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This VC firm predicted big cannabis would shrink. What happens next?

Narbe Alexandrian did not see COVID-19 coming, and that’s okay. As chief executive officer of the cannabis venture capital firm Canopy Rivers (RIV.TO), he’s not in the business of predicting pandemics.

What he did see prior to 2020 were cracks forming in the business model that has dominated legal cannabis in Canada since its inception: vertically-integrated licenced producers.

Many of the largest cannabis players were having a tough 2020 before the economic wallop of COVID-19. So far, the year has been marked by mass layoffsand lacklustre financial results. Producers face scarce financing options, unforgiving capital markets and resilient illicit sales.

Plans for global expansion and trial-backed pharmaceuticals years in the making have been shelved as investors demand tighter controls on spending and clearer paths towards consistent profits. Just about everyone is pulling back.

For Alexandrian, it’s proof of something he’s been saying for a while now.

“Vertical integration doesn’t work,” he told Yahoo Finance Canada in an interview. “Prior to legalization, because of how the public markets were valuing these companies, everyone had to increase their footprint as quickly as possible. They invested in cultivation, extraction, consumer packaged goods, pharma with clinical trials, pet health, biosynthetics, and they bought retail stores as well. You can’t be everything to everyone.” [Read More @ Yahoo]

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