SUCCESSFUL PARTNERSHIP in CANNABIS INDUSTRY. MYTH OR REALITY

Infuzes Team Posted 28 days ago
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We are moving from theory to practice and today, together with our experts, will talk about partnering in the cannabis business. Top principles, strategies, best and worst examples, and the latest news overview. Let's go!

What are the benefits for the marijuana business in a partnership with companies from other industries?  What examples of such a partnership are the best for today?

Bruce Linton’s firing by Canopy Growth raised concerns about cannabis sector-mainstream partnerships. In your opinion, these concerns are justified? Or is it just a single case, which should not be taken as an example?

Marijuana businesses can certainly benefit from the network, know-how, and funds of an established mainstream company. Altria's $1.8b investment in Cronos is undoubtedly a great example since the tobacco and cannabis industries obviously share several synergies.

What used to be unique about the cannabis industry is that most people involved in it were actually passionate about cannabis. With more money on the table, mainstream companies are keen on getting their piece of the pie. You may like it or not, but my guess is that we will witness many similar situations like with Canopy Growth in the future.

The fundamental benefits are stability and leadership. Most cannabis startups seriously lack the experienced A-suite leadership that is essential and eventually acquired when partnering with an established company, from another industry.  Ego is blind.  And what examples of such a partnership are the best for today? None, yet...

These concerns raised after Linton’s dismissal are not justified. A single case, so far.  In business, always go with your gut instinct.  Bruce is one of the first 'TSX Pink Sheet' In & Out's... good for him.

The key benefit is the sharing of expertise. The cannabis firm provides industry-specific expertise to those outside the industry, and the other companies provide the experience of operating in many more markets and business lines.  I think it's too early yet to see the positive impact of these partnerships, though it's definitely coming more into focus every year that the cannabis industry matures.

I can't speak to the specifics of Linton's dealings, though there is a good reason to be aware and careful whenever there are partnerships struck.  What are the terms of the deal?  What are the contingencies?  How are the contracts structured?  Any partnership needs to be a 1+1 = 3 situation to justify all the resources (time, money, energy) that go into fulfilling a partnership agreement, so empowering investors and shareholders early on in the process to educate them on the value and allow them to have a voice in the direction seems like a good idea.

The structure of a commercial partnership is rarely an actual legal partnership form. It is most often a Joint-Venture, contractual or legal corporate entity as a separate vehicle. The model is evolving in three forms:

a) direct investment, which is the Constellation-Canopy model, now stained by the value destruction which has occurred;

b) the JV model, which is the Hexo-Molson Coors model and is the more commonly found business model;

c) the hybrid where one controls the brand, one controls the manufacturing process or some version of this.

The best ones are JVs like (b) and (c). The reason behind this is firms need the expertise of array from both sides of the JV – almost need business twins across each subject matter working together, hence the JV is the perfect model which is rapidly emerging as the "right model". In part, this is because of GMP practices and the laws of each jurisdiction demand a separate manufacturing facility for edibles and beverages.

The concerns are justified in many ways. There have been a number of CEO's that have acted like celebrities, not real CEO. There are many changes of board members and CEO's and turnover of quality professionals — this is a very good thing, it shows the shareholders want more professional managers in these companies. The producers need talent from pharmaceutical, consumer packaged goods, food sectors involved and many are now doing that. Corporate governance is all about insight, foresight, and oversight and this is far beyond a single case.

Running a business is not an easy thing to do, especially when it comes to the young and still growing marijuana industry.  We are here in Infuzes are aimed to help young and experienced cannapreneurs by sharing our experts' advice, providing our readers with the latest news and cannabis date. So stay with us and subscribe to our newsletter!