A new niche sector within the marijuana distribution plan is developing in California: independent distribution firms 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 relatively 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 was established in 2016 as a wing from the California Growers Association.
The distribution sector has emerged as a result of changes for the state’s cannabis market which have been inside the works because the legislature approved a medical marijuana regulatory system in 2015.
A proverbial light continued for entrepreneurs after lawmakers approved the primary MMJ regulations in 2015, Fraser said.
“Distribution was such a big component of the language which had been used – and they also actually had a license type established for this – so following that, businesses begun to appear and say, ‘This will be the business I’m planning to pursue in this industry,’” she added.
There are already a large number of distribution businesses specializing in shipping, marketing for that brands they carry and – depending on the company – including the drying, curing and packaging of flower. The CDA, as an example, now represents about 50 distribution companies, Fraser said.
“In some other industry, distribution is an important component,” said Lucas Seymour, co-founder 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 current market, many distributors simply serve as third-party shippers for growers, edibles makers, concentrate producers and the like.
Some distributors specialize in raw flower, selling to both dispensaries and manufacturers like concentrate producers. Others carry an array of products and can be quite a one-stop look for retailers looking vcgtbq fill their shelves.
And a few companies, with an eye on the future, have begun diversifying their services and work simply with brands they’re certain will 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 be allowed to obtain distribution licenses and, thus, be spared the fee for hiring some other party.
But some skilled professionals don’t think that will lessen the requirement for third-party distributors, only if because some companies won’t want to handle the work.
“If you were to map the complexity of all of the various kinds of companies inside the supply chain, distribution sits on the center,” said Azam Khan, co-founder of California tech company Distru. “Because in order for flower to go from cultivators to manufacturers … you need to proceed through a (licensed) distributor once 2018 comes.
“These distributors are generally going to be a sales and marketing engine – especially the bigger guys – and additionally, there are going to be distributors which do solely transportation,” Khan continued. “What’s going to give distributors an advantage can also be what other services they could do.
“We see a lot of people that are distributing which also have processing facilities. Not only can they get your whole plant … but they’ll dry it and cure it at their facility, in addition to bottle it up then sell it to suit your needs.”