Spend enough time around cannabis companies and a pattern starts to emerge. Some operators are constantly raising, restructuring, or explaining why this next phase is going to be different. Others are just running their businesses — profitably, consistently, without much drama. Seth Yakatan has spent enough time under the hood of both types to know the difference isn't luck. It's structure.
On a recent episode of High Touch with Jake and Duffy, he walked through the models he actually sees working right now — not in theory, but in practice, generating real cash flow. There aren't many of them, but they're worth paying attention to.
In a market that's been flooded with product and squeezed on price, quality still cuts through — but only if you've built your whole operation around it. The ultra-premium cultivators Yakatan points to aren't trying to win on volume. They've built their moat around product consistency, brand reputation, and the pricing power that comes with it. He cites Connected as having set the standard for what that looks like at a global level, with a handful of California operators following a similar playbook.
"Ultra premium, high-end cultivators… are all at some level functioning businesses."
It's a harder model to build than it sounds, but once it's working, it's also harder to displace.
The category Yakatan keeps coming back to is what he calls the regional power player — vertically integrated, focused on one or a few states, profitable, and not particularly interested in chasing national scale. He puts the revenue range somewhere between $50 million and $250 million, and rattle off names like Good Day Farm, C3, Standard Wellness, and a handful of Missouri operators doing serious numbers quietly.
"50 to 250 million in revenue, vertically integrated, profitable."
What makes these businesses work is discipline more than anything else. They know their markets, they control their supply chain, and they haven't tried to be everywhere at once. While the big MSOs were stretching across a dozen states and the small guys were struggling to get to scale, these operators were just grinding out margin in their own backyard.
The third model looks more like traditional CPG than anything else cannabis has produced. Instead of owning cultivation, manufacturing, and retail, these brands focus on the brand itself — marketing, distribution, product quality — and leverage existing infrastructure to move across markets efficiently. Yakatan points to Grown Rogue as the highest functioning example of this, and sees the category expanding.
"Highly accretive… and they're all very profitable."
It requires a different mindset than the vertically integrated operators — less control, more partnership — but in many cases it's a more scalable path, especially for brands that have already built real consumer recognition in one market and want to move into others without the capital intensity of building everything themselves.
These three models look pretty different on the surface, but they share the same underlying logic: focus, discipline, and a genuine orientation toward cash generation rather than growth for its own sake. None of them are built around the assumption that the regulatory environment is going to bail them out or that the next fundraise is going to solve the underlying problem. They're just businesses that work on their own terms.
Yakatan is pretty direct about the fact that the gap between operators in this category and everyone else has been widening, and he expects that to continue. The companies that figured out how to be profitable within their existing footprint are going to be the ones with options when the consolidation activity picks up. The ones still waiting for the environment to change are going to have fewer of them.