The Death of Small Cannabis Has Been Greatly Exaggerated

Though some are already proclaiming the imminent death of all or nearly all existing cannabis businesses, believing it inevitable that national legalization will lead to all of them being crushed or swallowed by big pharma, big tobacco, and/or big pharmacy chains, we vehemently disagree.

Here’s why.

A recent Bloomberg article rightly contends that it will be a long time before pharmacies and multinational companies get into the marijuana business. The article notes that these big, mostly publicly traded companies are just not going to be willing to risk their DEA registrations and national banking relationships by getting into marijuana. We agree. Our agreement is based on the simple fact that some of these companies have retained us to “discuss” or “monitor” cannabis, but all of them have made it very clear that they are not close to acting, nor will they, until there are big changes on a federal level.

It also bears noting that just last week, the Nevada Gaming Control Board held that its license holders (Nevada casinos) cannot participate in Nevada’s medical marijuana scheme until marijuana is legal under federal law. The Gaming Control Board’s rationale would hold true if/when Nevada legalizes recreational marijuana. Score that as a loss for big casinos.

And while big canna is effectively being blocked from participating in the green rush, “small canna” will be out there growing not just in individual states, but in multiple states through the use of licensing and management agreements. For one example of how cannabis businesses are going national, check out Take Your Marijuana Business Nationwide With Brand Licensing.

As small canna gets bigger and bigger, that growth will create a barrier to entry for the “bigs” when they are actually ready to jump into the industry. We are confident that by the time the “bigs” are ready to make their move, there will be dozens of well-established cannabis companies, with strong brand names and strong reputations in multiple states. If you have happily been doing business with a company for years, will you just up and leave them because Walgreens or Pfizer is now in a similar space?

We are not saying that “the bigs” will never take their place in the cannabis industry. On the contrary, we believe that they will.  But by that time, so many of the small cannabis businesses will be both experienced and large that we think their first mover advantage will give them an edge for decades to come.