The Consolidating Cannabis Industry: Don’t Panic, Pivot
Consolidation has entered the cannabis building. Sadly, most undercapitalized and dysfunctional firms will not exit this period alive and kicking. If they can’t find a healthy suitor, competitive market position and or positive cash flow, they will simply evaporate or be sold for pennies on the dollar.
Yet, failure is not pre-ordained.
Businesses that can identify greener market pastures and quickly get there will maximize their chances of winning.
A Case Study
X was a client that successfully navigated a transformation from a vertically integrated producer to an outsourced manufacturing partner.
As background, X was struggling with margin compression, a lack of capital and talent gaps. At the same time, they were low cost, consistency-driven producers with modest positive cash flow.
Fact is, the company was in a strategic ‘no man’s land’.
They wanted to profitably grow but suspected they couldn’t do it with their existing business model and competitive climate.
Sound familiar?
I was engaged to help figure out a path to long term sustainability.
After a short but intensive analytics and soul searching phase, the leaders aligned on the need to pivot away from cultivation to operating as an outsourced provider of post-harvest services, including pre roll manufacturing, for other growers (including former competitors).
Its early but so far, so good.
This budding success story, however, is really about corporate transformation: a management ‘Come to Jesus’ moment, business reengineering and change management.
Successful Transformation – The 3 Hs
We pulled off the transformation by focusing on 3 thematic areas:
❤️ Heart
- Be emotionally ready to admit your reality won’t be the 'fairy tale' you envisaged and that change is needed;
- Get your team on board with the current situation;
🧠 Head
- Identify possible high growth/high profit markets & services to rotate into;
- Do a proper business case (costs, capabilities and cash flows) to ensure you are pivoting to a better place;
💪 Hands
- Create an actionable roadmap to achieving your end state;
- Do the hard work to get there.
X is one of the lucky companies. They had some financial runway plus quality assets and transferable skills.
Don’t tarry
Most cannabis firms need to wake up to their financial situation and current market realities, which are unlikely to change through 2026.
They should start by considering a Plan B pivot.
And yes, differentiated hemp-based products are an option.
My consulting services help leadership teams solve difficult strategic, cost & organizational problems and capitalize on growth opportunities.
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