Dispensaries are like dinosaurs. I predict they will meet their extinction when they become replaced by older, bigger, and more powerful dinosaurs: drug stores.
To understand the basis for this prediction, we must analyze the global cannabis movement outside the United States. One must also believe cannabis is medicine despite its prevalent recreational use, which is known to only a relatively small percentage of the world’s population.
Canadian medical marijuana market
Although young, the Canadian market is one of the most advanced markets outside the U.S. In October 2018, Walmart Canada announced it is exploring distributing cannabis. If Walmart decides to take the leap, Recall, IDA, Guardian, and Drug Mart—Canada’s largest pharmacy chains—likely will follow suit in order to compete with the international retail behemoth. The massive distribution network already in place and serving 99 percent of the Canadian population, coupled with political and financial lobbying power should the drugstores wish to distribute cannabis, would eliminate the need for dispensaries.
Reaching the level of efficiency pharmacy chains’ infrastructures already offer would require dispensaries spend tens of billions of dollars over decades. Even large dispensary chains would not be able to compete due to operating expenses needed to maintain their establishments. Large dispensaries would, at best, be considered mom-and-pop and boutique shops.
If legislation permits social consumption lounges, dispensaries would be wise to add that type of service and provide an experience similar to the lounges seen in the Netherlands. They should begin making those plans now.
Cultivators take on Big Pharma
As for cultivators, a pharmaceutical takeover would reduce costs and sales efforts because buyers for drugstore chains would hold large inventories. As one of Nevada’s largest cultivators, I would be happy to reduce my dealings with more than 100 dispensaries, each with its own model and desires, to just a few large buyers.
Products would become standardized and meet higher levels of scrutiny; they would face not only national requirements, but corporate standards, which are generally scrupulous. This move would push legislators to federally legalize cannabis as well as approve and fund further research and education.
European medical marijuana market
Now, let’s consider Europe. Currently, fewer than fifteen countries have any sort of regulation for cannabis. Distribution through pharmacies is the future for almost all European countries.
As in Canada, Europe-wide pharmacy chains are huge. If they enter the cannabis space, almost everyone on the continent would have access to medicine quickly. Controlling distribution would fall inside a currently controlled and functioning path.
Countries including Germany, an early adopter, have many options for pharmaceutical distribution and allow symptoms like pain to be included among the conditions for which doctors can prescribe cannabis. Yes, a real doctor must prescribe the medicine. Currently, only tinctures and flower are allowed. However, concerns have been raised about any drug that is smoked, and the German industry hopes for more advances in delivery to serve its 20,000 patients who’s numbers still are growing.
Other countries—France and Ireland, for example—have confined cannabis treatment to multiple sclerosis, epilepsy, and chemotherapy-related nausea. Italy and Greece have fewer than 100 patients each, and the army distributes the small amount of cannabis needed to treat them. Spain and Portugal, for the most part, exist in a gray area with social clubs similar to those found in Amsterdam.
European pharmaceutical networks are vast and would speed up usage adoption. Health ministers, regulators, politicians, and Big Pharma looking to tap into cannabis know distribution and regulation are important, but most important is taxing and keeping a reputable market to protect consumers. Well, guess what? Pharmacy networks already in place are in the best position to do that.
The future of cannabis in America
Now let’s take a closer look at the American market. Keep in mind Walmart, CVS, Walgreens, and other large chains, like alcohol and tobacco distributors, all are eyeing the cannabis market. Currently, their hands are tied by federal legislation, but it’s only a matter of time before corporations begin lobbying toward federal legalization to advance their own agendas within the industry.
But maybe that’s not a bad thing. There are not nearly enough dispensaries in the U.S. to match the population of 327 million, and there are no plans for a massive distribution network. The largest network comprises about 100 stores. Small cities contain more pharmacies than that. Also, due to the relatively small number of dispensaries, efficiency is slim. Look at MedMen as an example: One of the five largest dispensary chains, MedMen’s distribution, buying, and sales efficiencies come nowhere near those at even small pharmacy chains.
The future for cannabis dispensaries
Federal legalization undoubtedly will lead to massive changes in the industry. Dispensaries as we know them today may become extinct, but those that evolve won’t disappear. For example, dispensaries could reinvent themselves to offer “experiences,” much like breweries do. Beer connoisseurs love craft beer and breweries, which sometimes offer tours, often offer entertainment, and always offer socializing. Cannabis lounges with an attached dispensary could fulfill the same function for cannabis connoisseurs. The concept has proved successful in the Netherlands where lounges are packed with locals and tourists who enjoy cannabis, non-alcoholic beverages, food, and bar games.
The American cannabis industry is still in its youth, and the future for consumers and producers looks promising. Federal legalization will spark a survival of the fittest for dispensaries, but with the right moves, dispensaries can survive the impending asteroid that is Big Pharma.
Michael Sassano is founder and chief executive officer at Solaris Farms, one of the largest and most high-tech cannabis greenhouse cultivation operations in Nevada.
