What a month! Herbie, having received a license to operate a cannabis dispensary, has opened his doors and is now in business! With a sense of limitless optimism, Herbie comes to work each day with a sense of joy and purpose.
But something is nagging at Herbie. An avid reader, Herbie has been studying the industry for several months. And he is reading more and more about problems in certain markets. Big companies losing money in Canada. Dispensaries closing in Washington State. Yes, people actually losing money in the cannabis industry! How could this even be possible?
Herbie, with the help of some smart friends, pulls together some data from cannabis business publications. Focusing on Canada because of its size and national level legalization, Herbie thinks the following chart is basically accurate- that the industry is growing, but a period has arrived where people are in fact losing money, although some recent rebound has occurred.
With a sense of trepidation, Herbie goes to see his mentor, an aging college business professor who has “followed” the cannabis industry for over 50 years. Herbie’s mentor explains that, while nobody knows exactly what will happen, Herbie is witnessing fairly classical industry behavior. The mentor explains that many industries evolve along similar pathways- specifically, after a period of excitement where many people enter the industry, there is then a “reckoning”, a shakeout, frequently caused by overcapacity- too many people got in.
"But don't take my word", says the Mentor. "Al Foreman of Tuatara Capital (www.tuataracapital.com) describes a similar dynamic in the January, 2021 issue of Marijuana Business Magazine (@MJBizDaily). Mr. Foreman then describes a late 2020 "recovery" in some of the more mature markets".
Herbie wants to know, naturally, what should he do? If this stuff is “classical”, shouldn’t there be some sort of road map? If other people have faced these challenges, shouldn’t there be some experts out there? Herbie’s mentor agrees to lay out a basic landscape for Herbie- let’s call it a Market Evolution Landscape. The mentor agrees to describe the landscape, beginning with Part 2 of Herbie Goes to See His Mentor.