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Inefficiency is one of the biggest problems I see in the cannabis industry today. One major consequence of the rapid expansion of the cannabis industry is that companies had to scale so quickly to meet market demand that efficiency was often an afterthought. In the early days in Colorado vertical integration was a huge asset because it allowed companies to maximize their profit margin and grow quickly, essentially as fast as they could produce product and sell it. The need for warm bodies to expand the ranks of a business often outpaced the number of qualified candidates available, with long-lasting consequences to the organization.

As companies rapidly expanded, small inefficiencies were overlooked for the sake of progress–or due to lack of knowledge–and eventually these grew in magnitude and number. As basic best practices began to emerge, companies just entering the marketplace were able to draw on a more reliable knowledge base than those that entered the marketplace earlier and avoid some of the more costly mistakes. This, coupled with the leveling-off of demand, have created a situation where vertical integration is a liability if the company is inefficient. The same scale that allowed some companies to dominate the market early on has hamstrung some of these same companies as more agile producers gain competitive advantage.

The high market price of the early days allowed many companies to operate extremely inefficiently and still be profitable, but those days are over. In today’s more mature market the consumer is savvier, the competition is fiercer, and the regulations are tighter. The successful modern cannabis operator must make efficiency a priority from the start, and the way to do this is by developing a business framework that is based on established best practices rather than regulatory constraints. The real leaders emerging now are those that can accurately track cost, quality, and productivity across their organizations, allowing them to produce superior product while keeping costs to a minimum. This proactive approach allows companies the flexibility to allocate resources to new challenges as they arise, rather than face the business continuity issues and reallocation of resources that a more reactive approach creates.

In Colorado the wholesale price of cannabis has dropped below the cost of production for many operators, and these same operators are having to sell at a loss to move inventory and pay their costs, feeding the price collapse further. I have talked to multiple operators over the years who could not tell me what it cost them to produce a pound of cannabis. If an operator is already on the edge of profitability a sudden change in regulations, a product recall, or even a few batches that fail testing could put them under. The most important part of building any structure is the foundation, and NCRPS provides a complete framework for cannabis businesses that draws on the decades of experience we possess in the fields of risk management, cannabis R&D, large-scale cultivation, plant pathology, product safety, environmental site assessment, compliance, finance, and more.

Author:
Andrew Hatch
Director of Product Safety

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