimacy, and we will watch survival of the fittest play out, where 90% percent of what ever is out there will get eaten up by competitors or get left dead in the dirt. Initially, an industry where capital was flowing in and regulation was limited, now investors are sitting back to see what happens, and margins are suddenly thinned by regulation. Cannabis businesses must figure out what they are the best at, they can no longer try to do everything or do any of it poorly. Brands are differentiating -- who will capture the minds of the consumer most effectively, and service them consistently with a product they love? Any loose players will get eliminated. But for the businesses that run efficiently and commit to a strong and singular branding lane, there will be success. The cannabis Squid Games are in what could be the final round -- who ever survives until legalization wins.
