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April 12, 2019 | by Cannavida

From Seedling to Packaging: How Vertical Integration Creates Higher Quality Cannabis

Take a moment to think about the purchases you’ve made in the last month. Do you know where your groceries were grown, harvested, processed, and packaged? How about who made the clothes you’re wearing? Or, to go back even further, what farm grew and harvested the fabrics used to make your clothes? Odds are pretty good that unless you’re shopping exclusively at co-ops and farmer’s markets, most places you go practice horizontal integration. 

In horizontal integration, the retailer and the manufacturer of different products are distinct entities. Lael Henterly explains in her article: “When you select a perfect peach at your local grocery store, it’s a safe bet that the shop owner didn’t grow or harvest it. When you buy a tube of name brand toothpaste from the drug store, it probably wasn’t made by the retailer, and when you upgrade to the latest iPhone, it wasn’t manufactured by your service provider.” 

Let’s stick with one example for a moment. In horizontal integration, if the owner of a fruit market decides to expand their business, they don’t go out and buy an orchard. They purchase or acquire another fruit market. 

Vertical integration means a company controls two or more steps in the production path

Now consider the same situation, but the owner of the fruit market decides to integrate vertically. They want more control over the quality and variety of fruit they sell, so they purchase an orchard. They buy a packaging plant to process, package, and distribute the fruit they grow. They sell what they produce. When customers have questions, the market’s employees know exactly where their fruit came from, how it was grown and processed, and when it arrived on their shelves. 

As a vertically-integrated cannabis company, CannaVida proudly offers the same level of transparency and authenticity to our customers. The Cannabis Law Journal defines vertical integration as “a business strategy by which a company controls every stage of a single production path.” In other words, the same company grows, processes, and sells the product.  

Vertical integration provides unique advantages

In a recent article for The Cannabis Law Journal, corporate cannabis lawyer Anne van Leynseele writes that the benefits of vertical integration include “lower transactional costs, strict control over quality, reliability with respect to supply, and increased market control.” Because we’re in control, from growth to retail, we’re able to guarantee fresh, high-quality products. 

Even more important than cutting costs internally (savings we’re able to pass along to our customer base), vertical integration helps us build strong connections with our customers. Because we truly believe in our products, we’re able to grow a like-minded community, not just sell a product. Some of the top benefits we’ve identified include connecting consumers and growers, higher quality and safety, and greater transparency in our growth and production methods. 

Creating an experience, not just selling a product

Compare walking into your local Apple store, and browsing at Best Buy. Sure, you can get a Mac computer at either location. But when you walk into an Apple store, you know you’re getting a unique buying experience. According to Forbes, “[Apple] transforms its products into experiences and delivers those product experiences through a new kind of retailing model that elevates the Apple Stores from a place to buy things into a destination to have meaningful, important experiences.”

We believe in the power of experience. Whenever you walk into a CannaVida dispensary, you’re entering a space designed for you. Chat with one of our experienced budtenders, browse our digital catalog, or take the time to interact with our display pods. Everyone on the CannaVida team, from cultivators to budtenders, are committed to the same mission: creating a one-of-a-kind customer service experience. 

“Vertical integration makes complete sense for a company that innovates by dramatically changing the customer’s experience.” writes Rita Gunther McGrath of the Harvard Business Review. “Why? Because a customer-experience-innovation strategy depends on creating experiences that are easy, seamless, affordable, and, if possible, more pleasant than alternatives.” 

Direct contact with consumers drives innovation in growing

This same contact between consumers and growers can spur innovation in the growing facility and lead to more responsive inventories. “For example,” Joey Peña writes for Marijuana Business Magazine, “if a vertically integrated business sees retail sales increase for its Bubba Kush strain, that information can quickly be relayed to the cultivators, who can grow more for the next harvest.” Vertically-integrated dispensaries are better able to track popular products and ensure supply meets demand. 

If there’s demand for a product that doesn’t exist yet, cultivators can take that feedback to the drawing board. Every year, we’re dreaming up new hybrids to meet customers’ needs. Because our retailers connect directly with our growers, we’ve cut out the middlemen and empowered innovation. 

“Vertical integration allows for quick reaction to market conditions whether that is developing new products, servicing new clients or expanding distribution channels,” says Craig Goodwin, President and Founder of Hemp-based health foods company Naturally Splendid Enterprises.

More control over the quality and safety of products

To understand the potential quality and safety benefits of vertical integration, look no further than Caliva, one of California’s top marijuana dispensaries. In their on-site nursery, which produces 50-60% of the dispensary’s total flower, growers cut plants to create genetic clones, ensuring consistent quality between harvests. 

“When relying on third parties, there’s always the risk of potential contamination from their side of the operation.” writes Joseph Keller in his article for Cannabis Investing News. “Through vertical integration, companies can monitor every aspect of product development, applying their quality standards universally without having to worry that a third party might not have standards equally as stringent as its own.”

Quality control and strict safety adherence are critical, especially in the early stages of legalization and market expansion. Cannabis companies are under intense scrutiny right now, as more and more states legalize recreational use.

Better traceability and shorter supply chains

The food industry has already witnessed an enormous push towards greater transparency, traceability, and sustainability. In recent years, farm-to-table movements have gained momentum as consumers become more concerned with where their food comes from and how it is grown. What do these movements often require? Vertical integration. 

Shoreline Fruit, a vertically-integrated North American cherry supplier claims, “Vertical integration removes the steps and mystery between the farm and the final product. This creates a simpler supply chain that creates a direct connection all the way back to the farm.” When the same company grows, produces, packages, and sells your product, we can create a system that wastes less material and energy every step of the way.

As the market continues to expand, cannabis as an industry will shift dramatically

We can’t foresee exactly how the market and industry will change as more states consider legalizing recreational products. What we do know is that we’ve built our company on the quality control, responsiveness, and cultivator-consumer connection that vertical integration provides.

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