Marijuana Business Magazine July 2018

2. Look Beyond Flower to Other Products Will the future of the marijuana industry be flowerless? Not quite, but close. In the years to come, flower will play a much smaller role in marijuana sales, as oil and infused products evolve to give consumers more choices. “Flower will always have a place, but it will diminish (as consumers) turn to what they see as ‘healthier alternatives,’” said Nicholas Vita, CEO of Columbia Care, a medical can- nabis company operating in 10 states, plus Washington DC and Puerto Rico. Vita pointed to statistics showing that four years ago, flower accounted for 69% of MJ sales but now is responsible for only 48% of sales. Cannabis industry executives believe consumers are mov- ing away from flower in favor of products that claim to offer: • Healthier delivery. • Ease of use. • Discretion. • Ease of transport. “There will always be nostalgia (for flower), but ... prod- ucts are evolving,” said Michael Gorenstein, CEO of the Cronos Group in Ontario, Canada. What’s taking flower’s place? Oil, according to Nancy Whiteman, CEO of Wana Brands, a multistate edibles company based in Boulder, Colorado. “We’re at the beginning of product innovation from oil,”Whiteman said, “but we’re lagging in research and targeting.” Driving the interest in oil is that it delivers a consistent experience. “Consistency is so important,”Whiteman said. 3. Take Steps to Prepare for Big Booze, Big Tobacco and Big Pharma Consolidation is coming to the marijuana industry, and much of it will be led by the alcohol, tobacco and pharma- ceutical industries. “They have many of the core competencies already, and they have scale,” said JJ O’Brien, vice president and general manager at Pax Era, a division of Pax Labs, a vaporizer company. But they also have different competencies, he said. Pharma, for example, brings the skills needed for produc- tion, while alcohol is good at building brands. For existing marijuana companies, surviving consolida- tion will require more than just having a license, said Gore- nstein of the Cronos Group. “The value of a license erodes very quickly – but your business can appreciate very quickly,” Gorenstein said. “A lot of the existing operators don’t evolve.There’s not a lot of value for someone to consolidate them.” Another worthwhile note: “Don’t build off the business of today. Uncover what will create value tomorrow,” Goren- stein said. And what are some keys to creating value? • Automation to cut costs. • Standardizing processes to improve efficiency and quality. • Having a business that can be easily scaled. Federal rescheduling could also usher in greater con- solidation, Vita of Columbia Care noted, and would bring major changes. “If it moves from Schedule 1 to Schedule 2, the vast major- ity (of businesses) ... will be shut down. It’s not the panacea we all hope for. The FDA will be unforgiving,”Vita said. Nicholas Vita JJ O'Brien, second from right, expects other industries will apply their expertise to the cannabis sector. 80 • Marijuana Business Magazine • July 2018