Defense Wins Championships: Why Distribution (Not Branding) Will Determine Who Survives the Cannabis Shakeout

By Eric Offenberger via Cannabis Confidential

69% of cannabis consumers have no brand preference. 18% say brand influences their purchase at all. The durable competitive moat in this business is not the brand on the package. It is the licensed retail door through which that package reaches the consumer.

Editor’s note: Eric Offenberger is the CEO of Vext Science, a multi-state cannabis operator with dispensaries in Arizona and Ohio — which means he has a direct stake in the argument he’s making here. We’re republishing this piece from Cannabis Confidential because the argument is worth the industry’s attention, and because we believe our readers can weigh a strong point of view on its merits. The views are his own.

There’s an old football axiom: offense sells tickets, but defense wins championships.

I have spent the better part of 40 years watching that principle play out in business— first across the steel service center and commodity distribution industries, and now in cannabis.

The flashy play always draws the crowd. The disciplined work always wins the game.

The cannabis industry is still captivated by brands, despite the shakeout playing out across the sector.

Which cultivar will break through?

Which edible SKU will achieve shelf velocity?

Which logo will resonate with the adult-use consumer?

These are legitimate questions—but in a pre-consolidation industry that remains fragmented along state lines and structurally oversupplied, they are the wrong priority.

The structural advantages in this business have not yet been locked up. The operators who recognize what those advantages actually are will be the ones still standing.

My argument is more direct: in a heavily regulated, regionally fragmented, supply-constrained industry, the durable competitive moat is not the brand on the package.

It is the licensed retail door through which that package reaches the consumer.

When the data shows that 69% of cannabis consumers have no brand preference whatsoever—and that only 18% say brand influences their purchase decision at all— what you are looking at is a consumer who walks in the door and decides at the shelf.

That is not a brand story. That is a distribution story.

This may be a contrarian view, or perhaps one some of you are already recognizing, and I cannot prove a negative. But the data, the capital markets, and the history of analogous industries all point in the same direction. Let me walk through why.

The Growth-at-All-Cost Hangover

The first chapter of the cannabis industry was written in an OPM-fueled frenzy.

Other People’s Money.

Capital flooded in from 2017 through 2021 chasing a simple thesis: legalization was inevitable, the total addressable market was massive, and the first movers would lock up brands, licenses, and consumer loyalty before the dust settled.

A word on those brands.

A real brand—in any industry—is not packaging. It is years of consistent consumer experience, earned trust, the kind of customer relationship that survives a competitor undercutting your price by 20 percent.

Building one takes time and discipline that the OPM era did not reward. What the industry largely built instead was high-end design wrapped around a commodity product, and called those packaged products brands.

The distinction matters because investors spent real capital on the premise that those commodity products had durable brand value.

Back to the broader story.

The result was an industry-wide sprint toward scale—cultivation first, brands second— with multi-state operators funded initially by a seemingly endless supply of equity capital.

Once that equity became expensive, they shifted to high-cost debt from private lenders, traditional bank financing remaining largely inaccessible under federal prohibition, and executed sale-leaseback arrangements on cultivation facilities and dispensary real estate to generate liquidity.

These structures locked in significant long-term lease obligations, adding fixed costs to balance sheets precisely when the industry needed flexibility.

The capital markets data tells the rest of the story.

The U.S. cannabis industry is currently carrying an estimated $6 billion in debt, with meaningful maturities concentrated in 2026 and 2027.

The operators who structured their balance sheets conservatively during the growth phase—who avoided locking in long-term fixed obligations at peak valuations—are entering this period with options.

Those who did not are facing a much narrower set of choices.

This is not a story about brands failing.

It is a story about what the growth-at-all-cost era cost the operators who lived it most aggressively.

When Supply Overwhelms the Wholesale Market

The second chapter has been written by Economics 101.

As cultivation capacity expanded across licensed markets, wholesale prices fell—in many cases dramatically.

Across the major U.S. markets, wholesale flower prices declined 30 to 35% between 2022 and 2024, with national prices swinging as much as 21% within a single four-month stretch.

The pattern is consistent and directional: mature cannabis markets are structurally oversupplied, and wholesale prices reflect it.

For operators who built their model around wholesale as a primary revenue driver, that compression has been devastating—volumes up, revenues flat or declining, over a substantial fixed cost base.

The fundamental problem is structural, not cyclical.

Interstate commerce is prohibited, which means each state operates as an isolated supply chain.

Oversupplied states like Oregon and California cannot export their excess.

Undersupplied emerging markets like New Jersey saw wholesale flower prices near $2,600 per pound in mid-2025—roughly triple California rates. The market cannot self-correct across state lines.

And for those waiting on federal rescheduling or interstate commerce to resolve the imbalance—that road is longer than the optimists suggest.

States have powerful incentives to protect their licensed operators, their tax revenue, and local employment.

The pressure to keep commerce within state lines will outlast near-term federal action.

Operators in mature markets need to find a different answer to the imbalance, because the structural inefficiency is not going away.

“The operator who controls the retail door controls the conversation. The wholesale supplier is at the mercy of whoever opens that door.”

The Cable Industry Playbook

I want to step back from cannabis for a moment and talk about cable television, because I believe it offers an instructive parallel in American business history for what is unfolding in our industry.

In the 1970s and 1980s, the cable industry was a fragmented, capital-intensive, heavily regulated business with a simple and powerful characteristic: whoever held the franchise agreement controlled the distribution pipe to the customer.

Content creators—ESPN, HBO, CNN—were important. But they needed the pipe.

The pipe did not need any single piece of content.

John Malone understood this before almost anyone else.

His strategy at Tele-Communications Inc. was not to build better content. It was to acquire cable systems—subscriber relationships, local franchise agreements, and geographic footprint.

From 1973 to 1998, TCI generated a 30.3% annual return, compared to 14.3% for the S&P 500 over the same period.

TCI was eventually acquired by AT&T for $43.5 billion, and its assets ultimately flowed into Comcast, which spent decades consolidating the remaining regional operators into contiguous geographic clusters, maximizing operational efficiency.

The goal was not merely to eliminate competition—local franchise agreements meant cable operators typically did not compete with one another anyway.

The goal was to own the connection to the household.

And that connection proved durable across multiple technological revolutions.

When satellite threatened linear television, Comcast was not dependent on any single content relationship; it owned the customer.

When broadband became the primary product, the same physical infrastructure carried internet traffic.

When streaming disrupted the bundle, Comcast had the subscriber relationship and the pipe to adapt.

The asset was never the content.

The asset was the household connection.

Now apply that logic to cannabis—and let the data do the work.

Per New Frontier Data, 69% of cannabis consumers have no brand preference.

BDSA and Deloitte show that 18% of purchase decisions are influenced by brand.

New Frontier Data also reports that 72% of consumers choose based on THC potency and 64% identify price as a primary driver—two variables the retailer controls through stocking decisions, pricing, and promotional strategy, not the brand.

Consumer purchase behavior consistently reinforces this dynamic—the most price-competitive, highest-potency products on a dispensary’s shelf, regardless of brand, drive the majority of transactions.

The consumer’s loyalty belongs to the store, not to the label.

Cannabis brands are in the same position cable content was in 1985.

They are real, they matter at the margin, and the best ones will find homes on productive shelves.

But they need the shelf. The dispensary does not need any single brand.

The consumer’s loyalty—to the extent it exists—belongs to the store.

They go where it is convenient, where the value is right, where the staff knows them.

What they walk out with is largely what is available, priced well, and supported by an efficient supply chain to that shelf.

That is not an indictment of brands. It is a description of a market structure that permanently favors the distribution endpoint.

Critically—unlike cable, where new technology could eventually route around legacy infrastructure—the licensed cannabis retail door is protected by regulatory design.

It is the platform from which you respond to whatever comes next: federal rescheduling, shifts in consumption format, new product categories.

The franchise agreement in cannabis is the dispensary license.

The state regulatory framework is the territory.

No amount of brand equity changes that math.

Brands change.

The door remains.

Ohio as Proof, Not Postscript

That last point deserves more than a theoretical argument, so let me make it with a specific market.

Ohio launched adult-use cannabis in August 2024 with an existing network of medical dispensaries and a deliberately constrained supply base.

The results were immediate: $675 million in legal cannabis sales in 2024, a 40% increase over the prior medical-only year, with adult-use recreational sales reaching $829 million in 2025 alone.

According to LeafLink market data, Ohio dispensaries averaged $5.8 million in annual sales per store by mid-2025, more than double the national per-store annual average of $2.8 million.

What drove that performance?

The Ohio Division of Cannabis Control prioritized converting existing medical operators before opening new licenses, creating a market where demand grew faster than supply could expand.

Market analysts have noted that Ohio’s success reflects early demand strength coupled with constrained license caps and modest vertical integration—a framework that leads to sustained per-store performance and fewer boom-bust cycles.

But Ohio’s regulatory architecture tells the more important story.

Senate Bill 56 implemented an eight-dispensary ownership cap per entity, mandatory one-mile spacing buffers between locations, and a 400-store market cap that survived a referendum challenge.

These provisions are not administrative details. They are the structural equivalent of a local cable franchise agreement—they cap the number of pipes, define the territory, and make the licenses that already exist genuinely scarce.

This is exactly the regulatory framework that, in cable, separated the operators who built durable businesses from those who did not.

In Ohio, the operator who holds quality dispensary licenses in productive markets has an asset that cannot be easily replicated, regardless of what brands are on the shelf.

Market selection matters here too.

Not every state will structure its market this way, and operators who chose carefully—entering markets with supply discipline and rational license caps—will look very different in five years from those who chased volume in oversupplied states with no structural floor.

Forty Years of Watching This Movie

I have had the good fortune of watching this pattern play out across industries most people would consider unrelated.

Early in my career I worked in consumer goods—a Coca-Cola bottler as an intern, then Land O’ Lakes—before spending decades in the steel service center industry.

Consumer brands, commodity distribution, and now cannabis.

Three different industries, three different product sets, and the same fundamental cycle playing out each time.

The parallels are not abstract to me. They are lived experience.

The steel service center business is a distribution business at its core.

You buy flat-rolled or long products from the mills, process them to customer specifications, and deliver to manufacturers and fabricators.

The brand of steel matters very little.

What matters is whether you can deliver the right material, in the right form, at the right time, with the cost structure to do it profitably.

Every cycle began with capital chasing growth.

New entrants expanded capacity, warehouses multiplied, and service centers competed aggressively for mill allocations and customer relationships.

Then the cycle turned. Demand softened, inventory grew, prices compressed, and the weaker operators — those carrying high fixed costs, poor inventory discipline, and thin margins — were the ones that did not survive.

The operators that weathered those cycles were invariably those who had controlled their costs, maintained their balance sheets, built efficient back-office operations, and secured the customer relationships the market could not easily replicate.

And coming out of those down cycles, they became even stronger because the field had thinned and the consolidators were ready.

Cannabis is playing out the same script, compressed into a shorter timeline because of the regulatory overlay and the capital markets dynamics unique to a federally illegal industry.

“The operators that survive the shakeout and are positioned to consolidate will be those who controlled distribution and managed their balance sheet while everyone else was building brand decks.”

The Balance: Where Manufacturing Meets Retail

I want to be precise about what I am and am not arguing.

I’m not saying product quality, consumer experience, or brand perception are irrelevant.

I’m saying that in a regulated, supply-constrained market, those factors are necessary but not sufficient.

The operator who has invested in a superior brand but lacks control of the retail channel is ultimately dependent on someone else’s willingness to stock and promote that product.

In a market with wholesale price compression, that dependency becomes increasingly unfavorable.

What creates durable advantage is the balance between what you produce internally and what you can sell through your own retail footprint.

A vertically integrated operator who can rationalize cultivation and manufacturing output to match actual retail throughput, rather than producing to wholesale capacity and hoping the market absorbs it, has a structural advantage that no amount of branding can replicate.

You are not at the mercy of wholesale pricing. You are setting your own transfer price, capturing the full margin stack, and matching supply to demand in real time through a channel you control.

The corollary is equally important: the smart operator watches the signals. When wholesale prices compress, that is the supply-demand system sending a message. If you control your own retail outlet, you can respond—pull back cultivation output, shift product mix, protect your margin.

If you are dependent on wholesale sales as a large part of your model, you absorb the compression. The back-office disciplines—inventory management, cost accounting, cash flow monitoring, balance sheet management—are what separate operators who see those signals early and respond from those who see them late and react.

This is not glamorous work.

It does not generate press releases.

But it is what determines who is still standing when the cycle turns.

The Consolidation Thesis

Where does this lead?

I believe the cannabis industry is in the early stages of a consolidation cycle that will ultimately resemble both the cable rollups and the regional banking consolidations of the 1990s and 2000s.

In both cases, the surviving entities were not those with the best product or the most recognizable name. They were those with the most efficient operations, the strongest balance sheets, and the most defensible distribution networks in their core geographies.

The operators positioned to benefit from that consolidation are those doing the unglamorous work right now: rationalizing supply chains, matching cultivation output to retail demand, building back-office infrastructure that scales without proportional cost growth, managing cash carefully, and protecting their licensed retail locations as the irreplaceable assets they are.

The operators on the wrong side will be those still chasing wholesale market share in oversupplied states, servicing high-cost debt and sale-leaseback obligations underwritten on projections that did not materialize, and hoping a brand investment substitutes for the distribution control they do not have.

I have watched this movie before, in multiple industries, across multiple cycles.

The ending is not a surprise.

The only question is which side of it you are on when the credits roll.

The Price Is Never Too High for the Spectator

One final thought, drawn from four decades of making payroll in industries that have seen this cycle before: the price is never too high for the spectator.

There will always be voices—investors, advisors, brand consultants, industry observers—enthusiastically recommending strategies they do not have to execute, obligations they will not have to service and bets they won’t have to cover when the market turns.

Most are collecting fees on the front end.

They are not creating anything.

They are intermediating something someone else created.

There is a useful discipline in remembering where value actually originates.

Economists have long recognized that real wealth is created in three ways: you grow it, you manufacture it, or you mine it.

Cannabis is one of the rare industries that does two of the three.

We grow a plant.

We manufacture it into products.

That is genuine value creation—not financial engineering, not brand storytelling, not a clever capital structure.

The operators who recognize that, who right-size their cultivation and manufacturing to serve their own retail footprint, and control the licensed door through which the finished product reaches the consumer, are the ones building something real.

The shakeout will be uncomfortable.

But for the disciplined operator who has been paying attention to the fundamentals all along, it will also be an opportunity.

Eric Offenberger is the Chief Executive Officer of Vext Science, Inc. and its operating subsidiary Herbal Wellness Center, a multi-state cannabis operator with licensed retail dispensaries and vertically integrated manufacturing operations in Arizona and Ohio. Prior to entering the cannabis industry in 2018, Eric served as President and Chief Operating Officer of Delta Steel, a Reliance, Inc. company. He is a Certified Public Accountant (CPA) and brings over 40 years of experience in operations, finance, and executive leadership across the commodity, distribution, and consumer goods industries.

The views expressed are those of the author in his personal capacity and do not constitute investment advice or a solicitation to buy or sell securities.