As the regulatory landscape for cannabis remains uncertain, particularly with the unlikely passage of safe banking measures, the American cannabis industry is poised for a significant transformation. Without access to traditional banking services, smaller, non-scaled businesses are at a distinct disadvantage. These companies struggle to secure capital, lack the efficiencies of scale, and consequently, cannot compete on price and profitability.
In contrast, larger cannabis companies such as GreenThumb Industries, Trulieve Cannabis, Verano Holdings, and Curaleaf Holdings are poised to dominate and consolidate the market. This consolidation trend is likely to create an oligopoly, where a small number of large firms control the majority of the market.
This shift towards oligopoly is not just a change in market structure; it also creates a substantial business moat for the dominant players. With their scale, these companies can achieve economies of scale, access capital more easily, and invest in infrastructure and technology to further solidify their market position.
Investors looking to capitalize on this trend should consider the long-term potential of these leading cannabis companies as they navigate the evolving regulatory environment and position themselves as key players in the emerging American cannabis market.
Yup. Look at the Canadian and Florida markets.
Canada has been legal since 2018, and the top revenue share is still dominated by the top producers that were around back then.
Florida is dominated by 4 large companies controlling about 40-50% of revenue, and this will likely consolidate over time. The California craft brands like Jungle Boys and Cookies made a splash when they first showed up, but have stalled in their growth at only 3% or so of market share.
The fallacy that many people fall into thinking is that the bewildering variety and high turnover of brands in dispensaries is indicative of a lack of market leadership, but the major producers understand this trend and most of the glut of new brands and gimmicks are actually the products of those same parent companies.