In the burgeoning industries of cannabis, hemp, and CBD products, vertical integration can be a tempting prospect for businesses at every stage of the production pipeline.
Vertical Integration
Vertical integration, as defined by Investopedia, is “a strategy that allows a company to streamline its operations by taking direct ownership of various stages of its production process rather than relying on external contractors or suppliers.” In simpler terms, a vertically-integrated company controls the making and selling of its product at almost every level, allowing for a very strong degree of control over the many factors that involve running a business. In the cannabis industry, a vertically-integrated company may own its own grow facility, processing area, and packaging and distribution infrastructure.
Famously made popular in the 19th century by oil industry tycoon John D. Rockefeller, vertical integration (VI) is a compelling business strategy in the modern-day age of global connectedness and tightly intertwined supply chain systems. As the past few years of supply chain shortages and complications have shown, there are real, tangible benefits to a cannabis-oriented business being able to control the many factors that go into running its operations. Shortages of critical supplies such as seeds or equipment can be mitigated with VI, as the company owns its own infrastructure and controls its own supply chains. Additionally, vertical integration often helps a business reduce costs by combining operations into fewer facilities, which saves on overall property and utility spend.
However, VI does not come without risks and challenges. One example is the risk of cybersecurity attacks; with the business being operated under one umbrella, a single hacking attempt could grab most or all of a company’s sensitive data in one fell swoop. Upfront cost is another large concern, with many smaller operations simply being unable to raise the money needed to implement VI.
Legal stipulations also present challenges. Some U.S. states, such as Illinois and Washington prohibit vertically-integrated cannabis operations entirely, fearing they could lead to monopolies and unfair prices in the industry. Yet other states, such as Colorado, mandate the practice, on the logic that VI businesses are easier to keep tabs on and monitor for any illegal activity. The patchwork of varying laws across different states can represent a headache for cannabis industry operators of all types and sizes.
In any case, both vertically-integrated and traditional cannabis operations need comprehensive security solutions, both to stay in business and in compliance with stringent government regulations, wherever the business may be located. In an industry vulnerable to theft and bad actors, a strong security approach is the best way to a smooth operation.
Security for Cannabis Operations
Cannabis operations of all kinds must implement varying levels of security in order to stay in business. Government regulations, while varying from state to state, will typically mandate some level of video surveillance, live or AI-enabled monitoring, and strict access control to keep unauthorized parties out of growing and processing facilities. For a VI operation, these services can extend across the different levels of business & streamline security operations, reducing costs as well as headaches. Twenty20 Solutions provides several key security services for businesses in the cannabis sector, allowing operators to focus on their operations and revenue creation.
Looking to learn more about the solutions we provide for cannabis producers and distributers? Request a quote here.
About Twenty20 Solutions
Twenty20 Solutions is a global provider of surveillance, automation, monitoring, access control, and many other security solutions for many different types of industries. We work with cannabis producers of all sizes to keep their facilities secured and in compliance with state and federal regulations. Our mission is to serve you by providing world-class integrated security and automation solutions that solve your business’s unique security needs. We deliver much more than cameras, surveillance and sensors; we deliver peace of mind. Contact us today to learn more about how we can assist your organization.
Citations:
Hayes, Adam. “What Is Vertical Integration?” Investopedia, Dotdash Meridith, 6 Oct. 2021, https://www.investopedia.com/terms/v/verticalintegration.asp.
Indeed Editorial Team. “A Complete Guide to Vertical Integration.” Indeed Career Guide, Indeed, 22 Feb. 2021, https://www.indeed.com/career-advice/career-development/guide-to-vertical-integration.
King, Mike. “The Pros and Cons of Cannabis Vertical Integration.” Vangst, Vangst, 8 Apr. 2021, https://vangst.com/blog/vertical-integration-cannabis.
Perlow, Jason. “How the Marijuana Industry Is Organized in Legal States.” ZDNET, Red Ventures, 16 Nov. 2018, https://www.zdnet.com/article/how-the-marijuana-industry-is-organized-in-legal-states/.
“State Medical Cannabis Laws.” National Conference of State Legislatures, 12 Sept. 2022, https://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx.
“Understanding & Analyzing Cannabis Vertical Integration - YouTube.” YouTube.com, GreenGrowth CPAs, 4 June 2020. https://www.youtube.com/watch?v=f-qHWkSAjjI.