Acquisitions are leading to greater vertical integration, which is leading to greater profits
The cannabis industry continues to grow on a daily bases and things are just getting started. As the industry evolves, more acquisitions will be seen and this is going to be the catalyst for an explosion in vertical integration, which will see profits rise even more. A number of cannabis companies are already acquiring other organizations that allow them to expand their overall knowledge and skills while creating higher value chains and producing wider growth.
By pooling resources and merging different aspects of the marijuana supply chain – production, processing and distribution – companies can reduce their overhead, become more efficient and place more emphasis on quality control. It is the same formula that has already proven to be successful for a number of industries and will be just as successful for cannabis.
This “field to finish” mentality allows for companies to ensure that they are incorporating the brightest and most experienced individuals to establish a strong foundation for increasing sales. Building on proven techniques allows both the purchased company, and the purchaser, to come out on top. The merged businesses have greater scaling capabilities and access to processes not previously within their grasp, eliminating some of the gaps in their internal systems.
A few examples of this vertical integration can be seen in deals being worked between companies such as Altria, the company behind Marlboro cigarettes, and Cronos. Additionally, Anheuser-Busch is teaming up with Tilray to produce cannabis-infused beverages. In both cases, the companies can capitalize on the success and expertise of their partners to immediately have a major foothold in new markets.
