A new niche sector within the marijuana transportation plan is developing in California: independent distribution firms that don’t produce their own cannabis products. Such companies – which often act as inventory clearinghouses for existing dispensaries as well as other plant-touching businesses – are a relatively new phenomenon in California.
“It has ramped up in a formal sense,” said Lauren Fraser, the founding director in the Cannabis Distribution Association (CDA), which had been established in 2016 being a wing in the California Growers Association.
The distribution sector has emerged because of changes for the state’s cannabis market that have been within the works considering that 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 element of the language which had been used – plus they actually experienced a license type established for this – so after that, businesses started to appear and say, ‘This is definitely the business I’m going to pursue in this particular industry,’” she added.
There are already dozens of distribution businesses focusing on shipping, marketing for that brands they carry and – depending on the company – even 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 focused on serving the existing market, many distributors simply work as third-party shippers for growers, edibles makers, concentrate producers and so on.
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 a few companies, having an eye on the future, have started diversifying their services and work only with brands they’re certain will be able to obtain state licenses when California’s fully regulated MJ market launches in January.
Underneath the state’s impending system, plant-touching companies will be allowed to obtain distribution licenses and, thus, be spared the cost of hiring a third party party.
However, many industry experts don’t think that will lessen the necessity for third-party distributors, if perhaps because some companies won’t want to handle the extra work.
“If you had been to map out your complexity of all the different 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 go from cultivators to manufacturers … you must go through a (licensed) distributor once 2018 comes.
“These distributors both are going to be a sales and marketing engine – especially the bigger guys – and in addition there are gonna be distributors that do solely transportation,” Khan continued. “What’s planning to give distributors a good edge can also be what other services they are able to do.
“We see lots of people which can be distributing that also have processing facilities. Not only can 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 for you personally.”