No micro is an island
May 21, 2021 By David Brown
Micro cannabis licence categories opened up in 2018 and have since seen an enormous amount of growth in Canada.
More micro licences have been submitted and approved since legalization than standard licences, and several dozen of these micros have already found a way to reach retail shelves in various provinces, as well as through the medical cannabis framework.
Once approved, however, one of the challenges many new licence holders face is getting their product into consumer supply chains. Because cultivators of any size, micro or standard, are required to have a processing licence, as well as the appropriate sales licensing for those products, this can create a bottleneck in reaching the consumer market. This is especially true for licence holders who may not have been fully aware of all of these steps.
Processors with the appropriate sales licences then have to enter into sales agreements with the provinces and territories to sell into their respective markets – taking on additional product and/or recall insurance, supply agreements, etc. – all while waiting on receiving any payment.
What this means is that for most microcultivators, they will need to build partnerships with other processors and distributors in the cannabis industry. This isn’t necessarily limiting. Vertical integration in any industry can be expensive and onerous, and supply chain partnerships are not uncommon.
For the cannabis microcultivator (or standard), what this means is if they want to just focus on cultivation, they can without having to pay to build out and manage the processing and/or distribution side of things.
This is similar to those who are only getting a microprocessing licence (or standard). They can focus on the type of processing they are interested in without having to deal with the challenges of growing, if they don’t want to. And of course, for those who want to do both, they can still hold both of these licences at the same time.
This is why building relationships and partnerships is so key to the future of micro cannabis cultivators and processors. The ability to manage cultivation, processing and sales into the provinces can be challenging and costly. The micros who are currently on retail and medical shelves across Canada have done so by developing and maintaining these relationships.
This allows them to focus on what they do well, be it growing, extracting, making small-batch edibles or topicals, etc., while outsourcing other aspects of the supply chain they are not as experienced or interested in.
The process of building these relationships will take time though. Start the process even before you apply for a licence.
Talking to others who have already gone through the process should be one of the first steps toward understanding your place in the industry. Don’t remake the wheel. Learn from others who have put the blood, sweat and tears into this process and learn from their mistakes and successes.
Once you have begun the licensing process, continue to build these relationships. If you’re a small microcultivator who wants to only sell dried flower into the market, find those processors who are focused on this kind of packaging and reselling and find the right fit(s) for you.
It’s the same if you’re interested in supplying for the extracts market or edibles market. The difference between a mutually beneficial relationship with a partner who shares your values can make it a much easier experience for everyone involved, ensure you can focus on what you love to do, and let others take care of the other steps.
No human is an island and most people aren’t interested in doing everything themselves. Building a network of partnerships to succeed in a business will be vital to the growth and future success of the nearly 200 micros already licensed, and the many, many more to come.
While not all are seeking third-party partnerships for sales or distribution, many are. And as this number continues to increase, it will continue to provide more options and more leverage for those seeking to build these kinds of relationships.
Note: At the time of writing this article, there were 363 processing licences in Canada, both micro and standard. There are also 186 dried/fresh sales licences, 144 extract sales licences, 139 edibles sales licences, and 138 topicals sales licences.
Of these, 150 are microcultivation licences, 42 are microprocessing and two of these micros currently have a product sales licence. Several other micros are currently in the process of getting their own sales licences as well.
David Brown is the founder of StratCann, a cannabis industry publication with a special focus on micros and nurseries. Prior to StratCann, David was a senior policy advisor to Health Canada’s cannabis branch from 2018 to 2020.
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