“Vertical Integration” – Defined as:
- The latest Sylvester Stallone movie; or
- The psychological impact of being shorter than 5’9″ in height; or
- The skill of painting the wall without getting paint on the ceiling; or
- When one company owns and controls the cannabis cultivation, processing, and dispensing processes.
The answer, of course is #4. Besides, everyone knows Vertical Limit starred Chris O’Donnell, while Stallone’s ice mountain climbing movie was Cliffhanger.
In practice, vertical integration represents the ability for a cannabis company to manage every aspect of growing and selling cannabis – from the earliest planting of the seed or clone, through the final sale to the consumer.
A cannabis business often benefits from vertical integration – it allows a company to control quality, create staffing efficiencies, and reduce costs and tax liabilities throughout production.
So why are cannabis businesses not all vertically integrated? Because the government sometimes stands in the way.
Many medical cannabis states allow (and in fact, require) vertical integration – California, Massachusetts, New York, Florida and others. Yet others require separate licenses for cultivation, processing, and dispensing – including Illinois, Maryland, and soon-to-be Pennsylvania. There are some good policy reasons for splitting them up – for example, those that are excellent at cannabis cultivation might be awful at patient education and counseling at a dispensary. But generally if you find states without vertically integrated cannabis businesses, it is due to regulation as opposed to choice.