To stay competitive with larger industry rivals, smaller cannabis farmers throughout California are turning to the co-op model, MJBiz Daily reports. Co-ops, long a staple of college campuses and crunchier small towns across the U.S. alike, make a fair amount of sense for any group of smaller businesses trying to maintain competitiveness with larger companies. And cannabis is no different, the benefits to smaller grow operations in California are tangible.

“I’d say we at MMLG really began noticing this in the back half of 2018. Smaller clients of ours were approaching us and asking, ‘Hey, is this a smart move,’ and I do think it makes sense for a lot of them,” MMLG founder Aaron Lachant explained.

For smaller outfits in California cannabis co-ops make sense

As the industry has seen huge growth in California and beyond, smaller groups have struggled to keep up. The struggle comes down to a matter of “scalability” for smaller growers. Big companies stake a clear competitive advantage with a capacity to produce and deliver for more clients. However, where many smaller groups see opportunity, scaling up typically comes with a drop in quality.

Co-ops, on the other hand, provide a reasonable amount of scalability and very little decrease in quality. For many small operators, who pride themselves on the quality of their product, a co-op is the perfect marriage of scale and quality. “By and large, the big advantages are for smaller cultivators to share resources amongst themselves to lower the cost burden and to provide a steadier supply of product,” Lachant added.

But the MJBiz Daily story is quick to point out that even in co-ops a trade-off exists. Namely, disagreements over business practices can emerge. To snuff this and other issues out, it’s crucial that co-op members vet themselves to assure that everyone is on the same page and working towards a common goal.

Cannabis co-ops come with compliance concerns (just like everything else)

While co-ops are a smart solution to keeping up with the Joneses, there are some things to bear in mind when it comes to compliance. Our own director of compliance Juli Crockett has some pointers:

• Be careful who you’re getting into bed with, and be clear about how the activities of one licensee can impact the others.
• If the member cultivators are collectively advertising, entering into distribution agreements, or bound together in any way, it becomes essential to also make sure that the collective has a commitment to compliance as well.
• The necessity for transparency is manifest with co-ops of any nature. [It was true with the Soviets in 1917 and it’s true today. –Ed.] Particularly with cannabis and the complications inherent to this industry, transparency is an absolute necessity with co-ops.
• All that being said, co-ops do offer an exciting solution to some of the problems of scale, competition and marketshare that smaller grow operations face today.

While co-ops are by no means a silver bullet, the organizational construct has some inherent benefits to smaller cultivators across California (and the rest of the country.) But just like with anything else in cannabis, it’s not only crucial to understand the regulations and compliance that comes with the territory, but also crucial for all other parties to take those regulations and compliance demands seriously.