A new niche sector within the cannabis distribution plan is developing in California: independent distribution businesses that don’t produce their own cannabis products. Such companies – which often act as inventory clearinghouses for existing dispensaries along with 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 in the Cannabis Distribution Association (CDA), that was established in 2016 being a wing of the California Growers Association.
The distribution sector has emerged because of changes for 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 initial MMJ regulations in 2015, Fraser said.
“Distribution was this kind of big part of the language that was used – and they also actually had a license type established because of it – so next, businesses started to appear and say, ‘This will be the business I’m going to pursue in this industry,’” she added.
There are already lots of distribution businesses focusing on shipping, marketing for the brands they carry and – depending on the company – even the drying, curing and packaging of flower. The CDA, as an example, now represents about 50 distribution companies, Fraser said.
“In any 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 essential.
With business models centered on serving the present market, many distributors simply act as third-party shippers for growers, edibles makers, concentrate producers and so forth.
Some distributors specialize in raw flower, selling to both dispensaries and manufacturers such as concentrate producers. Others carry a wide range of products and can be quite a one-stop look for retailers looking vcgtbq fill their shelves.
And some companies, having an eye on the future, have begun diversifying their services and work simply with brands they’re certain can obtain state licenses when California’s fully regulated MJ market launches in January.
Under the state’s impending system, plant-touching companies is going to be able to obtain distribution licenses and, thus, be spared the expense of hiring a third party party.
But some industry experts don’t believe that will lessen the necessity for third-party distributors, if perhaps because some companies won’t want to handle the work.
“If that you were to map out your complexity of all of the various kinds of companies in the supply chain, distribution sits in the center,” said Azam Khan, co-founder of California tech company Distru. “Because to ensure flower to maneuver from cultivators to manufacturers … you need to go through a (licensed) distributor once 2018 comes.
“These distributors both are going to be a sales and marketing engine – particularly the bigger guys – and in addition there are gonna be distributors that do solely transportation,” Khan continued. “What’s likely to give distributors an advantage is also what other services they can do.
“We see a lot of people which are distributing that 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, in addition to bottle it up and then sell it for you personally.”