Interlude- “The Compleat Herbalist” 4- Herbie and his Friends Visit Great Smoky Mountains National Park

Business Cannabis Herbie National Parks Strategy

“OK, let’s continue”, says Monk. 

“First, our consultant looked at the level of concentration of the competitors in our sector.  For growers, it is high.  Labs too.  That’s good.  In our market, a few growers have over 90% market share.  That is probably good for market stability-discipline and things like lobbying the government- coordinated action and such.

For labs, a few labs have over 80% market share.  That is probably good for the same reasons as for growers.

But for dispensaries, most competitors are other small dispensaries, with only a few owned by conglomerates.  There are price wars, turf wars, lots of crazy market behavior.  So that’s bad for potential profitability.

“Now for the level of concentration of our suppliers:  For growers, it is medium.  Many are mid-sized ag companies- the same people who supply garden shops and nurseries.

For labs, it is high, which is bad.  Most are large chemical and glass manufacturers.  They bargain much of the value out of the system.

Finally, for dispensaries, it is high, which again, is bad.  With grower licenses limited in our state, growers have grown large, and small dispensaries have very little power.

As for the level of concentration of customers:  for growers, it is low but changing.  As more of retail is controlled by MSOs, they will have more relative bargaining power.  So it (potential profitability) is presently good, but that could change.

For labs, our consultant is not sure, and is still looking at this sector”.

“What’s wrong?” asks Herbie.

“It’s not always clear who the customer is- sometimes it is the grower who wants lab or processing services, but sometimes it is the dispensary.  Or rather, the MSO that owns 20 dispensaries- they are coming out with their own custom concentrates, so the market is evolving.  But the same principles apply.

And as for the dispensaries, most of their customers are individual retail purchasers, so concentration is very, very low from the perspective of potential profitability.  They have very little bargaining power if the dispensary should raise its prices. The main force against this is other dispensaries, not customers.

 

Summarizing:

Level of concentration of competitors:

 

Growers

Labs (processors)

Dispensaries

Level of concentration of competitors

High.  (Good).

High.  (Good).

Low.  (Bad). 

Level of concentration of suppliers

Medium, so, inconclusive.

High.  (Bad). 

High.  (Bad).

Level of concentration of customers.

Low, but growing. 

Uncertain

Very low, (good).

 

"So what now?" asks Herbie.  

"We leave the park and roll around in the weeds" says Astro.

"Woof": Blunt.

"Cool", says Monk.

"Let's go".


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