Vertical Integration: Blessing or Curse?

When California regulations came out late last year the opportunity presented itself for cannabis companies to acquire multiple licenses, thereby enabling a strategy of vertical integration. As cannabis entrepreneurs went through the licensing process they had to decide how many licenses to apply for and determine how their corporate strategy would evolve with these new opportunities. As they evaluated the prospects many were keen to pursue vertical integration as it provided increased revenue, improved profit margins and the ability to control one’s destiny.

On the face of it this seems logical. But here we are nine months later and what was thought to be a blessing is turning out to be a curse. Vertical integration is a complex and costly business strategy and entrepreneurs have consistently underestimated the requirements to succeed, particularly in an industry built on the shifting sands of regulation. At the center of this predicament lie two interrelated concepts: Domain Expertise and Scale.

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