Leading a multi-state cannabis operation can feel like opening a large box of crayons to color an empty page. The challenges—medical, scientific, social, and economic—are exhilaratingly boundless. Yet, providing legal cannabis products in thirty-three U.S. states also comes with a never-ending list of complexities. Throw in a morass of state and pending federal regulations, and it gets a lot harder to draw the picture you want.
Trying to find a home for dispensaries, manufacturing, and processing facilities might as well be called “zoning management.” Buried in the fine print of state laws is a long list of places cannabis operations are not welcome. In many states, only a handful of municipalities welcome dispensaries. Then, within those set regions exists a location-specific set of zoning regulations such as distance from schools, places of worship, or even competitors. This makes the “pool” of real estate opportunities more of a “puddle,” sometimes forcing companies to take what they can get. Even office space developers remain squeamish about housing cannabis headquarters—a space where no product is stored. Smelling an opportunity, landlords have grown savvy knowing the demand is high, leaving very little competitive advantage for cannabis clients.
A smart move is to partner with well-established local real estate firms that possess extensive knowledge of their regions. Together, you can create a heat map to find the right locations and even locate competitors. Buoyed by a long list of backup properties, it’s easier to negotiate favorable terms. This efficient system relies on the strength of teamwork, so it’s critical to pick the right partners who will not leave you on the field.
Distribution and scale
We face a tremendous number of constraints to distribute legal cannabis from where it is processed to where it is sold. Only a handful of people can touch the product, and often each delivery van must be equipped with advanced security cameras and other precautionary measures. The federal government prohibits transporting product across state lines. Tracking deliveries to ensure they adhere to every law for total custody and control demands huge investments in information technology equipment.
Given cannabis’s runaway popularity, companies might be tempted to throw together distribution platforms hastily in an effort to get product to market, but that’s missing the big picture. Today’s fragmented market is temporary. Building a business for the future means keeping an eye on what a national legalized scenario may look like. Believe it or not, we could learn a lot from how the black and gray markets have adapted technology. For example, many have developed apps to stay on top of real-time demand and dedicated a fleet of bicycle messengers to get customers what they want when they want it.
As pioneers of legal cannabis, we owe it to the industry to be better than illegal players. One way is to carefully develop a comprehensive, fully integrated technological infrastructure to efficiently deliver legal products anywhere. That’s going to mean investing capital in things like cloud services, design, and systems to track supplies, but those investments ensure products get to where they need to be now and will continue to do so as the industry grows and evolves.
Safety and quality are of the utmost importance to ensure customers know exactly what they’re getting. Each state requires testing, and each has state-run labs that will do the work for free. But the test regulations, while extremely important, can have long turnaround times that can hurt business.
For a low cost per batch, we have products tested by independent labs, which must comply with the same state testing regulations, in as many states as possible to deliver products to retailers or clinics quickly. But that expense can be a big one for companies just entering the market. My advice: Spend the money if at all possible. What you spend in testing, you’ll make up for with a steady stream of product.
In the end, success means driving a highly efficient and effective operations strategy that will result in the safest, highest-quality products delivered to those we serve. Whether they’re in California or Massachusetts, medical patients and adult-use consumers expect a positive and restorative experience.
As the greatest leader I have had the pleasure to work with, General Electric Chief Executive Officer Jack Welch, taught me: Whether it’s investing a little extra to deliver better quality products and services, or founding partnerships on mutual respect, businesses will only flourish when you plant deep roots and nourish them well.
Bob Daino is chief operating officer for Acreage Holdings. Previously, he served as chief executive officer at Terradiol, president and CEO at Promergent, and president and CEO at WCNY Public Media, where he parlayed a unique business model into engagement in all 50 U.S. sates and seventeen foreign countries. He also spent thirteen years in senior management roles at General Electric Company.