The legal cannabis market continues to reach new milestones, the latest being the launch of the industry’s first commodity trading desk — with the latest service provider highlighting the opportunity in addressing the more nuanced challenges of an unfamiliar, emerging market.
Marijuana company Grupo Flor has rolled out its commodity trading desk to connect industry buyers and sellers, and facilitate the trade of raw materials, including the THC flower, THC trim, crude and distillate THC and CBD oil, and more, the firm announced last week in its press release. Grupo Flor said that, in the first week of the trading desk’s operation, it facilitated “several million dollars’ worth of trades.”
“We created a more efficient exchange for buyers and sellers by solving two critical problems,” the firm’s CEO Paul Henderson explained. “Buyers are sourcing raw materials from an array of entities, and many of the products are inconsistent and unreliable. On the flip side, these sellers don’t have the support and logistics infrastructure to efficiently sell and transport their product[s].”
Beyond Banking Struggles
Henderson’s remarks, and the launch of the commodity trading desk itself, shed light on the industry risks that continue to face the market, even in the wake of legalization, and that go beyond the struggle to access banking services. In the B2B trading space, marijuana companies can struggle to mitigate the risk of product quality or in buyer-supplier relationships, for instance. At the same time, a lack of logistics and B2B service providers compliant with state regulations, and familiar with the products, is also a rising concern for industry players.
Grupo Flor may be the first industry player to launch a commodity trading desk, but other technology firms have stepped in to tackle similar issues in the marijuana B2B procurement and commerce space.
LeafLink recently introduced its B2B digital marketplace to support the trade of cannabis products between retailers, producers and processors. Last month, the company secured $2 million in funding from Canopy Rivers, with the option to secure an additional $6 million from the company, while Canopy obtained an 18 percent stake in the firm as well.
“The number of brands and products within our new cannabis economy has been explosive, making it difficult for retailers to deal with multiple parties in an increasingly fragmented market,” said Canopy Rivers President Narbé Alexandrian in a statement announcing the funding.
GrowGeneration, another industry player, announced last year that it would strengthen its position in the cannabis B2B commerce space, building out its own online marketplace and using the Amazon platform to connect its products — including soil containers, plant production supplies and soil nutrients — with commercial marijuana growers.
However, questions and opportunities remain when it comes to tackling newer hurdles. Last year, for example, Spend Matters raised the issue of hospital procurement for marijuana products, and how healthcare providers will be able to manage their supply chains, maintain compliance across state lines and provide the correct type of care to patients.
With marijuana legalization expanding, and with analysts voicing high hopes for industry growth (and profits), there is a major opportunity for procurement and B2B eCommerce solution providers to continue addressing some of the nuanced challenges the industry presents. For companies like GrowGeneration, LeafLink and Grupo Flor, compliance will be front and center to managing a consistently changing regulatory landscape.
In a statement, Grupo Flor Co-founder Gavin Kogan emphasized the opportunity he sees in addressing some of these key points of friction.
“As California’s THC market continues to explode, the desk will be instrumental in facilitating trades and moving physical goods around the state via our licensed warehouses and transportation network,” he said.
Accessing business partners that understand these challenges — from compliance to product quality — will be instrumental in the success of the growing number of B2B service providers hoping to cash in on the cannabis boom.