Marijuana Business Magazine March 2019

Marijuana Business Magazine | March 2019 82 JACK of all TRADES ... Nonvertically integrated retail business owners can take cues from Berkeley Patients Group. The longest-operating dispensary in the United States has developed long-lasting relationships with cultivators and product manufacturers, and it prioritizes authentic community involvement to build trust, said Sabrina Fendrick, the director of government affairs for Berkeley Patients Group, a nonvertically integrated retailer based in Berkeley, California. Both are winning strategies, she noted. Some of the dispensary’s relationships with wholesale partners date back 15 years, Fendrick said. It is imperative for businesses to forge those relationships and develop a deep understanding of local consumers, she noted. Community giveback programs are important, too. Berkeley Patients Group has sponsored events or fundraisers for the Women’s Cancer Resource Center, Berkeley Youth Alternatives, the Transgender Law Center and the Berkeley Police Department. It is also a member of the Berkeley Chamber of Commerce. The retailer also has hosted cannabis education events for seniors and medical marijuana patients and paid ancillary health-service providers to offer acupuncture, massage and other holistic treatments to customers. Those kinds of services develop deeps ties with local consumers, Fendrick said. “If you have community support and buy-in, it’s so much better for the sustainability of your business,” Fendrick said. — Joey Peña How to Get it Right with Retail Only For example, in the United States, interstate commerce or the ability to import cannabis from other countries could lead to the commoditization of marijuana, he noted. “In a totally free market where cannabis is legal and there’s interstate com- merce and international trade, cannabis is going to be grown in equatorial regions, mostly outdoors, where labor costs are low,” Dayton said. “Certainly, Canada won’t be the biggest exporter.” A brick-and-mortar retail shop could be disrupted by the state allowing di- rect-to-consumer delivery or the city or state issuing more retail licenses. “There’s always the possibility more licenses are issued, and that could disrupt your business model if you’re retail-focused,” Bachtell said. “It could dilute your presence in the market.” He also noted that if big-box retailers ever get the green light to carry cannabis— as Shoppers Drug Mart in Canada did—that could upend your marijuana retail business. OPPORTUNITIES AND CHALLENGES EXIST FOR RETAIL-ONLY BUSINESSES Only 24% of consumers say it’s important for retailers to grow their own marijuana, reports BDS Analytics, a Boulder, Colorado-based cannabis technology company. Many more consumers want a shop that is trustworthy, with a professional staff and in a good location. They also care deeply about product selection. The data illuminates opportunities and challenges for nonvertically integrated retail shops. On the one hand, it shows that vertical integration is not a purchase driver for consumers. Theoretically, a nonvertical- ly integrated retail shop could build its business around its convenient location, reliable inventory of good products and knowledgeable staff. On the other hand, the research shows that consumers prioritize consistent access to high- quality flower and edibles—something that may be more easily accomplished if a business is vertically integrated and has control over its supply chain. If a nonvertically integrated retail business curates its menu, it’s at the mercy of cultivators and product manufacturers, and it will pay a higher cost for wholesale products. Also, if consumers say location is important, retail-only company owners must prioritize where they do business, which can be complicated by a city’s zon- ing rules and made more difficult if those firms are operating with limited capital. IN THE END, DO WHAT YOU LOVE Upfront capital costs, state and local regulations and consumer trends are all important to consider when deciding whether to vertically integrate—but it’s equally important to do what you enjoy. Why cultivate if you have no interest in agriculture? What’s the point in creat- ing infused food or beverages if you don’t want to be a product manufacturer? Whether it’s done through vertical integration or specialization, it’s important to do something you love, Dayton said. “One thing people often don’t think about is what they want to do,” Dayton said. “Part of what makes business interesting is doing what you want to do. Somebody who’s starting a business should ask themselves, ‘Do I want to do it all?’ Because there are going to be winners in every sector. Usually the people who win, win because they love what they do.” Consumers who think it's important retailers grow their own marijuana Source: BDS Analytics