As cannabis markets mature, licenses have diverged from the standard cultivator-processor-retailer supply chain to a variety of types and roles within the growing industry, including wholesalers, storage facilities, research & development, event organizers, and more.
Wholesalers and Brokers
Wholesalers, also known as Brokers, or Distributors (not to be confused with Distributor licenses that meet only the definition of a Transporter) purchase and market cannabis products for resale to retail licensees from Cultivators and Manufacturers.
Varying in presence from state to state, the brokerage license type is generally very new. While legacy markets like alcohol have thrived under distributor-based sales, the cannabis industry has been slower to adopt this license type. Given the tight margins associated with buying and reselling cannabis products at a wholesale level, it’s understandable that few opportunities have arisen for cannabis wholesalers. That said, the cannabis market has ample space for brokers to grow into a role as tastemakers and major market players, and this license type is likely to grow in importance as legal barriers continue to diminish for broader wholesaler operations.
Storage
Storage licensees store cannabis and cannabis products on behalf of Cultivators, Manufacturers, Testing Laboratories, retail licensees and/or other licensees. While it can be difficult to see the utility of this license type, recall that Cultivators and Manufacturers face significant backlogs of products on QA hold pending analytical testing. This product is taking up valuable warehouse space that could be used for revenue generating operations. This dynamic creates portunities to use licensed storage sites to offer major value adds to transporters, analytical laboratories, and others in the form of off-site storage/fulfillment programs, genetics and sample storage, and other innovative business models. Notably, many existing transporters can store cannabis products for a specified period under their current license type, so logistics as a value add goes beyond an independent license.
R&D
Research and Development licensees, also known as Research Laboratories, develop cannabis products and conduct cutting-edge research on behalf of Cultivators and Manufacturers. Innovations in cannabis products have historically happened in-house, but as the market grows and matures, scale and efficiency are typically the first priority. After all, the capital, time, space, and effort required to pursue R&D can be immense. Often overlooked, the facilities and personnel best equipped to conduct process development and test production-readiness of a formula are often radically different from those needed to research and develop new formulations. Even the business philosophies that underpin these two endeavors are different. As such, most businesses do not have the resources to fully develop all three business units in-house.
As a consequence, opportunities abound for third-party R&D licensees providing advanced scientific and engineering services across a number of specialized roles, including biochemical research and process development. R&D licensees are able to remove the uncertainty of these projects for producers and maintain the specialized facilities, equipment, and expertise necessary to ensure operators of various sizes remain competitive as tastes and markets evolve.
Event Organizers
Event Organizers are authorized to put on events where cannabis products may be consumed and/or sold. The required licenses vary widely across states, from individual event permits to broader licenses that allow a venue to undertake these activities indefinitely, closely related to the consumption lounge license type. Often cannabis products must be provided by a licensed vendor on site or be privately sourced by event attendees, so event coordinator licensees are able to operate with little cannabis-based overhead beyond licensure and permitting (some jurisdictions do require or offer both). In some places, event coordinator licenses take the form of a venue license, authorizing the licensee to invite other licensed vendors to the location. In others, it is a means to providing cannabis at private events, like weddings, without a fixed venue. Depending on the form these license types take in each state, the pressures associated with operating as a cannabis event coordinator vary from finding and developing cannabis-friendly venues to drawing clientele through cross-promotions and maintaining a full schedule of private business.
Conclusion
Though all of these licenses are designed to fill specific, and often unexplored niches within the cannabis industry, all are likely to play a significant role as the industry matures. Fire Business Strategies can help your business explore emerging opportunities across a variety of verticals.
