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What's the Big Deal With the Cannabis Supply Chain?

By Olivia Zitkus - Apr 6, 2021 at 6:25AM

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Due to legal restrictions, the cannabis supply chain is not as simple a scheme as it is for other industries.

Ever wonder why Trulieve Cannabis (TCNNF -1.05%) has focused most of its resources on dispensaries in Florida, while Green Thumb Industries (GTBIF -1.92%) chose to vertically integrate and cement its foothold on the marijuana market in its home state of Illinois? The answer has to do with the federal illegal status of cannabis, and the fact that states have different rules and regulations surrounding recreational and medical uses of the drug. Horizontal integration and running cannabis operations in various states can be a perilous (and expensive) venture. 

Dr. Chanda Macias is a medical cannabis advocate, research, and dispensary owner. She joined Olivia Zitkus and Corinne Cardina of the Healthcare and Cannabis Bureau on a March 19 episode of Fool Live to discuss her priorities for manufacturing and distributing cannabis and the complicated nature of the industry's supply chain. 

Olivia Zitkus: I want to turn to the supply chain in cannabis and operations a little bit. You're a pro at this, you have an MBA alongside a PhD, which I think is just awesome. So I want to talk to you a little bit about opening a dispensary on the ground, and why the supply chain is so important, and how it's different for the cannabis industry. Because many cannabis companies can't operate exactly the way that other companies in fully legal industries can. My question is, what should investors know about the supply chain in the cannabis industry? How it's different from other industries? What sets it apart?

Dr. Chanda Macias: That's a very interesting and complicated question, all in one. Yes, my MBA is in Supply Chain Management, which means for me, we make sure each patient has a continuous supply of medication that they can use to treat their ailment and condition. Now, it's very interesting if we break this up, but the issue is infrastructure. Basically, from state to state, we have different regulations on how we can supply the medicine, and when I say that is that if you're in Washington, D.C. or in my vertical operation, West Virginia, Louisiana, et cetera, we can only grow in those states. There's no interstate commerce and we have to adhere to the regulations of that state. You do not have this one centralized supply chain all over the nation, you have to make sure to segment it and follow the rules and regulations for the different states. In doing so, you also have to address the issues of that particular region. So for me, it's important that when I develop as a cultivator, I'm growing strains that are specific for different conditions that are prevalent in those communities. When I manufacture my medicine, I'm making sure that I'm manufacturing medicine for the patients that need it in that community. As you can imagine in my West Virginia operation, the opioid epidemic is alarming, and so for that, we're using cannabis as a therapeutic way to help people off of opioids as an exit strategy. In Louisiana, we have more cancer patients. Again, we're developing these supply chains based upon actual data that the patients in the communities have to the Department of Health, and then making sure we can continuously supply them based on the regulations of the state. This is not the same as the pharmaceutical world. They can manufacture in New Jersey and they can disperse throughout the nation and have one centralized mechanism with different distribution channels to do so. We can't do that here, we're severely restricted. But what we're seeing is the underlying theme, Olivia, is that legalization will happen and it will be piecemeal to what's happening, and then we'll see that breakthrough one day, and this will all be a thing of the past.

Zitkus: But for now, it's a bit of a dance, it sounds like.

Macias: It's a big dance. [laughs]

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Stocks Mentioned

Green Thumb Industries Stock Quote
Green Thumb Industries
GTBIF
$12.75 (-1.92%) $0.25
Trulieve Cannabis Stock Quote
Trulieve Cannabis
TCNNF
$15.00 (-1.05%) $0.16

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