In 2022, while most of the extraction equipment industry pulled back and waited to see how the downturn would shake out, I built a federally licensed research center in Canada. It made no sense on paper. Capital was tight, sentiment was worse, and the safe move was to hold what we had and ride it out. We did the opposite.
In the years since, several of the largest names in extraction equipment have exited the U.S. market altogether. As a result, our growth rate accelerated from around 15 percent a year to nearly 100 percent, and along the way we picked up clients who needed a new partner and welcomed some genuinely talented people onto our team who needed a new home.
I don’t bring this up to celebrate anyone else’s hard time. Plenty of good people got caught in that shakeout through no fault of their own, and I don’t take satisfaction in that. I bring it up because it’s an example of a recurring pattern that shows up in almost every industry that matures past its gold-rush phase, and cannabis is entering that period right now.
History doesn’t repeat itself; it rhymes. Every new category attracts a wave of entrants when the opportunity looks limitless and the barriers look low. Then reality sets in. Margins compress. Capital gets more expensive. The operators who oversold their capabilities, who told customers what they wanted to hear instead of what was true, who scaled headcount and hardware without scaling discipline, start to disappear. What’s left, almost without exception, is somewhere between three and five companies controlling the vast majority of the market. That’s not a guess. It’s how mining consolidated, how brewing consolidated, how a hundred other categories consolidated before cannabis came along.
If you’re running a cannabis business today, the uncomfortable question isn’t whether consolidation happens. It’s whether you have a plan to be one of the three to five — because if you don’t, you’re planning your own demise. I know how that sounds. I don’t love saying it. But an inconvenient truth is still true whether or not people want to hear it.
The real dividing line
Here’s where I think most operators get the analysis wrong. They assume the winners will be whoever has the most capital or the flashiest technology. Capital and technology matter, but I’ve watched enough of this shakeout up close to tell you the real dividing line is something less obvious: whether the people running the company actually can change how the company operates before the market forces them to do so.
When expertise becomes a single point of failure
The processing sector of our industry operated on an “extract artist” model for years. One person, usually brilliant and often a little eccentric, held the entire process in their head. They could produce an incredible batch, but they couldn’t teach anyone else how to do the same, document the process, or scale the company without losing something in translation. That model got a lot of companies through the early years. It will not get anyone through consolidation, because consolidation rewards repeatability, and repeatability requires systems that don’t live inside one person’s intuition.
Why operational change becomes personal
The harder part isn’t building the system. It’s what happens to the people inside the company once you try to install a system. I’ve seen this up close, including inside my own team. When you introduce a new, more efficient way of operating, you’re implicitly telling some of the people who got you through the early years that the thing they’re good at, the thing that made them valuable, is about to matter less. That’s not a technology problem. It’s a psychology problem and an organizational behavior problem, and it’s the reason so many operators talk about efficiency but never get around to implementing it.
I had to make that call myself. As we scaled, I had to restructure parts of my team, including people who had been with us a long time and who I genuinely cared about, because the sales leadership and operational discipline the business needed next didn’t match the org chart that had gotten us that far. It wasn’t fun. I don’t think anyone should pretend decisions like that are painless, and I’m not going to pretend it here. But the alternative — keeping a structure built for a business we’d already outgrown — would have been the more expensive mistake, just paid for later and by more people.
Systems make knowledge transferable
This is the part I’d ask executives reading this to sit with. A quality management system, whether that’s CGMP, GPP, or ISO 9001, isn’t paperwork. It’s the mechanism that makes a company’s knowledge belong to the company instead of to one employee. It’s what lets you prove to a regulator, investor, or acquirer that your results are repeatable and not a matter of luck or one person’s skill on a given day. As rescheduling moves forward and quality expectations tighten, the operators who already have that infrastructure in place will be able to move the moment the door opens. Everyone else will be starting the clock late in a market that rewards speed.
Make the hard decisions before the market does
None of this requires being the biggest company in the industry. Some of the most sophisticated operators I’ve met are still relatively small. What they share isn’t size; it’s that leadership made the uncomfortable calls early — on people, on process, on what to stop doing — instead of waiting until the market made those calls for them.
So here’s the actual question, and it’s not about equipment or capital at all: Are you building a company today that could credibly be one of the three to five players left standing in five years, or are you hoping the wave carries you without the hard decisions?
The market doesn’t reward hope. It rewards the operators who read where things are going and start building before the inevitable becomes obvious to everyone else. That’s not a prediction I’m making from the sidelines. It’s the bet I made in 2022, and it’s the one I’d make again.
Adam Temple is founder and chief executive officer at Evolved Extraction Solutions, which designs and manufactures cannabis extraction and processing systems. He also founded the Health Canada-licensed Genome Technology Centre in Guelph, Ontario, a research and training facility focused on cannabis extraction. His experience spans cultivation, large-scale processing, equipment development, and operational systems.
