The Green Rush: recreational cannabis industry
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An industry analysis of the recreational cannabis industry for BUAD 497 (University of Southern California Marshall School of Business).
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The Green Rush: recreational cannabis industry
- 1. THE GREEN RUSHRECREATIONAL CANNABIS INDUSTRY USC Marshall School of Business Professor Victor Bennett 22 April 2014
- 2. I. Introduction II. Industry Definition & Overview III. Five Forces IV. Business Unit Analysis: Green Temple V. Recommendation VI. Conclusion AGENDA
- 3. First legal sale of recreational cannabis in United States on New Years Day 2014 THE GREEN RUSH Amendment 64 passes in November 2012
- 4. “Money does grow on trees. It’s called the Cannabis plant.” THE INDUSTRY What will change? Recreational production and sale of cannabis in Colorado DOOBIE-DO’S
- 5. A SHIFTING INDUSTRY MEDICAL RECREATIONALNo cross-selling NON- PROFIT Certificate of Occupancy Physician recommendation required No additional taxes FOR PROFIT Separate recreational license 15% excise+10% state+ regional tax LIMITED SUPPLY FOR HIGH DEMAND PRICE FLUCTUATIONS Stabilize to further favorable conditions holds promise of growth
- 7. THREAT OF ENTRY GOVERNMENT REGULATIONS: Random background checks Application fees Licensing (Certificate of Occupancy) Deposits Total:$500,000 MEDIUM
- 8. SUPPLIER POWER Each dispensary is allotted to grow six plants per registered patient Many growers in saturated market Threat of backward integration No specialized labor skills required Until recently, banks were hesitant to finance due to illegality risks MEDIUM - LOW
- 9. BUYER POWER Anyone 21 years or older is allowed to purchase recreational cannabis Demand is high with limited supply Prices in beginning of year sales were nearly 2X price of medical cannabis Low switching costs for buyers MEDIUM
- 10. PRICE RIVALRY Limited price competition in emerging market with many undifferentiated players Priority of dispensaries is to meet the demand Price cap influenced by the black market MEDIUM
- 11. SUBSTITUTES & COMPLEMENTS Alcohol & Tobacco: Not the same “satisfaction” Differentiation in quality Co-consumption of substances LOW
- 12. GREEN TEMPLE Medical dispensary in Echo Park VALUE PROPOSITION High quality product selections & excellent customer service CUSTOMER PROFILE Patients with medical needs & young “pot heads” Weed maps rating : 4.8 out of 5 rating
- 13. A LACK OF COMPETITIVE ADVANTAGES HOW DO YOU DIFFERENTIATE? Quality of strains Art of customer service
- 14. A LACK OF COMPETITIVE ADVANTAGES ...but unable to charge higher premium prices TOP SHELF PRICE COMPARISON Charlie Sheen Indica Hybrid Green Temple $40 MedCity (High end) $45-60
- 15. RECOMMENDATION DO NOT ENTER COLORADO & STAY IN LOS ANGELES STRATEGY: GROWTH & DIFFERENTIATION Develop trust & stronger relationships with vendors + partners Maintain loyal patients with great customer service + community building Build warehouse and vertically integrate growing operations to minimize costs and offer higher quality in private strains
- 16. KNOWLEDGE IS POWER California MCLR 2014 Marijuana Control, Legalization & Revenue Act PROPOSITION D General Ballot elections November 2016 Constant state of flux...
- 17. Smoke On! Thank you for s̶m̶o̶k̶i̶n̶g̶ listening.