Vertically integrated cannabis businesses can follow their products every step of the way
Owning or operating a fully integrated cannabis business offers the best chance of owning the quality and consistency of your brand and your products. To achieve any product or business success, operators need to understand how each individual part operates independently as well as how it relates to the overall larger system. The more precisely you can tune each moving piece, the smoother and more consistent the growth of your business.
The first key point is that each “vertical” or type of cannabis business has some information that drives success inside one team and other information that drives success across teams. Typically, each individual team needs to externally communicate the “Price to sell, cost to make & quantity, of what products, when?” to enable successful planning and execution for other groups in the business. Let’s connect the dots between internal and external data across various business types.
Cannabis cultivations are oftentimes considered the very beginning of the supply chain and provide raw cannabis products (flower, trim, shake, etc.) to be extracted, infused, or sold directly to consumers.
Cultivations source from agricultural suppliers and sell to extractors, kitchens, infused product manufacturers, dispensaries and retail stores. In every situation, understanding “Price, cost & quantity, of what strains, when?” can support more organized and profitable decisions for every following step. Where raw cannabis is being processed or sold internally, the “wholesale price” when you manifest from one license to the next can be considered equal to the cost to grow for downstream profit calculations. Another key piece of information, especially for the extraction-bound product, is the lab results and content of THC, CBD, and assorted terpenes. Growers that can effectively forecast the sellable volume and lab results of every strain will further enable success for every other team lead at your organization.
Of course, to determine the strains to plant and daily operations of your grow, there are a wide variety of data inputs that no manufacturer or retailer needs to know. Specifically, this can include environmental data such as temperature and humidity, nutrient recipes, energy costs, strain strategy and much more. Although these considerations are critically important for the cultivation team, the nuances of day-to-day choices zoom out to yield and potency once the raw flower is handed off to the next link in the product lifecycle.
If the cannabis plant is being sold raw or as pre-rolls, the product will go directly from a cultivation to a dispensary or retail store. Otherwise, it is most likely destined for extraction.
Extractors remove active ingredients, typically THC, CBD, and terpenes, from cannabis plants and use (or sell) these extracts for concentrates, vape cartridges, edibles, tinctures, topicals and a variety of other marijuana-infused products. Extraction companies or teams source from laboratory supply companies and cannabis growers and sell to kitchens, infused product manufacturers, dispensaries and retail stores.
Extractors are very often answering “Price, cost & quantity, of what products, when?”. As before, if the extraction is bound for internal use, “wholesale price” of your final product may be thought of as the cost to extract. Regardless of how you do accounting, you will also want to keep track of “cost to extract” plus “cost to grow” to keep a running cost per product to the overall business. For edible, tincture, and topical manufacturers, their profit margins are driven by the price per milligram of THC, CBD, or other desired distillates. For concentrate manufacturers, it can be especially important to know the pace of production so that information can inform what machines are operating at what time to create the desired product SKUs.
There are many different internal questions that will drive the decisions for pricing, quantity, and quality of any given product. These can include the original grower for the raw inputs, the strains of the raw material, the solvent used in extraction, extraction machine settings, and much more. Each of these considerations impacts the how and the why behind the products that your extractor sells to your customers or passes along in your supply chain.
Cannabis Product Manufacturers
Some concentrate products, such as shatter, wax, rosin, and others, are unaltered extracts sold directly to consumers. For every other non-flower product on the shelf, there exists a manufacturing or product creation process.
Manufactured cannabis goods vary from diverse food products to topicals to vapes, and they’re all united by incorporating cannabis extracts as one of or the primary ingredient in their final product. Manufacturing companies will own their extraction methodology, purchase cannabis extracts as ingredients from other licensed cannabis businesses, or most often some combination of owning and buying.
In the life cycle of created cannabis products, infused product manufacturers are the link from extraction teams to dispensaries and retail stores. Like all other verticals in the supply-side, makers of cannabis products most often answer “Price, cost & quantity, of what products, when?”. For cannabis products destined for your own shelf, you may think of your total cost to shelf (= cost to grow + cost to extract + cost to manufacture) as the internal “wholesale price” to your dispensary or retail business. This helps ensure that you don’t sell products for less money than it cost to make the product. Product quantity and manufacturing capacity can also play a big role for larger companies, or for manufacturers serving multiple large accounts.
There are invariably a number of internal considerations that are specific to each type of product category and manufacturer. These can include ingredients and recipes for product creation, maintaining consistency and quality of the product, bottlenecks in manufacturing workflow, and much more. The managers and operators that understand their data will be able to seamlessly move between the internal considerations and the impacts on key inputs for your wholesale and retail customers.
Dispensaries & Retail Stores
Regardless of the cannabis product or path, it ultimately finds its way to a cannabis dispensary or retail store.
These stores source directly from cultivators, extractors, and product manufacturers to fill their shelves with products that their patients and customers want. Managers of storefronts are frequently answering “Price, cost & quantity, of what products, when?”. The “Price” is the price that your customers pay for your product, and the cost is either your total internal cost to shelf or the wholesale price you paid for that product. Every business looks to increase their profit margin, or the gap between “sold price” & “cost to sell”, without sacrificing on quality or quantity.
There are many different decisions internal to a dispensary or store that result in what products to stock, how to price them, and when to run deals. All these and many other elements impact the types of patients or customers that come to your store, what they buy, and how often. Mastering your internal team data can provide an incredible asset in getting organized between teams.
Demand from customers can drive your product creation and sourcing practices, and to some degree, it’s also possible to increase demand based on the products you have to sell at any given time. Businesses that understand and manage their data can see the positive impact of better team collaboration that increases profits and efficiency.
How do I connect the dots and unlock my business data?
You are already collecting powerful data that can help you connect the dots within and between your various business teams. All you need is a simple, intuitive toolkit to answer your business questions. Identify your top initiative, define the metrics or reports that measure success, and use your data to help steer your direction.
If you’re not sure where to begin, we offer a free data consultation to get you started on the right path. If you’re interested in the examples above, we have dedicated modules to help you work through each consideration. And you can always send us a note to chat about what’s on your mind.
Overall, your data is a tremendous ally to help fine tune the individual gears and the system in your connected and successful business operation.