Avoiding a Canadian, California-style weed cluster fu*k
Pay attention Germany and New York
The early bird gets the worm – but not always in the cannabis industry. Entrepreneurs, MSOs, and LPs are jockeying to enter newly announced recreational jurisdictions like New York, Mexico, Germany and New Jersey. They should be cautious.
The travails of Canada and California’s, to name but two problematic cannabis markets, are well known. Understanding the lessons from these challenging markets can be the difference between survival & growth, and expensive failure. Below are 4 lessons:
1. Beware of FOMO. As with many new industries and capitalism itself, market hype can goad you into making rash and irresponsible investment and strategic decisions. Related to FOMO is the cult of speed. This is the assumption that being first to market is the key to success. Yet, the old adage remains true: best to market beats first to market almost every time. Upfront, it’s vital to undertake a thorough business analysis, challenge all assumptions and ensure you have good governance in place.
2. Wait for the final regulations. Announcing legalization is not the same thing as publishing the rules. It could take many months if not years for a market entrant to have the definitive regulations. And understand that these rules can change at the 11th hour. Make sure you have a local-eye view of what’s really going on and don’t make big decisions until you have regulatory clarity.
3. Avoid ‘fake it till you make it’ approaches. Cannabis pioneers underestimated the difficulty of growing standardized, compliant and quality cannabis on an industrial scale. Related to this approach is the decision to go to market with a minimum viable product, and then fixing later. While teething pains are to be expected, companies should resist the urge to enter the market with poor product. You often don’t get a second chance to make a good first brand impression.
4. Everything takes longer than expected. This includes getting final regulatory approvals, realizing product objectives, and hitting your forecasts. Many things can set back reaching your goals: the persistence of the illicit market, cultivation challenges and bureaucratic inertia. Capital reserves and safety time should be built into all plans.
Early market blunders were more about the failings of human nature (e.g., hubris and impatience) than it was about the regulations or industry dynamics. To win, having common sense, prudence and good management will be just as important as amassing cannabis expertise and capital.
#Germany #NewYork #strategy #legalization #regulations