Mary, Mary, quite contrary, how does your garden grow? Is Mary’s operation applying horizontal or vertical integration in order to grow? What’s the difference between the two? And why would she want to employ one or the other?
In this brief article, we’ll go over the differences between horizontal and vertical integration as well as discussing the benefits and drawbacks of each system of expansion.
Understanding Horizontal and Vertical Integration Is Especially Crucial In the Cannabis Industry
Understanding the difference between vertical and horizontal integration is especially important in the cannabis industry. This is because each state’s cannabis regulations are different. And even within each state, sometimes counties or individual municipalities have their own rules and regulations to follow.
Some states require vertical integration. In these states, retailers must grow and manufacture their own products. And some states actually forbid vertical integration. If you own dispensaries in these state’s, you’re not allowed to operate a cultivation facility.
A good example of a cannabis company that is growing horizontally is Ohio based dispensary chain Terrasana Labs who currently has three open locations in Ohio and are slated to expand.
A good example of vertical integration is Florida where cannabis companies were originally required to be vertically integrated — that is to grow, process, and manufacture all products that they sell in their dispensaries. (The vertical integration requirement may be changing due to legal challenges.) The three top licensed producer/dispensary retailers in Florida are Trulieve, Curaleaf, and Surterra Wellness.