MJBizMag November-December 2020 - 24

Trends&HotTopics | Matt Lamers
Banking on 'Regulatory Evolution'
Will Eventually Kill Your Business
Y
our competitors' mistakes can
offer valuable lessons. And in the
Canadian cannabis industry, there
are plenty of mistakes to learn from.
Some of the most common errors
executives made in the early days of
Canadian marijuana legalization were
the strategic priorities they established.
What is your business all about?
Who are the customers you plan to
delight-and how? What moats are
going to protect your business from
competition? Is there a regulatory
and legal avenue to achieve your
objectives?
Those guiding principles might
sound obvious, but many businesses
were predicated on objectives for
which there was no legal or regulatory
pathway. That's a major mistake.
Laws First, Then Business
Many companies assumed that
laws and regulations would " evolve "
to suit their respective corporate
strategies. That occurred in some
cases, but more often, that's not what
happened.
Let's look at one example-no need
to name the company.
The business in question had big
plans in Canada. Some of those plans
were legal and within the bounds of
existing regulations, and some were not.
The important parts of the business
were clearly out of bounds. The
company had plans for a cannabis
beverage facility, a cultivation facility, a
restaurant, a retail store and a hotel-all
on the same site. Most of that was not
and is not permissible, meaning the
business wasted valuable months and
capital planning to operate where it was
not allowed.
The company's only real asset-its
cultivation facility-is now up for sale,
and it's unclear if the business has any
future at all.
Expanding Too Broadly
Cannabis businesses, most of them
from Canada, rushed to establish a
foothold in Europe in recent years.
They spent billions of dollars building
cultivation and processing facilities
on the continent as well as pursuing
mergers and acquisitions.
What's the problem with that?
The market is worth only about
$290 million (250 million euros).
It's growing slowly but will not achieve
the grandiose levels predicted by
speculators within the next five years.
The assumption by Canadian
players was juvenile: They thought
laws and regulations would evolve to
suit corporate interests and prompt
exponential market growth in Europe.
Two things have to happen for a
medical cannabis market to grow
legally: A law has to open the door,
and-this is the important part-regulations
have to make that law workable
for industry.
A common story in 2017-19
involved companies rushing to set up
beachheads in nations where medical
marijuana laws were established. Their
downfall? Regulations had yet to make
these actual, functional markets with
customers and real sales.
There is no regulatory evolution
without some degree of devolution. You
can bank on that.
Matt Lamers is the international
editor at Marijuana Business Daily.
You can reach him at matt.lamers@
mjbizdaily.com.
Many businesses were predicated
on objectives for which there was
no legal or regulatory pathway.
That's a major mistake.
24 Marijuana Business Magazine | November-December 2020
MJBizMag November-December 2020

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