Building a business that benefits from cannabis— without touching cannabis
Companies that produce, manufacture and retail cannabis and cannabis products tend to get the most attention both in the popular press and in business media. However, there are many opportunities for entrepreneurs that do not involve actual contact with cannabis. In fact, with so many business people flooding the more obvious options, there may actually be more opportunity in realms beyond.
Why avoid cannabis?
For entrepreneurs seeking to enter the cannabis industry, some would argue that staying away from direct contact with cannabis is a good idea. Though industrial hemp and CBD are becoming legal nationwide, marijuana is still problematic for legal reasons. Even in states where marijuana is legal, the potential for a shift in federal policy and a subsequent crackdown remains until national legalization occurs. But, so many companies, celebrities, and established businesses are making moves into CBD production, manufacturing and distribution, that it might be a good idea to look at other options for competitive purposes alone.
In addition, companies offering related products and services often find it easier to diversify, whether now or in the future. At the end of the day, it comes down to what is the best fit for the entrepreneur and his or her team, the available funding and the most promising opportunities. Here are three public companies that reveal some of the possibilities for cannabis industry sectors that are adjacent to cannabis itself.
Predating the industry
The first two companies are larger cap stocks that are early examples of established non-cannabis companies that found new opportunities with the rise of the cannabis industry.
Scotts Miracle-Gro (NYSE:SMG) has long offered fertilizer and other gardening/farming supplies. It initially got attention as a cannabis-related play simply because its established brand and ubiquitous presence led cannabis growers to purchase its products. But the cannabis industry did not truly start to affect its bottom-line in a significant manner until they created Hawthorne Gardening in 2014.
Hawthorne Gardening allowed Scotts to begin acquiring smaller companies and to enter the hydroponic gardening sector with a focus on the needs of the cannabis industry. Though there have been some ups and downs, Scotts’ move into the industry makes it a long-term play.
Jack in the Box (NASDAQ:JACK) like all fast food companies, stands to benefit from the growth of an industry that features appetite enhancing substances. Even more than Scotts Miracle-Gro, Jack in the Box was likely benefiting from marijuana use long before state legalization. But with cannabis going mainstream, Jack in the Box has targeted cannabis consumers with advertising for various specials. Last year it also created the Merry Munchie Meal in partnership with a Snoop Dogg-backed social media site called Merry Jane.
It should be noted, though fast food joints and convenience stores are traditionally a popular destination, especially for the younger crowd, edibles and drinks containing THC and/or CBD are gradually undermining that market. The growth of edibles is an example of the challenges facing adjacent businesses that may be initially hesitant to take the next step into cannabis-infused products. For example, it is generally expected that companies like Coca-Cola will enter the game at some point but, for now, smaller companies have a great deal of room to operate and to build strong brands.
A diversified approach
On the smaller cap end of the spectrum, the following company is a prime example of diversification in the cannabis industry.
PotNetwork Holdings, Inc. (OTCMKTS:POTN) wholly-owns a number of subsidiary companies in the cannabis industry including Diamond CBD, a CBD product creation and sales company. So it is a serious emerging player though it is not currently producing products of any kind containing THC. This approach allows it to have the option to expand nationally into all states. But it is worth mentioning here because of two other subsidiaries, PotNetwork News and Grinders Distribution.
PotNetwork News is the company’s newest project that began as an industry news website and recently launched an industry print publication called PotNetwork magazine. Cannabis-related media is an interesting play because it is all about cannabis but does not require direct contact with cannabis products. Grinders Distribution distributes premium products from Easy Grinder. As what might be called a paraphernalia play, this company’s product is not a form of cannabis and will only come in contact with cannabis after the sale. Both subsidiaries allow PotNetwork Holdings to have broad exposure to various sectors of the cannabis industry.
So many opportunities
The entrepreneurial creativity currently on displaying at every level of the game makes for exciting times. And, as you will realize from the above examples, those with business skills developed outside of the cannabis industry may well find them relevant whether or not they involved direct contact with cannabis.
