Ohio’s regulatory framework for cannabis distribution allows for flexible models: fully vertically integrated businesses, standalone third‑party processors/distributors, and hybrid arrangements combining both. This flexibility reflects careful policy-making aimed at balancing efficiency, quality control, equity, and competition.

Vertical Integration: “Seed‑to‑Sale” Companies

Under Ohio’s medical and emerging adult-use program, operators can hold multiple licenses—cultivator, processor, and dispensary—under one entity, enabling full supply‑chain control.

Advantages:

• Cost efficiency: by eliminating markups across stages, companies save significantly—especially valuable under IRS §280E restrictions.
• Quality control: oversight from grow-room to shelf reduces the risk of contamination and ensures product consistency.
• Operational agility: in-house control speeds up new product development or strain testing, without reliance on external partners.

Challenges:

• High initial costs and licensing complexity: operators must secure distinct licenses across multiple vertical segments, each with their own fees and compliance burdens.
• Multi‑disciplinary management: skilled cultivation, processing, logistical, and retail teams are essential—prompting increased staffing costs and operational complexity.

Example:
Standard Wellness operates dispensaries in Sandusky, Springfield, Cincinnati, along with cultivation and processing in Sandusky County, exemplifying full vertical integration.

Third‑Party or Standalone Models

Ohio’s laws permit standalone processors—entities that cultivate or manufacture cannabis products for sale via separate licensed entities—without direct ownership of dispensaries.

This non-integrated model suits businesses that prefer focusing on core competencies—whether cultivation, product manufacturing, or retail—without the overhead of managing an entire supply chain.

Hybrid Approaches

A third option combines integration with strategic independence. Companies may vertically integrate cultivation and processing while partnering with independent retailers; or they may separately partner processors and cultivators delivering to their own dispensaries.

Ohio’s legalization plan allows level‑I cultivators to hold up to three adult‑use retail locations, while standalone dispensaries with no common ownership of producers are eligible for additional licenses. This enables hybrid brands to scale retail presence without fully owning production facilities.

Why Ohio Offers Multiple Routes

• Economic equity: standalone and hybrid models provide smaller, social equity, or minority operators entry points by eliminating the capital-intensive requirement to own all components.
• Market competition: third-party processors promote competitive product offerings among integrated retailers, stimulating quality and diversity.
• Regulatory fairness: Ohio’s Department of Commerce issues distinct licenses for cultivators (Level I/II), processors (standalone/vert-integrated/plant‑only), and dispensaries, imposing checks at each step.

Future Outlook & Industry Trends

As Ohio transitions to adult-use sales, integration levels may shift. Major multistate operators (MSOs)—like Cresco, Curaleaf, Verano, and Trulieve—are expanding in Ohio by leveraging vertical licenses. However, many licensees remain standalone with selective integration along segments, aiming for agility, reduced risk, and focused investment.

In Review

• Ohio supports three distribution models:
  • Vertical Integration – Full control from cultivation to retail.
  • Third‑Party/Standalone – Specialization in one area without full ownership.
  • Hybrid – Partial integration with strategic partnerships.
• Each model has trade-offs:
  • Vertical: Efficient but capital-intensive and complex.
  • Standalone: Lower entry cost and specialization, but dependent on partners.
  • Hybrid: Balanced flexibility, with moderate coordination needs.
• Business strategy should align with:
  • Licensing limits and availability
  • Capital resources and operational capabilities
  • Long-term goals in both the medical and adult-use sectors

Ohio’s cannabis distribution landscape is built for adaptability—offering opportunities for both large-scale multistate operators and small independent businesses alike.

Learn More: Why Choosing the Right Distributor Matters in Ohio