When it comes to the business world, I always tell people that marijuana is different. Strategies that work in other industries don’t always work in the marijuana industry. There are a multitude of reasons. The consumer base for marijuana is different than other industries due to the fact that those consumers had to operate in the shadows for so long, and there’s a lot of consumer behaviors that go along with that that aren’t found in other industries. Also, whereas other industries operate according to long established rules and policies, the marijuana industry is very new and the rules and policies that govern the industry are constantly evolving. There are many other reasons that marijuana is different when it comes to business, but those are the two that I offer up the most.
This has made it hard for people that are entering the industry that don’t have a long background with marijuana. They come into the industry with their business suits, pitches, and angel investments, and they think that the sky is the limit, and there’s simply no way that they can fail in anyway. They have big plans that they will re-brand the industry, and change the way things are being done, because after all, they have succeeded in other areas of business. A lot of those business types are getting a rude awakening.
I usually offer up the State of Illinois as an example of this, because business people there thought for sure that they would knock it out of the park. After all, there would be just a limited number of medical marijuana business licenses to go around, and with such a large overall population, anyone who got a license would be rich overnight, which is why so many tried to get licenses despite such a high barrier to entry in the Illinois market. That isn’t working out to well due to the fact that the Illinois law is so limited that the patient base is not large enough to support hardly any companies, let alone well over a dozen companies.
Canada was another very promising prospect for some marijuana investors. Canada was going to move to a model where just a handful of companies supplied all of the medical marijuana for the nation’s medical marijuana patients. It seemed like a golden opportunity for some companies since Canada has such a huge population, and, in theory, the only way medical marijuana users would be able to get their meds is via one of the handful of companies. So a lot of companies went all in, largely overestimating the profit potential from running one of the national medical marijuana cultivation companies in Canada.
These investors didn’t take into account that growing quality marijuana is not easy, nor is getting it to the masses at an affordable price. Companies that were once full of certainty and optimism are now learning that the average medical marijuana consumer in Canada is not like they thought, nor is the political climate like they thought, and things are about to get even worse as more and more companies get approved to cultivate medical marijuana and the market becomes more competitive. The City of Vancouver just announced it would allow medical marijuana dispensaries, and I’m sure there will be other cities that will follow suit. Dispensaries are all over Vancouver serving patients, and there are many more patients that just continue to grow medical marijuana illegally because what they can grow is better and cheaper than what the national companies can supply.
At least one Canadian medical marijuana company is planning on laying off over five dozen of its employees, which I suspect is due to the fact that business isn’t booming quite like they had thought that it would. Although to be fair, they claim it’s for a different reason. Per Marijuana Business Daily:
Canadian medical marijuana producer and distributor Tilray said it will lay off 61 employees as the company changes up its operating model.
The move comes about a year after Tilary opened its cultivation facility in the town of Nanaimo and a day after two of its competitors announced they are merging to create a powerhouse MMJ provider.
One dispensary owner in Victoria told the Canadian Broadcasting Corp. that the layoffs aren’t surprising, as he feels cultivation companies grossly overestimated the amount of revenues they’d take in.
Tilray is one of 17 companies in Canada licensed to both cultivate and distribute MMJ, according to Health Canada’s Marihuana for Medical Purposes (MMPR) regulations. It’s owned by Privateer Holdings, a Seattle-based private equity firm that in April closed a $75 million round of financing.
Again, no one knows for sure why the company is laying off so many employees. Could it be because they are just simply changing the way they are operating, and need less people? Sure, it could definitely be possible. However, I personally think that it’s more than just coincidence that they are laying off so many employees at the same time that there is so much turmoil and moving parts in Canada’s medical marijuana industry. I think this will become a trend for most, if not all, of Canada’s national medical marijuana companies. When people can grow their own medicine, and do it better and cheaper than large corporations, many will always do so, regardless of what the laws are. They will do it for themselves as well as others that are in need of compassionate access to medical cannabis, and because it’s the noble thing to do, not because it raises profits. That’s something that every marijuana investor on the planet should consider early and often before they get into the industry.