A new niche sector in the marijuana distribution plan is developing in California: independent distribution businesses that don’t produce their own cannabis products. Such companies – which often work as inventory clearinghouses for existing dispensaries and other plant-touching businesses – are a fairly new phenomenon in California.
“It has ramped up in a formal sense,” said Lauren Fraser, the founding director from the Cannabis Distribution Association (CDA), which had been established in 2016 as being a wing in the California Growers Association.
The distribution sector has emerged due to changes to the state’s cannabis market that have been in the works since the legislature approved a medical marijuana regulatory system in 2015.
A proverbial light continued for entrepreneurs after lawmakers approved the first MMJ regulations in 2015, Fraser said.
“Distribution was this kind of big element of the language which had been used – and they actually enjoyed a license type established because of it – so next, businesses began to appear and say, ‘This is definitely the business I’m likely to pursue in this particular industry,’” she added.
We already have a large number of distribution businesses specializing in shipping, marketing for your brands they carry and – depending on the company – even drying, curing and packaging of flower. The CDA, for instance, now represents about 50 distribution companies, Fraser said.
“In every other industry, distribution is an important component,” said Lucas Seymour, co-founding father 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 dedicated to serving the current market, many distributors simply work as third-party shippers for growers, edibles makers, concentrate producers and the like.
Some distributors focus on 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 some companies, with the eye on the future, have started diversifying their services and work only with brands they’re certain should be able to obtain state licenses when California’s fully regulated MJ market launches in January.
Beneath the state’s impending system, plant-touching companies will likely be able to obtain distribution licenses and, thus, be spared the cost of hiring an outside party.
However, many industry experts don’t think that will lessen the need for third-party distributors, if only because some companies won’t want to handle the work.
“If you were to map out the complexity of all of the several types of companies in the supply chain, distribution sits in the center,” said Azam Khan, co-founder of California tech company Distru. “Because in order for flower to maneuver from cultivators to manufacturers … you have to go through a (licensed) distributor once 2018 comes.
“These distributors are generally 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 planning to give distributors an advantage is additionally how many other services they can do.
“We see many people which can be distributing which also have processing facilities. Not only will they pick up all of your plant … but they’ll dry it and cure it at their facility, along with bottle it then sell it to suit your needs.”