The Crumbling Business of Marijuana

About this Video

• Video Title: The Crumbling Business of Marijuana
• Channel: Modern MBA
• Speakers: Noelle (Mecca Mid City owner), Jay (ERBA owner), Bobby & Nick (HERB owners)
• Duration: 53:57

Introduction

This Modern MBA Original documentary explores the challenges and unexpected successes within the cannabis industry. While large corporations have struggled with losses and commoditization, smaller, independent businesses have found ways to thrive in even the most competitive markets, like Los Angeles. The video analyzes the macro and micro levels of the industry to understand the factors contributing to its current state and the strategies employed by successful independent operators.

Key Takeaways

• The Green Rush is over: The initial boom in the cannabis industry following legalization in several US states has subsided. Large corporations, driven by venture capital and aiming for rapid growth, have largely failed to turn a profit.
• Commoditization and price competition: The market has become saturated, leading to intense price competition and declining profit margins for large companies. Branding has not proven to be a successful differentiator.
• High taxation and the black market: High taxes on legal cannabis in California, coupled with the complexities of the tax system, have driven many consumers to the black market, which offers significantly lower prices. This has negatively impacted tax revenue and the viability of legal businesses.
• Independent success through adaptation: Smaller, independent businesses like Mecca, ERBA, and HERB have survived by adapting their strategies. These include vertical integration (controlling the entire supply chain), focusing on customer service, offering a unique marketplace model, and emphasizing quality and value.
• Policy failures: The video suggests that the struggles of the legal cannabis industry are partly due to flawed policies, specifically the high tax rates and lack of federal legalization.