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I’ve been building out a Value Chain for the cannabis industry.
If you’re not familiar with a value chain, think of them as a road map for business.
While they are good for classifying individual business units (a thrill a minute), value chains are really good for identifying the components of a business where a company might need specialized talent or leadership, defining natural ‘subunits’ or natural divisions within the business, where challenges in delivering profits might be, and where it might have gone horribly wrong when the trustees move in.
Subunits are sometimes referred to as ‘silos’ in companies where empire building is a reward until itself. Yes, we’re looking at you Mr. Local Utility <narrows eyes, looks at magnet on fridge>.
One of the best features of a value chain is that it can help an investor pinpoint exactly where you think a money shot might be. Are they lowest cost? Best branding? Fastest to market? Producer or processor? Everything to everybody?
A value chain of ‘agriculture’ is typically in mature industries. Think baking, or coffee roasters.
Dope’s as new as everything old is new again can be.
Yes, the product is new (legally anyhow), but it’s a commodity. It’s relatively homogeneous, it’s fast growing, it’s replicable, and it’s fungible.
This is about constructing a value chain of a producer growing a replicable living stock, selling it, and getting money in exchange for doing it. Whether the plant is sold as is, transmuted into concentrates, branded by Dr. Dre, or sold to me by Loblaws – don’t care. It’s a plant. It’s an ag.
I know there’s some folks around who don’t believe cannabis is a commodity. This isn’t the place to argue that. From here on, it isn’t. If you’ve got problems with that, either stop reading, pm me, or create a discussion to debate. All good.
Here is a simplified, ‘Dick & Jane’ of the chain I’m creating.
It’ll be morphing through time as we dissect, expand, refine, and illuminate what makes up each of the components.
To kick this off – let’s start with genetics.
Also known as ‘feedstock’, this is where the prize bulls come from. The golden goose. The alpha, and the omega. Where the marketing guys can sell sizzle and drop the steak….. where the lab guys and breeders will lay claim to greatness…. it’s what entire franchises are built upon. Think Wendy’s versus Burger King.
Genetics are at the core of dope. And every companies’ ‘special blend of herbs and spices’.
It also…..sadly….currently sits in the darkest corner of the room with a bag over it’s head, and told not to talk to anyone.
Live plant genetics are unlawful for importation into Canada. No, it’s not ‘illegal’. That is a term not known to Canadian law, it’s a term imported from the US. In Canada, the Criminal Code refers to things being ‘lawful’, or ‘unlawful’. Just because CSI: Flavour Of The Moment repeats it alot, it isn’t true.
In the US, ‘breaking the law’ either lands you a charge of a misdemeanour, or a felony. One’s crappy, one’s a whole lot crappier if you’re charged with it. In Canada, depending on exactly how hard you broke the law, it’s either a ‘summary offence’, or an ‘indictable offence’. Same distinction.
Enough law shit for now. The point being is that it is an offence under Canadian Law to import live marijuana plants.
Seeds are a different story. That’s why many people from around the world can buy 5 packs of seeds from legacy seedbanks like The Greenhouse, Barney’s Farm, or one of a gazillion others offering an amazing smoke that’s better then their competitors.
About 15 years ago, The Greenhouse launched a video series, professionally produced, that promised to scour the world in search of the best land race and heirloom genetics. Called ‘The Strain Hunters’, it’s actually on fucking HBO now. I remember trying to spoof my ip to avoid linking it with dope. This stigma is changing. What a beautiful change.
So, how do companies in Canada source raw materials?
If you’re like FIRE, you do a deal with a seedbank (corrected link) You buy seeds from them, create mothers under licensing (or ‘bearer plants’ for the correct term. Our very own u/CytochromeP4 is light years ahead of me here, he’ll be bringing this up in the only place you can find it – which is here), and off to the races you go.
Other outfits like Canopy buy their seeds from somebody they won’t mention, in an alley they won’t name, and take it in as one of their ’secret recipe of 11 herbs and spices’. It’s become IP now. And they’ll hold close to it.
Tastes change in dope. Years back, NYC Diesel was the rage, Blueberry was still a fruit, and Girl Scout Cookies (arguably the most successful commercial strain of the past 2 years) wasn’t even known. Blue, white, orange. Families of product segmentation were being developed in the black market by breeders trying to get rich, and breed trying.
Now, legal money is coming in.
The Greenhouse is the single largest seedbank in the world…they have an ‘ark’, filled with extensive holdings of sourced landraces, and their own breeding program that’s been in place for decades. It’s privately held, & Arjan (one of the owners) is worth billions. If dope goes legal globally, he’s your next Elon Musk.
Whether companies in Canada ‘buy’ or ‘build’ out their genetic suite, they’ll need to chase fashions. Innovate. Create, rebrand, or do something to promote their ‘Fall 2020’ collection.
Other companies might just be happy to offer you the Jack Daniels or PBR of the industry.
How is this going to shake out? Wish I knew.
But as we begin building out this value chain, I hope you can see how one small component of it differentiates companies as much as having different parents differentiates us from our friends.
And even with the same parents, how different we can be from our siblings.
This type of information is tradeable, and has much value.
We’ll try and unlock the value chain here over the next couple of months. It’ll allow you to find where companies are trying to position themselves, where they see themselves in 5 years, and where gaps exist in the industry.
It’s gonna be fun.
Edit: For grammar and cleaning up of my crappy on screen typing.