Florida governor wants to eradicate vertical integration from licensed cannabis operators statewide

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Florida governor wants to eradicate vertical integration from licensed cannabis operators statewide

Bethan Rose Jenkins, Cannabis News Writer/Editorial

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Florida Governor Ron DeSantis has declared his plans to drop a predecessor pleading against the legalization of cannabis flower for medical cannabis patients.

DeSantis also has plans to eradicate vertical integration for licensed cannabis operators in the state. Rather, individually-licensed pot businesses will be given a fair chance to operate in such a way.

“The way they did this vertical integration is not [based on] free market principles,” said DeSantis.

What is a vertically-integrated cannabis company?

A vertically-integrated cannabis company oversees various aspects of the supply chain. These companies will have their fingers in many pies, so to speak. Instead of focusing specifically on retail or cultivation, the supply chain of a vertically-integrated company will be owned by that company.

By abolishing vertically integrated licenses in Florida’s cannabis market, smaller companies may benefit. More opportunities to participate in the state’s pot industry will arise for retailers, who can start selling whatever product they desire.

A cannabis industry consultant named Jade Green spoke to Forbes about the issue of vertically integrated cannabis companies in Florida.

Most cannabis states, especially those with recreational laws, are horizontally integrated, which means you must obtain a separate state license for each individual part of your business. In other words, you need one license for growing, one license for manufacturing, one license for distribution, and one license for retail,” said Green.

“Sometimes, like in California, a business can become vertically integrated by owning and operating two or more types of individual licenses at the same time. In other cases, like in Florida, the license issued by the state itself is vertically integrated, meaning the license owner automatically has the right to operate every point in the supply chain, from seed to sale,” she added.

Vertically-integrated cannabis companies in Florida may pose threat to small businesses

Green went on to explain how, when Florida first legalized medical cannabis, it integrated a “merit-based application system by which companies could apply for one of only five vertically integrated licenses to be awarded for the entire state,” adding that “the legislators did not anticipate the enormous number of lawsuits that were filed by applicants who lost out on the first round of licenses.”

The expense of vertical integration is one of the reasons why Governor Ron DeSantis has chosen to rule it out.

During his speech, he made a point of talking about how the vertical market hinders small scale cannabis business in Florida; preventing those who voted for a legal weed industry to get involved and instead, get forced out of the limelight by bigger out-of-state corporations with a wealth advantage.

Vertically-integrated cannabis companies could also benefit U.S. States

In spite of the concerns that Green may have, there are also numerous benefits associated with allowing vertical integration in statewide cannabis operations. Vertically integrated retailers can acquire products at lower prices and drive down overall costs, thus allowing states to offer cannabis for the lowest dollar.

Moreover, states with vertical integration can better control how many cannabis companies are in operation. In an evolving industry, vertical integration does undoubtedly have its perks. Companies are capable of conducting research and development (R&D) by means of vertical integration, which can also aid a company in broadening their branding and distribution sources. For long-term positioning in the cannabis industry, vertical integration certainly appeals.

Leveraging business partnerships with this method can trigger innovation in cannabis product development; something that Green may want to think about if he wants to satisfy the weed-related needs of Floridians.