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THE GREEN RUSHRECREATIONAL CANNABIS INDUSTRY
USC Marshall School of Business Professor Victor Bennett22 April 2014
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I. IntroductionII. Industry Definition & Overview
III. Five ForcesIV. Business Unit Analysis: Green Temple
V. RecommendationVI. Conclusion
AGENDA
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First legal sale of recreational cannabis in United States
on New Years Day 2014
THE GREEN RUSHAmendment 64 passes in November 2012
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“Money does grow on trees. It’s called the Cannabis plant.”
THE INDUSTRY
What will change?Recreational production and sale of cannabis in Colorado
DOOBIE-DO’S
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A SHIFTING INDUSTRYMEDICAL RECREATIONALNo cross-selling
NON- PROFITCertificate of OccupancyPhysician recommendation requiredNo additional taxes
FOR PROFITSeparate recreational license
15% excise+10% state+ regional tax
LIMITED SUPPLY FOR HIGH DEMAND
PRICE FLUCTUATIONS
Stabilize to further favorable conditions holds promise of growth
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THE FIVE FORCES
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THREAT OF ENTRY
GOVERNMENT REGULATIONS:Random background checks
Application feesLicensing (Certificate of Occupancy)
DepositsTotal:$500,000
MEDIUM
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SUPPLIER POWER
Each dispensary is allotted to grow six plants per registered patient
Many growers in saturated market
Threat of backward integration
No specialized labor skills required
Until recently, banks were hesitant to finance
due to illegality risks
MEDIUM - LOW
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BUYER POWER
Anyone 21 years or older is allowed to purchase recreational cannabis Demand is high with limited supplyPrices in beginning of year sales were nearly 2X price of medical cannabis Low switching costs for buyers
MEDIUM
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PRICE RIVALRY
Limited price competition in emerging market with many undifferentiated players
Priority of dispensaries is to meet the demand
Price cap influenced by the black market
MEDIUM
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SUBSTITUTES & COMPLEMENTS
Alcohol & Tobacco:
Not the same “satisfaction” Differentiation in quality
Co-consumption of substances
LOW
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GREEN TEMPLEMedical dispensary in Echo Park
VALUE PROPOSITION High quality product selections & excellent customer service
CUSTOMER PROFILE Patients with medical needs
& young “pot heads”
Weed maps rating : 4.8 out of 5 rating
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A LACK OF COMPETITIVE ADVANTAGESHOW DO YOU DIFFERENTIATE?
Quality of strains Art of customer service
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A LACK OF COMPETITIVE ADVANTAGES...but unable to charge higher premium prices
TOP SHELF PRICE COMPARISON
Charlie Sheen
Indica Hybrid
Green Temple
$40
MedCity (High end)
$45-60
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RECOMMENDATIONDO NOT ENTER COLORADO & STAY IN LOS ANGELES
STRATEGY: GROWTH & DIFFERENTIATION
Develop trust & stronger relationships with vendors + partnersMaintain loyal patients with great customer service + community building Build warehouse and vertically integrate growing operations to minimize costs and offer higher quality in private strains
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KNOWLEDGE IS POWER
California MCLR 2014 Marijuana Control, Legalization & Revenue Act
PROPOSITION D
General Ballot elections November 2016
Constant state of flux...
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Smoke On!
Thank you for s̶m ̶o ̶k ̶i ̶n ̶g ̶ listening.