Lessons From The Financial Troubles Of Cannabis Company Plus Products

Several factors eroded the company’s position in the Californian market

On Sept. 13, California-based Plus Products (CSE: PLUS; OTCQX: PLPRFfiled for protection from creditors under the Companies’ Creditors Arrangement Act (CCAA), the Canadian counterpart to U.S. bankruptcy statutes.

The filing caps a long-running battle to maintain liquidity despite the increasing difficulty in accessing capital markets.

Plus Products enjoyed several advantages early on:

  • An initial entrant into the California edibles market, it had three of the top 10-selling SKUs of any branded product category in first quarter 2019.
  • Management, led by co-founder and CEO Jake Heimark, was well respected, and the company had a tightly controlled strategy of proving itself in California before venturing into other geographies.
  • Its “asset light” strategy appeared to be the prudent way to approach a rapidly evolving market.

What went wrong?

  • Competition eroded the company’s position in the California market. Wyld and Kiva Brands displaced Plus as the top two edibles brands in California, according to Seattle-based data analytics firm Headset.
  • Increasing competition revealed the weakness of the business model of a small, independent brand selling through independent distributors. This structure makes it difficult for the independents to push products onto retail shelves.
  • The COVID-19 pandemic changed cannabis usage patterns. Edibles offer a more discrete method of consumption. But when the pandemic kept more people at home, consumption trends shifted to flower, which benefits from the immediacy of effect and lower cost.

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