The business of cannabis is starting to look a little different with two of the biggest companies in the industry, Aleafia Health and Red White & Bloom, seemingly making the difficult decision to call off their merger agreement. While the exact details of the companies’ decision remain unclear, one thing is for certain: this move will almost surely have far-reaching implications for the emerging cannabis industry in the weeks and months to come.
1. Cannabis Companies Aleafia and Red White & Bloom End Merger Discussions
Aleafia Health Inc. and Red White & Bloom have officially ended their merger talks after months of negotiations. As two of the largest cannabis companies in Canada, the move marks a big shift in the industry landscape and could have wide-reaching implications for both companies in the coming months.
The two companies had been in negotiations since February of this year, with the aim to create one of the largest vertically integrated cannabis companies in North America. Both companies had hoped to significantly increase their existing market capabilities and capitalize on the emerging demand for cannabis products.
- Aleafia Health is a health and wellness company that produces and sells cannabis products across Canada.
- Red White & Bloom is a leading cannabis producer with extensive operations in the U.S.
The failure of the merger to come to fruition is a major setback for both companies, who had hoped the partnership would allow them to better position themselves for the rapidly evolving legal cannabis landscape. The move could cause both companies to have to reevaluate their long-term growth plans.
2. What the Cannabis Community Loses With Failed Merger
With the failed merger in the cannabis industry, what was once a hope of a major united entity has gone up in smoke. The effects of a failed deal are equally unfavourable to both the companies involved and the cannabis community as a whole. Here are a few of the key drawbacks:
- A Setback for Consumers – The failed merger means that consumers will have less choice when it comes to cannabis products. Without increased competition from the merged firms, prices may stay high, and the same group of companies may end up dominating the market.
- Lost Opportunity for Innovation – Different companies bring different experiences and strengths to the table. The potential of a merged entity had the opportunity to innovate with unique products and services. Now, such potential is gone.
- A Reduced Push for Legalization – When the two companies were united, their combined power could have been used to push for more legalized access to cannabis products, but that opportunity has now dwindled.
Ultimately, the biggest losers with the failed merger are the cannabis community. Not only have consumers lost out, but their prospects of legal access may take longer to be achieved. All these, combined with the absence of a larger, more innovative entity, paints a sobering picture for the industry going forward.
3. Aleafia and RWB’s Plan to Thrive Despite Opportunities Lost
As Aleafia and RWB plan for their future in light of the challenges posed by the COVID-19 pandemic, they have formulated a comprehensive strategy for thriving in the upcoming months and years. The main goals of their plan are to:
- Enhance their digital marketing initiatives
- Strengthen their focus on sustainability
- Broaden their customer base
- Increase their market share
To accomplish these goals, Aleafia and RWB have adopted a multi-faceted approach that emphasizes both short-term and long-term solutions. In the short-term, they are launching a comprehensive rebranding strategy, focusing heavily on digital solutions such as video conferencing and e-commerce. They have also invested heavily in revamping their website and optimizing their online presence.
In the long-term, Aleafia and RWB plan to capitalize on the opportunities presented by the disruption of the global economy. By leveraging their considerable assets and resources, they are working to expand into new markets, build stronger relationships with customers, and find new ways to maximize their potential.
4. Combining Forces: The Future of Cannabis Mergers
Now that the cannabis sector is becoming more regulated and competitive, consolidation through mergers and acquisitions is increasing — with more companies combining forces to stay ahead of the game. This trend presents a promising future for the industry as it allows companies to invest in innovative technology and maximize efficiency for a stronger business.
Mergers provide larger companies with the capability to remain more competitive — with economies of scale and a fund for innovation. Innovations include new cannabis products, delivery methods, and even data-driven systems for cannabis growing. Consolidation of industry players creates a platform for increased professionalization and better-coordinated efforts. Companies can also gain new intellectual property, access profitable market segments, and expand their product portfolio.
- Economies of Scale. Mergers open the possibilities of larger economies of scale. Companies can create better conditions for investment, cost savings, and resources sharing.
- Innovation. Mergers and acquisitions provide the possibility to drive innovation in the cannabis sector — from data-driven cannabis production to the development of innovative products.
- Market Segmentation. Mergers also provide companies with the opportunity to enter profitable market segments and boost their market presence.
As Aleafia and Red White & Bloom flee away from each other, a big question remains: what will happen to the future of cannabis companies as they look for innovative and progressive business partnerships to keep up with the competition? Only time will tell how our industry’s landscape will look in the next few years.