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There are few business sectors that have collapsed as dramatically as cannabis. Once projected to generate billions in new business, radical social reform, job creation, and rapid growth, the industry has devolved into a commoditized race to the bottom. But these days, with competition everywhere, profits have collapsed and no one has been able to figure out how to compete at scale on anything besides price. From one angle, this was just a case of too much supply for too little demand. From another angle, commoditization was always inevitable. But market correction shouldn’t mean collapse. What’s left today is just business - regulated, fragmented, ruthless, and perfectly competitive where only the smartest survive.

Every industry has its gold rush. For cannabis, the “Green Rush” started in 2012 when Colorado and Washington became the first U.S. states to legalize recreational marijuana. As more states and countries joined in after 2012, every link in the value chain—from farming to retail—was up for grabs. Startups burned through millions in venture capital, building fast and talking big. When Canada legalized marijuana in 2018, it gave these same companies the means to pump-and-dump weed stocks. But just because the corporations are losing money, doesn’t mean everyone else is.

While they’re hemorrhaging cash, local, self-funded dispensaries are quietly surviving. For them, profit isn’t a future goal—it’s a mandate. California is the world’s largest and most competitive cannabis market. In 2023, $5.1 billion of legal cannabis was sold in the Golden State, with another $8 billion moving through the black market. Los Angeles County alone reigns as the highest-grossing market, with 5 to 10 times as many sales as any other county in the state.

In this Modern MBA Original, we go from the macro-to-micro to analyze the economics of legal cannabis from the global corporations all the way to three independents in the world’s most competitive market.

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