CYBER MONDAY SALE! Save 20% off all new annual memberships!
The holiday seasons are upon us and youʻve probably been inundated with commercials and advertisements for all sorts special holiday sales…but have you considered getting you and your business a gift of NCIA membership?
This year weʻve got a deal you canʻt pass up if you own or operate a business in the cannabis industry.
Maybe youʻve been putting off the idea of joining because youʻve been busy running your business. Perhaps youʻve been waiting until you got some things in order. Maybe you just havenʻt allocated the money in your budget or maybe your boss just hasnʻt approved it yet.
If youʻve been putting off joining NCIA for these or any other reasons. Donʻt wait any longer.
2019 has been one of the most monumental years for political progress at the federal level cannabis has ever seen.
With the SAFE Banking Act passing through the House of Representatives, several other pieces of cannabis legislation getting hearings in Congress, Illinois passing adult-use legislation and more states signaling theyʻll pass their own legalization in 2020, itʻs never been more critical to support the work we are doing on behalf of your business.
Here are just a few of the benefits of your business joining National Cannabis Industry Association as a member:
National representation from the onlyfull-time government relations team working to pass the SAFE Banking Act and end federal prohibition.
If youʻre ready to join the fight to end federal prohibition and fulfill our mission to promote the growth of a responsible and legitimate cannabis industry, take advantage of this special deal now!
This Cyber Monday special will end tonight at Midnight PT, so donʻt miss out!
Member Blog: Youth Safety is Imperative to the Future Success of the Cannabis Industry
by Joan Irivine, Co-founder and CEO of ResponsiTech
The House Judiciary Committee recently passed the historic Marijuana Opportunity, Reinvestment and Expungement (MORE) Act in a 24-10 vote. After weeks of declining cannabis stock prices and layoffs due in part to counterfeit vaping issues, this vote provided a much needed, bipartisan boost to the industry. However, we need to remember that this is only the beginning of this process and there is still much to be done for our industry to be successful.
For example, this week, the legislators expressed both support and concerns about de-scheduling cannabis, but there was one consistent theme expressed by several of the committee members – youth safety. Representatives Doug Collins (R-GA), Tom McClintock (R-CA), Lou Correa (D-CA), Karen McBeth (R-RI), Debbie Mucarsel-Powell (D-FL), Sheila Jackson Lee (TX-D) and many more expressed valid concerns about youth safety.
As we all know, there have been many challenges for the industry and it seems that we are always reacting to change rather than being proactive about it. However, we now have the opportunity to lead our community when it comes to improving youth safety–especially online youth safety.
Online tools such as parental control filters are already offered by web browsers, Internet Service Providers (ISPs), firewall proxy servers, search engines, and even computer operating systems. Meanwhile, special plug-ins, toolbars and filtering software are widely available. These options are also commonly used to moderate kids’ Internet use in schools, libraries and other public places. However, even conscientious parents equipped with these tools can’t do it alone. Cannabis companies have a responsibility to label their sites that are unambiguously recognizable by parental control systems to reduce access by minors.
One of the issues in making website labeling mandatory is the fact that each state has different regulations. In addition, domestic laws do not apply internationally. As a result, websites operated by foreign companies cannot be required to comply with another country’s, state, or provincial labeling requirements. However, if international cannabis businesses and bloggers adopt a voluntary standard parental filtering label, proactive industry self-regulation can accomplish what governments can’t.
With parents implementing parental filters, and the industry installing standard parental controls, we can work together to reduce children’s access.
Moving forward, what does ResponsiTech recommend for companies in the cannabis industry? To start:
Continue to use self-affirming age gates for initial entry as a secondary safeguard.
And of course, use an age verification service for any purchase; including both online and delivery services.
Let a qualified marketing compliance expert conduct an audit of all of your brand’s Internet and social media profiles.
Like it or not, media, parents, and legislators consider vaping THC and nicotine as the same issue, even though minors obtain THC products from the illegal and counterfeit markets. Licensed e-cigarette retailers use various forms of age gates and verification to prevent youth access. We suggest that the cannabis industry incorporate policies that we established for another industry and Juul has included in its new marketing policies:
Do not feature images or situations intended for a youth audience.
Campaigns depict appropriately aged individuals.
Do not use cartoons, caricatures, or other designs aimed at attracting minors.
Ensure responsible placement of our product designed to limit exposure to an underage demographic.
Support and comply with all federal and state regulations to prevent sales to minors – this includes stringent third-party age verification for online sales.
Use social media responsibly to ensure content is targeted to adults while limiting engagement by youth.
Our industry needs to establish its own standard online youth policies before our legislators do. Let’s take the lead and make it happen.
I have written several recent articles about Online Youth Safety which provide more details:
Joan Irvine, ResponsiTech Co-Founder & CEO, brings over two decades of policy development, government relations, and advocacy for online child protection in ‘high-risk’ industries to the cannabis industry. She successfully spearheaded an international award-winning parental filtering label and worked with First Amendment, Internet Security, and Privacy attorneys and international law enforcement to establish online child protection. Learn more about us on our site, LinkedIn and Facebook.
Member Blog: Cannabis Business Security – Going Above and Beyond
In 2018, Sacramento CBS reported crooks stole $80,000 worth of cash and cannabis products from TotalLeaf Inc. after circumventing the facility’s alarm system and video surveillance technology.
Christopher Cohen, owner of the Sacramento-based cannabis manufacturing and distribution company, told the news outlet his security plan passed muster with state and local authorities, but noted the company upgraded its security after being robbed. The edibles-to-oils manufacturer has added steel doors, additional security cameras, alarm systems, fences and bolted-down safes. The firm also hired a private security company to watch over the property 24 hours a day, seven days a week.
Commercial cannabis businesses, like TotalLeaf, are prime targets for burglary, robbery and internal theft. This is not surprising in a cash-based industry with a flourishing black market. Commercial cannabis business operators must maintain stringent and customized security strategies that go beyond state and local minimums to fully protect their businesses from crime.
In states where cannabis is legal, the first step toward acquiring a commercial cannabis license is meeting state standards. However, a growing number of local communities are expanding on these bare minimums and applying a wide-ranging set of additional security requirements for commercial cannabis businesses. Emerging local regulations incorporate specific design elements, lighting standards, manpower requirements, and heightened camera and alarm standards.
Regulations vary by municipality. Regarding design elements, local entities typically require the use of door-redundant screening areas, internal/secure loading areas, and reinforced product storage rooms. A minimum exterior lighting standard of 1.5-foot candles of LED, white luminance, and prohibitions against up-lighting and light trespass are also common. Some localities even demand one or more armed, or unarmed, security guards on the premises, during business hours and sometimes around the clock.
Gaps remain though local regulations are more stringent, says Matt Carroll, President of Carroll Consulting and Director of Compliance for Seed to Sale Security. Carroll, who develops security plans for cannabis operations, finds, “There is little value in meeting state (and local) standards just to check a box for compliance. Operators seeking to enjoy peace of mind and asset protection will approach security planning from two different perspectives: technical compliance and actual security. Existing regulations do nothing substantive to deter burglary, robbery, or to protect the safety of those working within or visiting a commercial cannabis business.”
But what does going beyond security requirements actually look like? This article investigates how cannabis operations can better harden their security by voluntarily meeting additional requirements for security cameras, access control and alarms.
More Security Camera Coverage
State-level cannabis regulatory bodies typically demand a basic level of surveillance coverage for access points and limited access areas, which are spaces where operations process, store or transfer cannabis goods. Most local authorities expand this requirement to include security camera coverage on all sides of the building, adjacent thoroughfares, and more thoroughly throughout the interior.
States also set a minimum resolution for security cameras. For instance, California requires a minimum resolution of 1280×720 pixels (e.g. 1 megapixel). Herein lies the problem: Any minimum megapixel standard predisposes operators to meet the minimum standard and little else. But, doing so may not achieve the goal of “certain identification” as expressed in the regulations.
Security camera megapixel ratings mean virtually nothing. For certain identification to take place, companies must also factor in the distance of the targeted viewing area from the camera placement, and the camera angle, lens quality and compression rates.
For positive identification in idyllic lighting conditions, security cameras must meet a minimum standard of 60 pixels. For night mode, positive identification demands up to 90 pixels per foot. This is what matters: pixels per foot (PPF) at the target, not the camera resolution. IPVM, an independent research group, has developed a great video to drive these points home.
Regulatory agencies hoping to get footage of value from crimes in cannabis settings would be wise to adopt a PPF standard over an overly simplistic megapixel standard.
Better Access Control
With access control, state regulations typically require walls, doors and commercial-grade locks. They also expect operators to maintain a log of visitors and those accessing video surveillance systems. More stringent access control regulations are few and far between.
Though reasonably priced biometric and electronic key systems are readily available, hand-written logs meet most state and local regulations. However, manual logging is unreliable. Using a manual system, coupled with PPF-ignorant video standards, puts access control on the honor system.
Responsible operators fill the gaps regulations ignore. These business owners reinforce storefronts and roll-ups with K4 or better rated bollards to deter vehicular intrusion. They install solid-core doors at all exterior access points and at internal doors leading to limited access areas. They equip doors with pry-resistant latch covers and automatic closing devices. They reinforce shared walls to prevent tunneling and they fortify product/currency storage rooms.
They also use electronic access controllers that limit staff to areas of relevant roles and to the days and hours when employees work. They reduce opportunities for human complacency to override their access control strategies from initial design, to technology, to supporting and enforcing policies.
Improved Alarm Systems
Short of mandating that operators install an alarm system that is operational after hours, most states establish no standards for monitored intrusion alarms at commercial cannabis businesses. This is another area where applicants can fill in the gaps.
Some jurisdictions mandate a specific Underwriter’s Laboratory (UL) standard for intrusion detection and robbery alarms.
Beyond meeting UL standards, it’s also important to extend the focus of an intrusion alarm system beyond exterior access points. Offenders can come in the form of stowaways concealing themselves inside until closing. They may be employees accessing areas they shouldn’t or third parties who find less expected ways to access the premises, such as tunneling through walls or ceilings and misappropriating ventilation shafts.
A properly designed alarm strategy protects against these situations by establishing various partitions, allowing for “home” and “away” modes, and setting aside areas for management-only access. Even while occupied by workers, certain areas of the premises, such as product or currency storage areas, should remain under alarm monitoring.
Finally, a thorough alarm system abides by UL Standard 681, incorporating contact points at every door; sufficient motion detectors to detect movement in any direction, in any area of any room; glass break sensors; ventilation protection; and panic alarms at vulnerable positions, such as the entrance, loading areas, product/currency storage areas and the management office.
What more can you do?
Responsible cannabis operations also seek to elevate the safety and security of the entire industry.
This includes lobbying at the state level for severe criminal penalties against those engaged in the black-market trade. Public acceptance of cannabis often leads prosecutions to fall flat as jurors shrug about black-market activities. Black-market operators also view the limited penalties as a cost of doing business. But, as long as the government handles black-market cannabis retailing with kid gloves, criminals will target legitimate operators for their stockpiles of Grade-A product.
It also includes lobbying at the local level for more stringent security standards. Offenders who reap the rewards time after time an area will continue to target that area. But if cannabis business owners’ partner with local authorities to tighten up safety and security standards, their businesses become an environment where the juice is not worth the squeeze for offenders, ultimately driving their crimes to regions with less formidable targets.
Finally, it includes teaming with proven security experts who work in the cannabis space; following their best practices, developed based on real-world experiences; and teaching others in the industry to do the same.
Patrick Chown, is the Founder and President of Seed To Sale Security, a national cannabis security company offering security consulting, security plans, and security system installation to customer’s in 30 states. With cannabis-specific technology and a proficiency with regulatory compliance state by state, Seed To Sale Security makes sure your cannabis business stays safe, secure, and compliant.
Member Blog: Hemp and Marijuana Genetics – A Closer Look At The Differences
There are many ways to classify cannabis variants, but the most popular distinction is between hemp and marijuana. Although most of us take these classifications for granted, perhaps you’ve wondered if they are really legit? Put another way: are there real genetic and anatomical differences between marijuana and hemp? And, if so, what are they?
The hemp/marijuana classification is still a major debate within the cannabis community. Although up-to-date research suggests there are genetic differences, critics contend these distinctions have much more to do with legality than botany.
To better understand the complexity of the hemp v. marijuana classification, let’s quickly go through a primer on the cannabis genus. Afterward, we’ll take a closer look at the differences often associated with hemp v. marijuana and why these terms have gained such prominence.
The Basics Of Cannabis Distinctions
The first thing we should clear up is that the word “cannabis” is reserved for the plant genus. This means that both hemp and marijuana technically fall under the cannabis label. For many years, botanists have categorized the cannabis genus into the following three groups:
Cannabis sativa
Cannabis indica
Cannabis ruderalis
Of these three, sativa and indica are probably the most familiar to you. Usually, cannabis connoisseurs draw the sativa v. indica distinction to help differentiate the physiological effects of each strain. Sativa-heavy strains are said to be more energizing while indicas are supposedly more sedating.
It’s important to remember, however, that sativas and indicas were first split up due to their flowering patterns and features. Here are just a few of the key distinctions often ascribed to these two cannabis variants:
Indicas
Short
Fat leaves
Fast-growing
Enjoys mild climate
Sativas
Tall
Thin leaves
Slow-growing
Enjoys a humid climate
Ruderalis is a shrub-like variety of cannabis that evolved in harsh northern environments. Due to its history in regions with little light or warmth, ruderalis strains evolved unique genetics that allows them to flower automatically rather than relying on specific amounts of light.
Cultivators nowadays cross-breed ruderalis strains with indicas, sativas, or hybrids to create what are known as “autoflowering seeds.” These auto varieties are convenient due to their predictable flowering period, but they tend to have fewer cannabinoids than standard sativas or indicas. Most often new cannabis cultivators use auto seeds to gain valuable growing experience.
Hemp v. Marijuana: The Legal Distinction
So, why do we need a hemp v. marijuana distinction on top of all these cannabis varieties? A short answer is that drawing the line between hemp and marijuana helps a lot in the legal department.
You see, hemp is legally defined as a substance containing less than 0.3 percent of the high-inducing compound tetrahydrocannabinol (THC). Marijuana, on the other hand, could have 0.3 percent THC content or above.
Obviously, this makes it a lot easier for legal authorities to categorize what is and what is not legal. As of today, the U.S. legalized hemp at a federal level, but marijuana laws vary by state.
Beyond THC: The Different Uses Of Hemp V. Marijuana
This all doesn’t mean that the hemp v. marijuana distinction was arbitrarily drawn up to help legislators. OK, the 0.3 percent benchmark was pretty arbitrary, however, it’s true that hemp naturally produces less THC than marijuana strains. But there’s more to this story than just THC.
Now that the CBD market has skyrocketed, it’s often hard for us to imagine non-edible uses of hemp. However, for most of human history, hemp has been cultivated strictly for industrial purposes. Indeed, people have used the hemp plant’s fibrous stalks to make clothing and rope for thousands of years. Amazingly, hemp is now showing great potential in a variety of fields including papers, plastics, cosmetics, and even fuel.
Marijuana, on the other hand, has always been associated with recreational and medical use. Growers who cultivated marijuana were always interested in maximizing certain terpene and cannabinoid profiles for their chosen strain.
So, the distinction between industrial hemp and marijuana is still valid and useful as the cannabis industry expands. Growing hemp for industrial purposes is far more interested in quantity rather than quality. Marijuana cultivation, on the other hand, requires a greater degree of care and attention to detail.
Industrial hemp cultivators could often get away with planting their male and female seeds in rather tough environments. Professional marijuana cultivators, on the other hand, need to focus a lot of attention on making their environment hospitable for female seeds.
Of course, there are now many high-CBD hemp cultivators out there using similar marijuana grow methods. With that in mind, it’s still quite useful for cultivators to distinguish between industrial hemp and marijuana to better plan their growth cycle.
Does Hemp Look Different Than Marijuana?
Now we know how hemp and marijuana differ in THC content, growth features, and traditional uses… but do they look different?
To the untrained eye, mature hemp and marijuana might appear to be the same. Indeed, there are many cases of police accidentally arresting truck drivers for “marijuana possession” when they were actually transporting hemp. There are, however, a few key anatomical differences to look out for.
For instance, hemp plants are generally taller than most varieties of marijuana. Remember that many cultivators are interested in hemp’s fibrous stalks, which is why they’ve bred them to grow as tall as possible.
In addition to their height, hemp plants also tend to have thinner fan leaves compared with most strains of marijuana. These hemp leaves also tend to be concentrated at the top of the hemp flower with few leaves further down the stem. Marijuana plants, on the other hand, tend to have more leaves evenly spread throughout their branches.
Looking Into The Genes: Novel Research On Hemp v. Marijuana
After reading the above description, you might understandably conclude that hemp strains might lean more towards the sativa side. After all, sativas are typically associated with tall height and thin leaves.
While this makes logical sense, recent genetic research is changing how we think about the sativa v. indica theory. A team of Canadian researchers recently published a study examining the genetic makeup of over 80 marijuana and about 40 hemp strains. Shockingly, they found that hemp plants have a closer genetic tie to indicas rather than sativas. Most marijuana strains, however, showed a mix of sativa and indica influences.
The scientists concluded that there was enough of a genetic difference between hemp and marijuana strains to warrant the classification. Of course, more research will be necessary to understand these complex hereditary differences.
So, Is The Hemp v. Marijuana Distinction Valid?
While there will likely still be a debate about the hemp v. marijuana distinction, this classification system is popular for good reason. Also, there appears to be a scientific basis for grouping hemp and marijuana into separate genetic categories.
Distinguishing between hemp and marijuana can help consumers make a more informed decision when purchasing hemp flowers, hemp trim, oils, or other products. Plus, with the growing interest in hemp’s industrial uses, it’s important for farmers to separate out strains for industry and those for human consumption.
While it might not be a perfect classification system, “hemp v. marijuana” is still around because it continues to help cultivators and consumers make informed choices.
George Mouratidis is a cannabis writer and freelance contributor to Industrial Hemp Farms, Cannabis Tech, and Highlife Media.
IHF LLC is a Colorado-based, fully licensed & certified hemp farming and wholesale company. IHF wholesales CBD hemp biomass and many different cultivars of clones and seeds. The Company also wholesales CBD distillate, T-Free, Decarboxylated Crude, Isolate and other cannabinoids produced at our extraction facility. One of our primary goals is to make mutually beneficial deals, connections and contacts in the hemp industry.
Member Blog: Are Women In Cannabis Facing Some Headwinds?
So far, the cannabis industry is willing to elevate female executives more than other industries. And it’s been this way since adult-use legalization started to spread among states in 2014. That’s when a huge opportunity opened up for people with some leadership experience and a cool idea. Women who had hit a glass ceiling in more traditional industries saw a chance to make a rewarding career shift. Long-term success isn’t a given for anyone making this move, but it’s easier to get in and get noticed if you have a niche product, a specialized service, or fill a particular wellness need.
I fear the inroads women have made for higher ranks at canna companies are getting needlessly tougher. As our industry continues to mature and expand, larger amounts of funds are needed to get a business off the ground or scale a business, but securing funds could become harder if you’re female.
From the moment I first started helping cannabis companies, I was riveted by its diversity and inclusion. In my years of working with some of the most innovative companies in Silicon Valley, I was used to male-dominated cultures. It didn’t matter what I role I held — I started as an engineer in aerospace and later became involved in operations, marketing and sales, and professional services — a lopsided imbalance was often in play.
But with cannabis, this industry has seen a higher proportion of women rise to great heights. More than one-third of executives at cannabis companies are female. That’s remarkable when you also take into account that females hold only 21 percent of senior-level roles at other types of companies, according to Marijuana Business Daily survey figures. On a more anecdotal level, however, I suspect from what I’m hearing that the gains women have made could waver. With industry maturity, even at this early stage, comes the zealous interest of deeply pocketed investors (most of them men).
Why the Shift?
Female leaders in cannabis have made great strides, but history threatens to repeat itself. For instance, this statistic would make anyone wince: Female founders across all industries acquired only 2.2 percent of venture capital in 2018, according to PitchBook. And those who are able to get the funding they need don’t get as much as men in the same position.
We’re in the midst of rapid growth, and big-name investors are noticing. While I don’t want to generalize, it’s widely known that investors are more likely to be white males. This puts the more equitable playing field created by cannabis at risk.
In some ways, it’s natural that as more money comes in, there would be a shift. That’s the tradition, as more men have traditionally beendominantin business. I don’t buy into this tradition and it’s what attracted me to the industry — the cannabis industry is known for being non-traditional. We’ve been cracking glass ceilings and we’ve been shedding corporate conventions. The result has been fast growth, satisfied customers, and innovative products. I think we can attribute some of that to the diversity at work.
How can we ensure that women get their fair share? There are loads of opportunities here for entrepreneurs and seasoned executives, across genders, to make their mark. What matters less than someone’s gender is the ideas they have, their plan for making their business thrive, and whether they have a solid foundation for truly understanding the company as they make big decisions. When you encounter women entrepreneurs, I encourage everyone to give them a shot, hear out the business plan, and assess the opportunity they’re presenting with an open mind.
There is still time to build upon the momentum women have made. Let’s all, especially men and investors, make a concerted effort to fully support women-led businesses and recognize the need for diverse talents and skillsets. I made a similar call in a blog post for my firm, and I was pleased with the reaction — it really hit a nerve. Women in our industry clearly want to talk about this. The consensus is that when different perspectives are voiced, smart ideas and decisions rise to the top.
As vice president, Maureen Ryan leads the business development functions at Kukuza Associates, a finance and accounting firm dedicated to the needs of cannabis companies. She spearheaded Kukuza’s parent company’s (RoseRyan) 2014 entrance into the cannabis marketplace and developed Kukuza’s finance solution to address the common pain points across cannabis companies. Check out the Kukuza Rapid Diagnostic to find out if you have the right finance pieces in place to scale your business.
NCIA Board of Directors Results Are In
The results of NCIA’s 2020-2022 Board of Directors nominations process are in!
Earlier this year, we announced a new application process for our annual Board of Directors nominations. We are appreciative to have received so many very thoughtful and impressive applications from over 50 NCIA members seeking to fill eight available seats.
Candidates not chosen during the selection process may now seek an independent nomination to go before a vote of the NCIA membership. Independent candidates must get the signatures (electronic) of 3% of the membership in order to qualify for the ballot.
If no qualified independent candidates are received by December 20, the slate of nominees recommended by the Board of Directors shall be declared members of the Board of Directors and shall commence their term in January 2020.
If one or more qualified independent candidates qualify, all candidates will be presented to the membership for an election in late December.
For information on the process or instructions on seeking an independent nomination, contact NCIA’s Hilary Srole at Hilary@TheCannabisIndustry.org by Friday, November 22.
Stay tuned!
Video: NCIA’s 2019 Year In Review & Announcing 2020 Dates
2019 was quite a year! We’d like to take a moment to thank all of our attendees and the sponsors who made our events possible.
Were you one of the 15,000 attendees at our 15 Industry Socials, 15 Cannabis Caucuses, and 3 Conferences & Trade Shows this year across 20 states and 27 cities?
Watch this video recap of 2019 with NCIA’s Director of Events, Brooke Gilbert, and Events Manager, Brian Gilbert.
The rapid growth and ever-evolving nature of the cannabis industry has resulted in wild and hyperinflated business valuations, making it extremely difficult for companies to zero in on a fair valuation as they seek to acquire or be acquired in the up-and-coming field.
What can cannabis companies do to counter overinflated valuations as they pursue an exit or acquisition strategy? The best approach is to better understand what investors are looking for when they evaluate a company for a potential merger and acquisition deal.
Many Ways to Determine Value
Pinpointing the value of a business is not an exact science. Investors rely on a variety of methods and evaluation techniques to help them land on a fair valuation. Let’s break down some of the most common methods.
Discounted Cash Flow: A Discounted Cash Flow (DCF) analysis attempts to determine a company’s value today based on projections of how much money it will generate in the future.
Market Transaction: This method estimates a company’s value by comparing the business to similar companies in the marketplace. This approach works really well with publicly traded companies.
Adjusted Net Asset Method: A company’s value is determined by analyzing the net value of its assets minus any liabilities.
Revenue Multiplier/EBITDA: A company’s value is determined by dividing its revenue multiplier ratio by its earnings before interest, taxes, depreciation, and amortization (EBITDA).
Unique Cannabis Challenges
Because of the unique nature of the cannabis field, each of the above-mentioned valuation methods come with their own challenges when applied in the industry.
Discounted Cash Flow: Because cannabis businesses’ operating costs are so high and their margins are so slim, a DCF analysis will likely produce a more modest valuation than some of the eye-popping ones seen throughout the industry in recent years. But that doesn’t mean it’s unfair or wrong. DCF analyses take into account the current realities of U.S. tax code and the impact it has on costs and earnings.
Market Transaction: A market method should not be used by cannabis companies in pinning down a valuation because cannabis companies that have gone public — most notably in Canada — have not been able to sustain their sky-high IPO values, which raises concerns that they were overvalued. Also, public cannabis companies north of the border have seen their values plummet in recent months because big promises of heady market growth don’t seem to be coming to fruition.
Adjusted Net Asset Method: While this method can be beneficial for certain cannabis businesses with a lot of assets (cultivators, for instance) one potential downside is it assumes the value of the company is simply the value of its assets and does not take into account any potential for future earnings.
Revenue Multiplier/EBITDA: This is currently the most widely used valuation method in the cannabis industry and is likely going to be used in tandem with another valuation method. That’s because EBITDA eliminates the impact of tax restrictions under IRS tax code 280E. It allows investors to look at a company’s hypothetical profitability for when those tax issues are eventually resolved. Most professionals in the cannabis industry agree those tax and legal issues will be eliminated in the next five to eight years. The risk or challenge with this method, then, lies in if that timeline ends up being longer than expected.
Other Valuation Considerations
Evaluating a company’s valuation is a multifaceted approach. Investors often rely on a hybrid approach, using more than one of the standard valuation methods. But they also take into consideration other metrics that have little to do with the bottom line. Some of those include:
Management Team: Who’s on your board? Who are your top executives? Investors take a look at management before any other metric. Because of the industry’s legal haziness, investors want to see legitimate industry expertise on boards and management teams.
Brand Loyalty: Brand loyalty is big in cannabis. If buyers find a strain they really enjoy, they are more likely to try other strains from the same brand when the preferred product is out of stock. Investors will look at how companies measure brand penetration as part of their due diligence.
State of Financials: How quickly are you able to produce them? Is your accounting managed through a cloud-based system? Are your company’s financials messy? Unbalanced? Clear and organized financials are important, as is responding to investor requests in a timely manner. Otherwise, an investor will get the impression that you are disorganized and don’t truly understand your business — which can have a huge impact on any potential valuation.
Be Your Own Advocate
Whether a cannabis business operator is pursuing an acquisition or an exit, it’s important to understand the standard approaches investors take when evaluating such opportunities. Also, don’t be afraid to suggest a particular valuation method or approach to potential investors. Ultimately, nobody knows your business better than you — it’s vital to be your own best advocate.
Advocating for your business and having a better understanding of the valuation process will go a long way toward landing on a fair valuation for your business.
Melissa Diaz is a co-founder and CFO of Arizona-based Rebel Rock, which provides cannabis businesses across North America with specialty accounting solutions, income tax services (U.S. only), CFO and controller services, and business system implementation. She guides companies of all sizes through GAAP compliance, financial modeling, financial reporting and general financial accounting inquiries and functions.
In addition to leading Rebel Rock, Melissa co-founded Rebel HR, which provides cannabis companies with technology-based HR solutions. She is also a partner in High Rock, a likeminded accounting firm focused on cloud technology integration. Melissa has additional experience as a financial statement auditor with a large international accounting firm, providing audit services for domestic and international businesses. Further, Melissa has experience overseeing global revenue and receivables for a Fortune 500 company.
Melissa earned a bachelor’s degree in Accounting from University of Arizona and a master’s degree in Accounting from Arizona State University.
NCIA’s Safe Vaping Task Force Submits Testimony
Last week, the Center for Disease Control (CDC) identified a probable proximate cause of recent vaping injuries and deaths. Simultaneously, the United States Senate (HELP Committee) noticed a hearing for tomorrow (Wednesday) on the vaping crisis, where CDC officials will testify.
NCIA Policy Council’s Safe Vaping Task Force has submitted testimony for the record, which can be found here.
For weeks, NCIA’s Policy Council has been calling for de-scheduling and regulation at the federal level to displace the illegal, untested, unregulated illicit market. It’s time for Congress to act. We can no longer sit by and watch as people are sickened by unregulated, untested, and dangerous products from the illicit market.
As of now, ten states have legalized recreational cannabis. Twenty-one other states allow medicinal use of cannabis, many of which are expected to legalize recreational cannabis in the near future. Investment in cannabis-related businesses totaled almost $10 billion in 2018 and is expected to top $16 billion this year.
Patent Protection
A patent, and the exclusivity it provides its owners can play a key role in assuring success for cannabis-focused businesses. However, protection and enforcement of cannabis-related patents faces unique challenges, since, despite its recent and spreading success at the state level, cannabis is still illegal at the federal level, while most intellectual property protection, as well as enforcement, is federal. Nevertheless, cannabis-focused businesses can benefit from patent protection.
Patents protect inventions, which meet the required criteria of utility, novelty, and non-obviousness. The four main categories of patents, including Utility Patents, Design Patents, Plant Patents, and Business Method Patents, are available to protect cannabis-related inventions. Despite illegality under federal law, the USPTO has been issuing patents for cannabis-related inventions for decades; a trend, which has significantly accelerated with the spread of legalization at the state level.
Recent examples of issued cannabis utility patents include USPN 10,028,987, issued on July 24, 2018, entitled “cannabis-infused milk,” and USPN 10,206,888, issued February 19, 2019, entitled “A cannabis-based therapeutic product for the treatment of chronic pain produced by separating hash resin from plant material of the cannabis plant.”
Plant patents protect new varieties of plants. USPN PP27,475, issued on December 20, 2016, is entitled “cannabis plant named ‘Ecuadorian Sativa’.” According to its specification, “The new strain has energizing and motivating psychoactive effects.”
Design patents protect ornamental, aesthetic and non-functional aspects of useful products. Design patents can protect cannabis-related products such as smoking paraphernalia and containers. For example, USPN D844,892, issued on April 2, 2019, issued for a “cannabis container,” and USPN D798,739, issued on October 3, 2017, is directed to a “cannabis storing container with individual tear-off lids.”
With issued cannabis patents multiplying, enforcement efforts have followed suit. Because patent enforcement disputes are predominantly within the jurisdiction of federal courts and cannabis remains illegal at the federal level, there have been questions as to whether a patent suit can be maintained in Federal court. The answer appears to be affirmative. Following several patent infringement cases, which were filed but then voluntarily dismissed prior to substantive court action, Cannabis Corporation sued Pure Hemp Collective, Inc. in federal court in Colorado. That case is still pending and recently survived a motion for partial summary judgment filed by Defendant Pure Hemp Collective Inc., where the court found that the asserted claims were subject matter eligible for patent protection.
The trend in the issuance of cannabis patents by the USPTO and enforcement by federal courts presents a unique opportunity to entrepreneurs, businesses, and investors to participate in the growing market on the “ground floor.”
Dr. Dariush Adli, Ph.D., Esq., is the Founder and President of ADLI Law Group. Recognized as a premier strategist in patent, trademark, copyright, trade secret, and complex commercial disputes. Dr. Adli is widely sought after by businesses large and small, seeking effective strategies for protecting their valuable intellectual property assets. In that effort, Dr. Adli partners with businesses to identify their protectable intellectual property assets and to develop customized legal strategies, which are consistent with the businesses’ goals, resources, and risk tolerance.
ADLI Law Group is a multi-service law firm providing legal services in the areas of Intellectual Property (Patent, Trademark, Copyright and Trade Secret), Corporate and Commercial Transactions, Labor & Employment, Media and Entertainment, Real Estate, Construction, Products Liability, and Cannabis. Since its inception in 2010, ADLI Law’s mission and focus has been on providing quality client service and maximizing the value of its legal services to clients. We appreciate the trust and confidence our clients’ place in us, which has earned us a place on the highly coveted and competitive Los Angeles Business Journal’s list of the top 200 law firms in Los Angeles county.
Video Member Spotlight: AgriScience Laboratories
In this month’s video member spotlight, step into the cannabis and hemp testing labs of AgriScience Laboratories, based in Denver, Colorado. AgriScience Labs was created as a merger of two laboratories: CMT Laboratories and Terra Health Care Labs. CMT had been operating since 2011 and was known as a leader in science and customer service during that time. Terra Health Care Laboratories (THCL) was the first certified testing lab in the United States, and they were known for state of the art equipment, methods, and facilities. Learn more about the company’s testing methods and values from Frank Traylor, Founder & CEO, and Laboratory Director Claire Ohman.
Member Blog: Stop The Illicit Market With Profitability, Save Lives
By now, we’ve all seen the concerning vape cartridge illnesses and deaths across various states. While the exact cause is still being determined, our industry has an opportunity to step up our game. So the question we must ask ourselves is: how can the cannabis industry help to prevent potentially dangerous illicit market cannabis sales?
The everyday consumer is seduced by lower-cost alternatives and some turn to the grey market with an assumption of safety. “If the price is half as much, why not?” wonders the consumer. Unfortunately, tragic examples slapped us back to reality and we are now seeing all too clearly the downsides of the laissez-faire approach that feeds the grey market. Low cost is good, but people are dying. This is where our crisis is real.
Safety protocols, procedures, regulations, and oversight, applied to the old methods of production, lead to increased costs that are duplicated on the way through the channel. High taxes multiply that effect, serving as a barrier to the consumer. The illicit market circumvents the bureaucracy and offers a lower cost that meets consumer demand at an increased risk.
Lower Production Costs = Lower Costs For The Consumer
As the end of cannabis prohibition nears, we have to remember that long before we had added regulations and government overhead, proponents of legal cannabis emphasized the medicinal value of the plant, for treating everything from chronic pain to post-traumatic stress syndrome. What started as a simple plant that grew outdoors with free sun and water has evolved, with numerous controls added to regulate, generate tax revenue, and improve the odds that this new medicine is safe. As well-meaning as those precautions are, they have added significant cost to the wonder drug through legal channels. Our best hope for migrating consumers away from dangerous shortcut products is to get a handle on production cost and make it easier for cultivators to follow the rules and enjoy profitability.
It pains all of us when we see the recent spate of illnesses — even deaths — increasingly associated with vaping cannabis, despite the fact that the majority of health issues appear to stem from the illicit market. If we don’t fix this, the market will be severely impacted by either consumer avoidance or government fiat. I’m proud to see that NCIA is taking a lead role in communications around this critical issue and in the fight to deschedule cannabis and enacting federal regulations at a reasonable cost, protecting consumers from potentially dangerous illicit cannabis distribution.
Raise The Quality, Lower The Cost Of Production
Safety, of course, has been and always will be a key concern of the legal cannabis industry. But as our industry grows up and competitive pressures bear down, we can’t afford to shortcut our responsibilities. Running a grow operation is full of potentially harmful contaminants that can strike at any time. Producers need to choose ways to protect their investments with safe operational procedures and new technologies that guarantee both safe and superior products for our customers. At a lower cost!
Where there is a need and a business opportunity, innovation will rise to the challenge. The vape crisis points to an urgent need for low-cost yields and profits for legal cannabis producers. This can be achieved through a highly controlled aeroponic approach for consistent, pure, clean yields that exceed regulatory and medicinal requirements. Using advanced technology, the cost of production can be reduced to as low as $0.30/gram, and the result is legal cannabis that can enter the channel at much lower cost at levels where the illicit market can’t compete, and legal producers can profit.
Fully automated environments, nutrients, pH, air, lighting, humidity, temperature — are all monitored and adjusted through software-controlled electromechanical systems in a soil-free environment. With minimal labor required, contamination risks are low, natural contaminants won’t take root and heavy metals and pesticides can be excluded from the environment.
Indoor aeroponic grow systems represent a sea change for many longtime growers and modernizing the industry means new opportunities. New technology replaces labor-intensive efforts with cruise control automation in an efficient climate-controlled environment. Cutting corners proves to be costly while the rewards for doing it right are considerable: precision fast-turning superior yields — and a dramatic reduction in the potential for contaminants to wreak havoc and impact safety.
We all know that risk is part of any business, and that a key element of our jobs is to reduce risk and cost for our customers. Growing in a highly controlled indoor environment at lower cost to the consumer can dramatically mitigate your risks so you, and your customers, can breathe easier, and we can ensure cannabis remains safe.
Phil Gibson, Vice President of Marketing has 30 years of sales, marketing, and channel experience with 3 years at AEssenseGrows, and is known as the creator of the WEBENCH online design environment now owned by Texas Instruments. Previously, Phil held executive marketing positions at Infineon, TI, and National Semiconductor. With 8 patents in web technology, Phil is an expert in digital marketing and built his first web site in 1995. Phil holds an MBA from the University of Southern California and a BSEE from UC Davis.
Member Blog: Sustainable, Indoor-Grown Cannabis Starts with LEDs
Despite cannabis’s down-to-earth appeal, it hasn’t been as friendly to the earth as one might assume. But cannabis growers have always been resourceful, and with recent developments in technology and improved growing methods – including full-spectrum LED grow lights – the cannabis industry is becoming increasingly sustainable. The end results? A healthier environment, better products and a notable cost reduction. It’s a win-win-win.
Cannabis’s Carbon-Intensive Past
Between staggering electricity usage, a ballooning carbon footprint, a habitually gratuitous use of pesticides and toxic runoff decimating local ecosystems, the cannabis industry hasn’t been the best steward of the environment. As more states pass adult-use and medical laws across the country, this seemingly blameless plant has come under scrutiny from environmentalists, consumers and policy-makers alike.
Evan Mills, Ph.D., is regarded as one of the leading minds in cannabis industry sustainability issues. A California-based energy and climate change scientist, he authored a landmark and frequently cited report in 2012, “The carbon footprint of indoor Cannabis production,” highlighting the cannabis industry’s not-so-green track record. The report devotes a few hefty paragraphs to indoor lighting needs at cultivation sites. Primary takeaways include:
Indoor cannabis production requires lighting levels 500-times greater than that recommended for reading.
Cultivation sites power densities are measured at 200 W/m2, on par with modern datacenters.
Grow facilities nationwide consume the same amount of electricity as two million average American homes.
A single cannabis cigarette, according to Mills’ calculations, is equivalent to 3 pounds of carbon dioxide emissions.
The data is clear: without adjusting equipment and techniques, the cannabis industry was on track to becoming one of the largest carbon emitters in the world. And amidst growing calls for improved business transparency and environmentally conscious methods (that have only gotten louder in recent years), cannabis businesses were desperate for solutions that matched performance with sustainability.
The LEDs of Today
Many outdated lighting technologies like HPS and fluorescents consume exorbitant amounts of energy for sub-par output, run hot (and therefore place additional pressure on environmental controls like HVAC and AC) and tend to burn out quickly. These technologies can leave many growers wondering if it’s worth the trouble – and encourage them to make the switch to LEDs.
While LEDs have certainly been around for a while, they’ve gained traction among cannabis growers more recently. At one time, large installations of LEDs needed at commercial grow operations were highly cost prohibitive, only allowing the biggest enterprises to reap the benefits. But, over time, LEDs have become increasingly affordable and accessible to smaller businesses, start-ups and hobbyists. Moreover, the technology has improved drastically.
Today’s cutting-edge LED grow lights come with built-in features leading to better performance paired with lower costs and emissions for the modern grower.
Unparalleled Efficacy and Efficiency LED grow lights today are able to deliver unmatched uniformity, ensuring every plant in your canopy receives adequate photosynthetically active radiation. They also use less energy while delivering plenty of brightness – meaning you’ll cut electricity costs and emissions without seeing a dip in performance.
Full-Spectrum Light and Spectral Tuning Wish you could bring the sun indoors? Invest in LEDs – they’re the closest thing to sunlight you can find because they deliver full-spectrum light. Your plants can benefit from the full range of spectrum as they would in their natural environment. Further, features like spectral tuning give cultivators ultimate control, allowing them to elicit certain biological responses, hasten flowering and shorten the growing cycle altogether.
Vertical Racking This capability, made available with some modern LEDs, can double or even triple your harvests without investing in additional square footage. Vertical racking allows growers to use their spaces in the most efficient way possible, resulting in verdant, multi-level gardens.
Automation Automating light cycles, watering and even nutrient distribution can cut down on labor-intensive tasks and human error that can result in additional, unnecessary energy usage. By pre-programming the necessary functions of your grow, growers are given peace-of-mind and can focus on other important tasks that require more of a human touch.
Low Heat Profile and On-Board Dimming A huge selling point for growers of all kinds, LEDs have a much lower heat profile than other lighting technologies. They present less of a risk for heat stress, reduce reliance on other environmental controls and can be placed much closer to the plant canopy (a plus when vertical racking!). On-board dimming is a helpful feature as well: growers can create an artificial sunrise and sunset to gently ease their plants into light-dark cycles and prevent spikes in both temperature and humidity.
Improved Durability LEDs are built to last, another selling point for environmentally conscious cultivators looking to cut down on waste. If you’re in the market for some new efficient grow lights, look for LEDs that are built with industrial-grade materials and come with the IP66 or IP65 waterproofing certification.
Looking Toward a Bright, Green Future
Cannabis has become a regular facet of countless American lives. It helps people relax and de-stress, mitigate crippling pain and calm seizures. In 2018, the Pew Research Center reported that 62% of Americans are in favor of legalizing cannabis. The once-villainized plant, long at the center of fear-mongering campaigns like reefer madness and gateway drugs, is now widely enjoyed by everyone from politicians to grandparents to entrepreneurs to professional athletes. It’s not going anywhere any time soon.
That means that cannabis industry professionals have a responsibility to produce cannabis with sustainable methods – and LEDs are a great place to start. Not only do LEDs help shrink your business’s carbon footprint, they can also save you money in the long run and boost profits. There are countless growers today who prefer using LEDs, and it’s pretty easy to understand why.
Andrew Myers is President and CEO of ProGrowTech, which helps commercial horticulture operations increase profitability, yield and energy efficiency with industry-leading LED lighting systems. For more information, visit progrowtech.com.
Apply For A Scholarship To The Northeast Cannabis Business Conference By December 1!
In an effort to create a more diverse and inclusive industry, we are thrilled to announce that NCIA in conjunction with the Diversity, Equity and Inclusion Committee has opened applications for its scholarship fund for qualified cannabis executives.
NCIA is excited to have the opportunity to offer 30 applicants a complimentary pass to join us at the Northeast Cannabis Business Conference this February 19-20 in Boston, MA. If you are a minority in an executive cannabis position, please take a moment to fill out the application. We look forward to seeing you in Boston!
The scholarship application period closes on December 1, so get your application in today!
Applications are due by Midnight PST, December 1, 2019. Awardees will be notified on December 16, 2019. Scholarship recipients will receive complimentary passes to the conference. Scholarship recipients will need to cover & arrange their own travel and lodging needed to attend the event.
While April 20th, or “420” is the “high” holiday of cannabis, did you know there are a variety of lesser-known CBD-related holidays throughout the year that can be great grist for the promotional mill? To achieve notoriety and engagement, CBD purveyors may want to include lesser-known celebrations into their annual marketing calendar.
For example, there’s National CBD Month in January, National Hemp Day February 4, National Hemp Month in July, Oils and Concentrates Day July 10 (sometimes referred to as 710 because OIL upside down resembles the number), National CBD Day August 8 and National Pet CBD Month in October.
And let’s not forget Jack Herer’s (The Hemperor’s) birthday celebrated June 18. According to Wikipedia, the devoted cannabis rights activist and author promoted cannabis and hemp for decades. His book, “The Emperor Wears No Clothes” has been in print for three-plus decades. Herer was “frequently cited in efforts to decriminalize and legalize cannabis… Herer also founded and served as the director of the organization Help End Marijuana Prohibition (HEMP).”
CBD purveyors wanting to get even more innovative can use their branding — including labels — to tie to lesser-known holiday promotions. Here are some ways to use labels as powerful promotional tools in conjunction with “holiday” celebrations:
Extend their reach for a whole year via extended content labels (ECLs). For CBD purveyors committing to promotions tied to a calendar of holidays, ECLs can be a fun and impactful way to present information, offers and calls to action.
Create a major promotion around one celebration (e.g., January’s National CBD Month), and use ECLs to explain/inform. This could be a contest with details, one or more discount offers, or even a history of the CBD “movement.”
Print specific labels for each holiday. For example, create fun and informative labels around “The Hemperor’s” birthday month in June. A series of labels could detail various hemp-related accomplishments by Herer, even possibly going so far as to be small pieces of art depicting him and his life’s work.
Use them to link to digital media. There’s always a case to be made for labels containing QR codes, URLs and other links to more information. This can be especially appropriate for surveys, reviews and other interactive platforms where consumer feedback is desired. Any of these efforts can be themed around holiday celebrations (e.g., an upcoming anniversary of hemp or CBD adoption/legalization). In the CBD world particularly, companies need to understand how their consumers view them, assess the quality of products and express any concerns that may emerge.
Present labels as a quality control and consumer safety tool. At a time when buyers worry about the safety and authenticity of the products they consume, labels can help come to the rescue. And what better holiday than one which celebrates both the healthy effects of products and a concerted effort to protect those consuming them?
For example, new label technologies enable consumers to verify the authenticity of their products through a smartphone app that scans a small digital ID on the label. These track-and-trace digital IDs offer a powerful deterrent to counterfeiting, protecting consumers from harmful or ineffective fake products. In turn, CBD product manufacturers can demonstrate to customers that they are working actively to ensure their safety. That creates favorable word-of-mouth, goodwill and loyalty among buyers who will criticize or even pursue regulatory and legal remedies if they feel there’s a problem.
Gary Paulin is Director of Sales and Client Services for Lightning Labels, a Denver-based label printer that has been offering state-of-the-art affordable, full-color custom labels and custom stickers of all shapes and sizes to cannabis purveyors for more than a decade. They offer many options for materials and laminates and special effects to achieve digital short-run requirements (50 minimum) on up to 15 million labels, plus Lightning fast delivery. For more information and to place orders online, visit LightningLabels.com. For the latest in packaging news and labeling promotional offers, find Lightning Labels on, Facebook, Instagram, Twitter (@LightningLabels), Pinterest, and LinkedIn.
Webinar Recording: The Veterinary Cannabis Industry – What to Know And What’s For Show
In case you missed the live webinar this week, watch this recording to learn more about the medical applications in veterinary medicine. NCIA has proudly partnered with one of the leading figures in the veterinary cannabis space, Dr. Zac Pilossoph, a nationally recognized veterinarian to shed light on the veterinary cannabis industry. He provides a general overview of where the veterinary cannabis industry currently stands, briefly touching on endocannabinoid system comparative anatomy, proposed clinical applications, and current rules and regulations.
NCIA’s Safe Vaping Task Force Latest News And Recommendations
by Andrew Kline, NCIA’s Director of Public Policy
In response to the recent wave of vape-related illnesses, NCIA’s Policy Council has formed a Safe Vaping Task Force. The purpose of the task force is to unify the industry by communicating clearly in response to press reports and state/federal governmental actions, and by clearly articulating the state-legal cannabis industry’s obligation to act with integrity as responsible actors. The task force is publishing summaries of recent developments and the cannabis industry’s response, producing and publishing a white paper on safe vaping, unifying the industry’s response, and engaging federal and state/local governments as appropriate. Members of the task force include medical doctors, scientists, cannabis license holders, and relevant ancillary businesses.
Here’s the latest about safe vaping from the news this past week:
As of October 22, 2019, 1,604 (up from 1,479) lung injury cases associated with the use of vaping products have been reported to CDC from 49 states (all except Alaska), the District of Columbia, and 1 U.S. territory. 34 deaths (up from 33) have been confirmed in 24 states. The CDC is updating this information every Thursday. The good news is that it appears that illnesses and deaths are slowing down. The bad news is that we still don’t know the proximate cause and the federal government has not communicated a timeline by which we will have better information.
Since the specific compound or ingredient causing lung injury is not yet known, the CDC continues to recommend refraining from the use of all vaping products. NCIA’s Safe Vaping Task Force is hopeful that the CDC and FDA will act swiftly to ascertain the proximate cause of the vaping problem, expose and address those specific issues head-on, and communicate clearly the specific dangers to the American consumer.
Although cannabis has only been legal in Massachusetts for less than a year, the state is already putting on the breaks. Massachusetts is the first state to ban the sale of all vape products, unleashing a major financial blow to the state’s marijuana businesses and sending consumers to the dangerous, unregulated and untested illicit market. Massachusetts Gov. Charlie Baker secured approval from the Public Health Council to issue an emergency regulation to maintain the statewide retail ban on the sale of all vaping products. A local judge simultaneously issued a ruling allowing for medical cannabis patients to purchase crushed flower for use in vaporizers. The emergency regulation keeps the vaping ban in place while also creating a three-month timeline for rulemaking and public hearings.
California lawmakers are also considering an outright ban of all vape products, including nicotine and THC. This potential action comes on the heels of Charlie Baker, Governor of Massachusetts, banning all vaping products for four months.
Marijuana became legal for adults over 21 in Colorado in 2014, yet even with 5 to 6 years of regulatory experience, Colorado has not banned all vape products. Instead, Colorado has conducted public hearings to determine what specific products or ingredients should be banned, based on scientific evidence. Colorado is in the final stages of finalizing permanent rules for adoption of a prohibited ingredients list (due Nov 5). It should also be noted that Colorado has not attributed any deaths to THC vaping, an indication that the state regulatory regime is working.
A judge in Utah ruled on Monday that the state cannot immediately ban flavored e-cigarette products. The state had justified emergency restrictions on flavored nicotine by arguing that they were a gateway to vaping THC products. This leaves the state with a 120-day rule-making process.
NCIA Task Force Recommendations
NCIA’s Safe Vaping Task Force believes that a more thoughtful approach based on science, like the one undertaken by Colorado, will yield better results for policymakers and patients alike.
NCIA continues to advocate for descheduling, federal oversight, regulation, and standardized testing.
NCIA recommends that manufacturers avoid untested additives and flavorants.
NCIA recommends that when creating novel formulations, manufacturers conduct a scientific analysis that leverages the knowledge base of other inhalation products.
Andrew Kline is the Director of Public Policy for the National Cannabis Industry Association and Chair of the Policy Council’s Safe Vaping Task Force.
Committee Blog: Vaping-Related Illness – Applying Lessons Learned From The E-cig Market
by Ramon Alarcon, Wellness Insight Technologies, Inc. NCIA’s Cannabis Manufacturing Committee
THE ISSUE
In recent weeks, a growing number of respiratory illness cases associated with nicotine or cannabis vaporizer cartridges have been reported, leading to increasing concern among cannabis cartridge consumers, regulators, and medical experts. The vast majority of these reports are linked to cartridges that were produced and obtained in the illicit and unregulated market, or that were adulterated by consumers. The small number of cases that have so far been associated with legal cannabis products have not shown definitive links to those specific products.
Furthermore, similar cases of respiratory illness have not been reported in Europe, where the regulations governing vapor products are different. Even if, as we suspect, it is confirmed that the source of the current problem is limited to illicit-market products, there are valuable lessons to be learned to ensure the future safety of licensed vapor products and preserve our ability to promote vapor products as a viable and beneficial method of consuming cannabis.
Although cannabis vaporizers and nicotine e-cigs are not the same, there are important commonalities that we can learn from given that the nicotine e-cig market has been around for over a decade. First, it is essential to acknowledge the differences. Although some people view all vaping through the same lens, vaping cannabis and nicotine are as different as drinking alcohol and coffee. The formulations are vastly different in their chemical compositions, and usage patterns of cannabis consumption are far less intensive than those of nicotine e-cigs, which tend to be used many times throughout the day. Notwithstanding those differences, the principles of operation are the same; a heating element is generally used to aerosolize a stored liquid without combustion.
THE RISK
Moreover, in both cannabis and nicotine cartridges, the target active ingredient is typically combined in formulation with other organic compounds. These include glycerol (VG) and propylene glycol (PG) that are more commonly used in nicotine-containing cartridges and dictate the viscosity of the liquid. And flavorants, typically terpenes in the case of cannabis, are included in the formulation to provide particular taste and aroma characteristics.
Nicotine e-cigs have had numerous public health concern moments, some real and some manufactured, but one particular issue is especially illustrative to cannabis manufacturers. In the early days of e-cigs, some smaller e-cig manufacturers added diacetyl to their formulations in order to create flavored e-liquids with buttery notes. Those manufacturers assumed diacetyl to be safe because it is classified as GRAS (Generally Recognized As Safe) by the FDA (we eat it on our popcorn for goodness sake). Nevertheless, that GRAS classification was provided for ingestion, not inhalation. In fact, diacetyl had already been discovered to cause bronchiolitis obliterans, also known as “popcorn lung,” in popcorn factory workers in the early 2000s. And although no one was reported to have been hospitalized or died, the discovery of diacetyl in nicotine vapor products cast a cloud over the entire e-cig industry, even for those companies who employed scientists, practiced good product stewardship and developed internal lists of ingredients that led them to only include ingredients that had low inhalation toxicity risk profiles. This example illustrates that it is in our interest to ensure that all cannabis vapor product manufacturers understand that compounds that are characterized as GRAS are not necessarily safe for inhalation purposes and that an additional level of risk analysis must be performed.
THE SOLUTION
We must ensure vapor product safety because the potential of cannabis vapor products to deliver the necessary medicine to patients without the harmful byproducts of combustion must not be undermined by industry missteps or the loss of public trust. Again, using nicotine e-cigs as an example, we know that vaporization can eliminate the byproducts of the combustion of plant materials. In one study, approximately 1,000 times less harmful chemicals like carbon monoxide, formaldehyde, and acetaldehyde were measured in e-cig vapor when compared to combusted cigarette smoke¹. Designed with the proper materials, protocols, and formulations, nicotine vapor products can have a very low-risk profile relative to combusted cigarettes. In fact, one nicotine vapor product has been evaluated as low risk enough to have been approved by the MHRA (UK equivalent of the FDA), thus adding to the evidence that, generally speaking, vaporization can be considered safer than combustion. Of course, confirmatory studies need to be done with cannabis but combined with the ability of vapor products to deliver fast-acting, precise doses of formulations that can be tailored to an individual’s needs, the importance of vaporized cannabis as a low-risk method of consumption is real.
With this in mind, we, as an industry, must develop standards and best practices. Doing so will build consumer trust while also providing guardrails that still allow for innovation. Other industries have done precisely this, including the fragrance and food additive industries. Moreover, if we do not develop our standards and only react to state regulations, which can tend to lag, we run a higher risk of similar problems in the future. A few simple principles can be applied to this problem.
Test what goes into your body. In the case of vapor products, that is the vapor. In other words, we should test the aerosol, not just the liquid that goes into the cartridge. Labs in the e-cig industry already do this type of testing, and the methods can easily be adapted to cannabis products.
We should develop a list of analytes that have low inhalation toxicity risk profiles.
Stick close to what nature gave us. People have been smoking cannabis for thousands of years, and we have not seen similar health problems. As a matter of fact, we can say that the risk profile for cannabinoids and terpenes in the amounts typically consumed via smoking cannabis is low². However, we do know that some compounds that naturally occur in cannabis can pose a safety risk at high enough concentrations. So until we have more data on inhalation toxicity for all terpenes and minor cannabinoids, we should practice caution when creating novel formulations. In other words, try to remain close to the amounts found natively in the plant in order to preserve the same risk profile.
Whether or not required by state regulations, be transparent, and list all ingredients. This will not only help consumers better understand what ingredients are safe — it will help capture their long term trust.
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1 – Rana Tayyarah, Gerald A. Long, Comparison of select analytes in aerosol from e-cigarettes with smoke from conventional cigarettes and with ambient air, Regulatory Toxicology and Pharmacology (July 31, 2014)
2 – Pletcher, et al., Association Between Marijuana Exposure and Pulmonary Function over 20 Years, 307 JAMA 173 (Jan. 2012).
Update From NCIA’s Safe Vaping Task Force
by Andrew Kline, NCIA’s Director of Public Policy
In response to the vaping crisis, NCIA’s Policy Council has formed a Safe Vaping Task Force. The purpose of the task force is to unify the industry by communicating clearly in response to press reports and state/federal governmental actions, and clearly articulating the state-legal cannabis industry’s obligation to act with integrity as responsible actors. The task force will be publishing summaries of recent developments and the cannabis industry’s response, producing and publishing a white paper on safe vaping, unifying the industry’s response, and engaging federal and state/local governments as appropriate. Members of the task force include medical doctors, scientists, cannabis license holders, and relevant ancillary businesses.
Here’s the latest about safe vaping from the news this week:
TheNew York Timesreported on October 21, 2019 that while the government and researchers have expended significant resources into studying nicotine delivery devices, federal law has not allowed research into the health effects of cannabis because it is classified as a controlled substance with a high potential for abuse. Therefore, we don’t have much scientific knowledge about what THC vaping does to the lungs. The Times report added that even in states where cannabis is legal, counterfeit vape cartridges (vape carts) are cheaper than the regulated, licensed, tested and taxed products.
The Boston Globereported on October 21, 2019 that a state court judge ruled that the four month ban on nicotine vapes by Governor Charlie Baker was unconstitutional because it did not allow for input from affected businesses and the public. The Court ruled that nicotine vape sales must resume on Monday unless the Baker Administration submits the nicotine ban for consideration as a formal emergency regulation before then. The decision did not impact THC vapes.
The Senate International Narcotics Control Caucus will convene this week Wednesday, October 23 to discuss marijuana and public health, featuring panels that include witnesses from federal agencies and academia. The Caucus is co-chaired by Senators John Cornyn (R-TX) and Dianne Feinstein (D-CA). Senator Cornyn is an outspoken opponent of cannabis legalization, stating recently that he wants to hold this hearing in advance of any vote on SAFE Banking. Surgeon General Jerome Adams, who has been an outspoken critic of marijuana reform, is scheduled to testify. Also testifying will be Nora Volkow, Director of the National Institute on Drug Abuse (NIDA). Volkow has opined that the Schedule I status of marijuana under the Controlled Substances Act is inhibiting research. This is consistent with NCIA’s position, which is that we need to de-schedule, regulate, and test.
CDC Principal Deputy Director Anne Schuchat emphasized last week that the majority of vaping-related injuries associated with THC-containing cartridges are being traced back to the illicit market, rather than state-legal cannabis shops.
California lawmakers are considering an outright ban of all vape products, including nicotine and THC. This potential action comes on the heels of Charlie Baker, Governor of Massachusetts, banning all vaping products for four months.
Anti-marijuana legalization group Project SAM (Smart Approaches to Marijuana) hired three new lobbyists to help fight SAFE banking and other cannabis legislation on Capitol Hill and sent a letter this week from the organization’s science advisory board to congressional leadership urging them not to support cannabis legislation.
As of October 15, 2019, 1,479 lung injury cases associated with the use of vaping products have been reported to CDC from 49 states (all except Alaska), the District of Columbia, and 1 U.S. territory. Thirty-three deaths have been confirmed in 24 states. The CDC is updating this information every Thursday.
Former FDA Commissioner Calls For Descheduling And Federal Regulation
by Andrew Kline, NCIA’s Director of Public Policy
With uncertainty about the proximate cause of the vaping crisis continuing to roil state regulators, and state governors trying to determine the right short-term solution to protect the public health, the former Commissioner of the FDA has a longer-term plan. Former Commissioner Scott Gottlieb is rightly calling for descheduling and federal regulation in an op-ed in the Wall Street Journal. NCIA made the same argument in our Policy Council’s recent white paperon regulating cannabis post-legalization and in our public responses to the vaping crisis.
While no one yet knows for certain what has been causing these injuries and deaths, it is readily apparent that unregulated and untested products are extremely dangerous and continue to infiltrate the market. Just last week, a mother and her two sons were arrested for allegedly illegally filling over 30,000 vape cartridges in Wisconsin from their home. That burgeoning illicit and untested market poses real risks to American consumers. And the best way to eliminate the illicit market is to create opportunities for consumers to purchase products from legal dispensaries and market awareness of the benefits of purchasing from those regulated markets.
For example, if consumers know that legal dispensaries are selling regulated products that have been tested to improve consumer safety, then they will be more inclined to stop purchasing from the illicit market. People already know that when they step foot into a grocery store, the foods they eat and the drugs and dietary supplements they take are part of a supply chain designed to improve safety. That is because they have placed trust in the USDA and FDA. And no better way to build consumer confidence, than to make sure that trusted federal agencies are in charge of promoting public health in the cannabis industry.
We can’t continue to leave the cannabis industry in a state of uncertainty. It’s time to deschedule, regulate at the federal level, and require mandatory lab testing. We must displace the illegal, unregulated and untested illicit market. There is no plan B.
Andrew Kline is Director of Public Policy for NCIA and Chair of NCIA’s Safe Vaping Task Force
What The Cannabis Industry – And Congress – Can Do To Help The Vaping Illness Outbreak
by Morgan Fox, NCIA Director of Media Relations
In recent weeks, the reports of mysterious respiratory illnesses tied largely to unregulated cannabis vaping products, as well as some other products including nicotine vapes, have turned from a trickle into a steady flow. The most recent count is at over 1000 cases, including more than a dozen deaths. One of the most troubling aspects of this outbreak is that it is still unknown what exactly is causing these illnesses. Early research seems to be pointing to additives or thickening agents as the most likely culprit, but other causes are being explored such as the presence of pesticides and fungicides that create dangerous byproducts, faulty delivery devices, problematic consumption patterns, and pre-existing medical conditions.
One thread seems to tie all these cases together: almost all of them involved untested products that were produced and purchased on the illicit market.
At its roots, however, is the same thing that has caused most of the other problems associated with cannabis: prohibition.
Outdated federal policies are responsible for the existence of the underground market for this popular substance in the first place. Their dominance over this medically beneficial plant for nearly a century continues to block research, discourages states from regulating cannabis and making it legal for adults, prevents the federal government from establishing uniform safety standards or providing guidance to states that are implementing sensible policies, and make it harder for legal businesses to displace illicit operators around the country. This is in addition to the suffering and harm caused by the criminal enforcement of these policies, which disproportionately impacts low-income communities and people of color.
Unfortunately, some governmental agencies are glossing over these facts. Last month, Massachusetts instituted a four-month ban on all vaping products, and on Friday the Food and Drug Administration issued a warning urging people to stop consuming any vape products containing THC, despite THC itself and legal products generally not being implicated in these cases. Other states and localities are considering total bans as well.
The cannabis industry is deeply troubled by this outbreak, but we are also concerned that reactionary responses to it at the state and federal levels could make the problem even worse. Preventing the sale altogether of regulated and quality-controlled cannabis products could easily drive more consumers to purchase potentially dangerous products from the illicit market. The lack of competition from legal, licensed producers and retailers could also embolden irresponsible underground operators to drastically increase production in order to meet demand, as well as cut corners even further and make their products even more unsafe. Such reactions are a common response to tragedies like this, but they often cause more harm than good in the long run.
Rather, states should be reviewing their regulations regarding testing and labeling and should be in close contact with federal and state medical authorities so that they can incorporate the latest information into their regulatory response. Producers should also be reexamining their methods and avoiding the use of any additives that have so far been linked to these cases.
At the federal level, the best way to help fix this issue, as well as prevent further outbreaks from happening at all, is to end prohibition.
On October 3rd, NCIA delivered a letter to every member of Congress signed by more nearly 800 business leaders, advocates, and policy experts, which urges them to immediately work to remove cannabis from the Controlled Substances Act and work to regulate the substance at the federal level. This letter references a paper produced by NCIA’s Policy Council released on October 1 that suggests a regulatory framework for various cannabis products through existing federal agencies, most notably the FDA and the Alcohol and Tobacco Tax and Trade Bureau (TTB).
The letter closes with: “It is clear that the American public wants quality-controlled cannabis products made available for adults and patients. The recent news is, unfortunately, yet another reminder that there is no time to waste. Our industry wants to provide the products voters demand with a tireless focus on improving consumer safety. While state regulators and licensed businesses appear to be doing an excellent job at keeping potentially dangerous products out of the legal market, federal descheduling and regulation will allow more research and help states continue to improve their regulatory activities and oversight, as well as provide universal standards for safety. We are ready to work collaboratively with federal lawmakers, the same way we have at the state level for over a decade. Please let us know how we can help move the ball forward on descheduling legislation. Lives are literally at stake.”
That pretty much says it all. It is up to members of the legal cannabis industry to continue to prioritize consumer safety and do everything in their power to make sure they are going above and beyond state regulatory requirements in this area. But it is ultimately up to Congress to end prohibition, regulate cannabis intelligently, and help us replace the illicit market to the greatest extent possible. With your support, we can continue to work with lawmakers every day to help make this a reality.
Video: Member Spotlight – WonderLeaf
In this month’s video member spotlight, we headed to Aurora, Colorado, to visit with the family-owned team at the WonderLeaf facility, founded in 2015. WonderLeaf products feature full-spectrum cannabinoids and strain-specific extractions. Learn more about WonderLeaf’s values of educating the consumer through budtender education tools, including information about the terpenes and cannabinoid profiles of their products.
Member Blog: Helping Mary Jane Is Good For Business
by Kharla Vezzetti, Business Membership and Advertising Manager at California NORML
Who is the cannabis consumer to you?
In a vast industry with so many important contributors, the one group that we all have in common and eventually serve is the consumer. The cannabis consumer is our shared financial bottom line, the foundation of our industry, our end-all reason for being in business. The cannabis consumer is one huge group. While your company may see your target market as including a specific demographic, the totality of the cannabis consumer group spans ages, genders, and socio-economic groups more so than the average marketed “widget.” That said, there are needs and concerns that the average cannabis consumers share.
I Call Her Mary Jane.
While we all move forward in California ‘s post Prop 64 environment, our ongoing goals, as both businesses and organizations, need to be consumer-focused. Mary Jane’s needs, as an individual, must not be overlooked.
Mary needs to be healthy and free enough to drive herself to work. She needs to not fear being honest with her doctor, nor be submitted to a job-ending drug test. She needs to be able to afford and have access to her choice of medicine. She needs advocates and educators to monitor our legislators, answer her questions, and to fight for her rights as a cannabis consumer. She needs all of us to honor her importance as the foundation she is.
Why You Should Support Mary Jane’s Rights:
An Employed Consumer Base Is Essential For Product Sales.
Think about how you would attempt to sell cannabis to the unemployed. California, unlike 15 other states, still subjects employees to the risk of losing their jobs or being denied employment due to their cannabis usage, even when Mary has a doctor’s recommendation. Read more about the solution here.
Consumers Must Be Free To Discuss Cannabis With Their Doctors Without Repercussions.
Medical Cannabis users are a large portion of the industry’s market. Unfortunately, California pain patients, who wish to reduce their use of opioids with cannabis, currently risk losing their prescription medication if they get caught supplementing with cannabis. Read more about this discriminatory issue here.
Californians Love Driving—Many Must Drive.
Year after year, unscientific and discriminatory driving laws are proposed by state legislators. Just imagine Mary losing her license due to simply having THC in her bloodstream. She is now unable to get to work or to her doctor’s visits. Good thing for Mary, this scenario is being regularly averted by California NORML, while cannabis delivery rights have also been maintained across the state.
Contributing To Mary’s Rights Is Good For Your Branding.
Showing yourself as a company that cares about the consumer, their health, happiness and well-being, as well as exhibiting respect for their history, sets you apart in a California cannabis community which has such old, strong roots alongside so many new players.
Sane Laws And Regulations Benefit All.
In this fast-growing and adapting climate, we must have a say on proposed laws and regulations that affect our industry and those who depend on our success. Read more about Cal NORML’s recent accomplishments and current plans on behalf of Californians here.
It’s often said that California “leads the way” for the rest of the United States. While this hasn’t always been true, a state our size with a cannabis history so long and distinguished should continue to strive to be a positive trendsetter. Let’s keep Mary Jane at the forefront of our plans for success. She is more than an email analytic or a dollar sign. Mary and her needs spurned this modern movement with the passage of Prop 215. She should continue to be the inspiration, and a significant focus for the industry. When we take care of Mary, as our combined consumer, we all win.
Kharla Vezzetti volunteered in the 1990s as a both a signature gatherer as well as the Media Liaison for the Sonoma County chapter of Californian’s for Compassionate Use, working on what was to become Prop 215/The Compassionate Use Act of 1996, the first successful medical marijuana initiative in the country.
From 1996-1998, Vezzetti was the owner and operator of Natural Harvest, a wholesale distribution and retail vending business specializing in Sonoma County produced industrial hemp products.
In the years 1997-1999, She was the Advertising Manager for HempWorld: The International Hemp Journal and Hemp Pages: The Hemp Industry Source Book, both first of their kind publications.
In 1998, Vezzetti served as a member on the Board of Advisers for the Industrial Use of Hemp (Marijuana) Initiative
She excitedly joined the staff of California NORML in 2017, where she continues as the non-profit organization’s Business Membership and Advertising Manager. Additionally, she is a graphic designer, marketing advisor, and blogger based in Santa Rosa, Sonoma County, CA.
Webinar: SAFE Banking – What’s Next?
Join this webinar on September 30 at 1:00 PM MT to learn more about cannabis policy and legislative priorities for the 116th Congress. You’ll get the latest updates on the SAFE Banking Act and other cannabis legislation being considered in this Congress. You’ll also get an update on NCIA’s plan for how cannabis should be regulated by the federal government post-legalization. Lastly, you’ll learn more about how NCIA’s plan to federally regulate can help to solve issues around vaping.
Member Blog: Cannabis Seed To Sale Transparency Provides Solution To Vaping Illnesses
by Jessica Billingsley, CEO of Akerna NCIA Board Member
The day I sat beside the MRI while my daughter’s mystery neurologic symptoms were investigated, I began my crusade for product transparency. I didn’t know then that transparency in products would become life’s work. On that day, I only knew my daughter risked potential long term physical and mental disability due to unknown causes. I then spent months, which turned into years, hunting for a solution to her neurologic events, which started with an unexplained fever that would sometimes develop into lesions in her brain causing varying symptoms depending on the location of the lesions. Often the symptom manifested as trouble walking; however, one heartbreaking time, she slurred her words and couldn’t remember many basic components of speech.
She was diagnosed with recurrent ADEM, an autoimmune demyelinating illness that doctors didn’t understand and were at a loss to cure. The western medicine approach didn’t have an answer, and I wasn’t really surprised. Western medicine’s approach of diagnose and drug (or diagnose, surgery, and drug) rarely takes into account what we put in and on our bodies. And my gut told me I needed to take a closer look at foods and products to find the source of her illness. This is a lot easier than it sounds. We actually know very little about what’s in our products. There’s an assumption that harmful ingredients or additives have to be disclosed in products, but they don’t. My journey into product transparency — looking at ingredients, additives, and the chemicals used to make our products — led me to find a solution for my daughter that has resulted in her being 7 years in remission and counting.
My passion for saving my daughter and my tenacity in peeling back the layers in our consumer product goods supply chain left me with a sobering conclusion: Consumer transparency and public safety is not at the forefront of our current consumer goods regulations. We don’t have any requirements to give consumers transparency regarding what’s fully in the products we eat or absorb. That perspective is what inspired me to launch the first seed-to-sale tracking technology in 2010. I believed then that cannabis patients needed to know how their medicine was grown and the public needed assurances that we can identify the regulated, tested medicine from the illicit alternatives.
The number of vaping-related illnesses keeps climbing. The crisis has claimed at least six deaths and there are over 450 cases in 36 states and the U.S. Virgin Islands. And best, early thinking is additives – cutting agents, potentially Vitamin E – may be the culprit. I am reminded clearly of my daughter’s early years and my hunt for product transparency. We’ve done a lot of good with seed-to-sale tracking in cannabis. The regulated cannabis industry has the most transparent and accountable supply chain of any consumer packaged good.
For nearly ten years, my team has refined a technology that pinpoints most every aspect of every gram of cannabis tracked in our system — the plot of land it was grown on, soil nutrients, water and light intake, additional ingredients for edibles, when it shipped out and in what batch, and finally where and when the product was sold and to what patient. The exactness and granularity of this data enables prompt reactions in times of crisis that narrows down areas/people of impact, points investigators to probable causes, and importantly allows consumers and patients to make informed decisions.
As much as we do track in regulated cannabis, we need to track more. Most governmental compliance frameworks don’t require additives to be tracked and thus communicated to consumers and patients. We need to make this mandatory in our regulations.*
Consumers and the industry should rally around three things. First, the majority of the cartridges in this crisis were purchased on the illicit market with completely unknown ingredient sources, which gives more reason to legalize cannabis in every state for adult use. Second, legal markets should continue to implement seed to sale tracking compliance as table stakes. And third, we need to make additives information a requirement for cannabis oil manufactured products.
I knew the industry needed a means of monitoring products through its lifecycle and generating transparency and accountability to support the 3P’s — patient, product, and public safety. I know the data in our system has the power to do great good — for science and medicine, for food and agriculture, for communities and tax revenues, for governments’ ability to respond to issues and effectively direct investigations and enforcements. I contend that while the industry is part of the health crisis story today — we are part of the response tomorrow. I am as committed today as CEO of Akerna as I was when I started MJ Freeway; we can give consumers the full product transparency they deserve to make the best choices for their health. It’s what I want for my daughter, and it’s the solution I commit to deliver every day.
Jessica Billingsley is a technology pioneer, solutions creator and industry leader, providing proven compliance software solutions to the cannabis market. She is the Chief Executive Officer of Akerna—the first cannabis compliance technology company to be traded on Nasdaq—making her the first CEO from this market space to bring a company to a major U.S. exchange. Jessica is also the CEO of Akerna’s flagship subsidiary—MJ Freeway. She established MJ Freeway in 2010 and it is the leading seed-to-sale regulatory compliance technology provider and developer of the cannabis industry’s first enterprise resource planning (ERP) platform. Akerna also offers Leaf Data Systems as a government resource for public sector compliance. Combined entities tracked more than $16 billion in world-wide, client cannabis sales to date. She is the first woman ever from the cannabis industry to receive the prestigious Fortune’s “Most Promising Women Entrepreneur Award” and is also recognized as one of Inc.’s “Female Founders 100.” Jessica received a degree in Communications and Computer Science from the University of Georgia and lives with her daughter in Denver.
Akerna’s MJ Platform includes “additives” as ingredients clients can use to communicate to patients any additives in a finished gram of oil. We believe additive ingredients should now be a required data field captured and communicated to patients, and we’re committed to training our existing client base on how to do so.
The cannabis industry today is characterized by rapid growth and a degree of unpredictability as it faces issues including legality, stigma, and all the challenges that come with offering a product never before mass-retailed.
Dispensaries and other key market players have long been operating in the dark when it comes to their customers. With little data around the attributes and lifestyles of their target consumer, the new industry has a long way to go when considering marketing opportunities.
In order to shed light on the best marketing practices for this burgeoning industry, we surveyed over 8,000 consumers between the ages of 21 and 64, in the 21 states where cannabis is currently legal to create LOCALiQ’s Canna Curious Report. The report reveals the lifestyle attributes, shopping behaviors, consumption motivators and brand selection drivers for the industry’s top customer segments. The surveyed individuals were split into two groups, current consumers and acceptors.
Here are the key segments of consumers that industry companies should pay particular attention to impress:
Affluent Families with Children
We found that affluent families with children under the age of 18 were an active cannabis consumption group. Spending over $623 million on cannabis-related products, this group has the potential to grow to a market worth over $1 billion.
In this segment, dads were typically the more active purchasers, shopping at more than 4 dispensaries in the past 3 months, while moms tended to be more brand loyal and shop at the same dispensary.
The data supports that to impress this segment, dispensaries should focus on offering a wide variety of products, as well as prioritizing price and convenience.
Baby Boomers
Baby boomers were another top consumption group, with the majority of those surveyed going to a dispensary monthly, and 60 percent of non-consuming boomers more likely to consider it than millennials.
To reach this customer segment, companies will likely have the most success maintaining strong websites, advertising in newspapers, and creating online videos as these are top discovery sources for the baby boomer group.
The top motivator for usage in this group is strongly tied to health and pain management, with 58 percent of baby boomer respondents displaying a preference for alternative medicine.
Frequent Shoppers
The frequent shopper group is more diverse in demographics than our previous two categories, but has the most focused purchasing pattern, with most shopping at a dispensary 3-4 times per month. The frequent shopper group boasts the highest spending but tends to be the least loyal, easily swayed to competitors due to price, product variety and staff friendliness.
Promotions are more likely to be impactful with this segment, as 62 percent indicated receiving notifications of promotions through news sites and email or text message.
Acceptors
Defined as current non-users who are open to cannabis consumption in legal states, this group spans many demographics. These cannabis curious consumers cited reasonable prices, a good selection of products/strains, and friendly and helpful staff as their top brand selection drivers.
As dispensaries become more established in cannabis-legal states and competition intensifies, it’ll be more important than ever for sellers to understand their consumer, whose preferences vary widely by segment. For example, while a frequent millennial buyer may be well-targeted through personalized text message or email promotions, a baby boomer is much more likely to consult their local news for a trusted recommendation.
To grow alongside the quickly expanding industry, cannabis businesses should work to prioritize legal, digital marketing, storytelling, and target marketing expertise, to continue to attract and retain customers.
Anthony Bratti is the Regional President – West for the USA TODAY NETWORK/LOCALiQ. In this role, Anthony leads and supports the west coast sales teams as they drive digital advertising and strengthen relationships with local businesses. Anthony’s success as a leader and executive is rooted in nearly 20 years of global business experience ranging from early-stage start-ups to mid-level enterprises and Fortune 50 companies, as well as local community involvement. He is actively involved in the greater Phoenix economic development group and Phoenix Chamber of Commerce.
Prior to joining the USA TODAY NETWORK, Anthony enjoyed a long, global career at AT&T where he served both domestic and international markets, served as the SVP of Business Development at Buzzboard, and most recently, as the Head of Channel Sales at ReachLocal. His vast experience, deep knowledge of digital media, and innovative thinking make Anthony one of the most transformational sales and marketing leaders within the USA TODAY NETWORK.
The Burning Question – When Will SAFE Banking Get A Vote?
by Michelle Rutter, NCIA Government Relations Manager
With Congress returning from their annual August recess, all I seem to be asked is “when will we get a vote on SAFE Banking?” And while it’s unclear whether that vote will be in September or beyond, it’s important to remember that this is the farthest a standalone, pro-cannabis bill has ever gotten in the U.S. House of Representatives. Since the House Financial Services Committee hearing on this topic earlier this year, it seems like the momentum to pass this legislation has only increased. Let’s take a look back and what’s happened and what’s to come:
First, in February, the Subcommittee on Consumer Protection and Financial Institutions held its first-ever hearing on marijuana and financial services, entitled: Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses. Up for discussion at the time was a draft of the Secure and Fair Enforcement (SAFE) Banking Act. Later, in March, HR 1595/S. 1200: the Secure and Fair Enforcement (SAFE) Banking Act was introduced in the House of Representatives by Reps. Ed Perlmutter (D-CO) and Denny Heck (D-WA) and in the Senate by Sens. Jeff Merkley (D-OR) and Cory Gardner (R-CO). In a stunning, historic surprise, the legislation was introduced with a whopping 106 original cosponsors in the House. By July, that number rose to include more than 205 cosponsors.
As a refresher, the SAFE Banking Act would prevent federal banking regulators from punishing banks for working with cannabis-related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting a depository institution’s access to the Deposit Insurance Fund. The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes, and requires the Financial Institution Examination Council to develop guidance to help credit unions and banks understand how to lawfully serve cannabis businesses.
After the bill was introduced, the House Financial Services decided to take the next step in the legislative process and schedule a mark-up of the bill. A markup is the process by which a congressional committee debates, amends, and rewrites proposed legislation.
The bill is read for amendment, one section at a time, with committee members offering their amendments to each section after it is read but before the next section is read. Committees do not change the texts of the bills they mark up. Instead, committees vote on amendments that their members want to recommend that the House adopts when the House considers the bill on the floor. The bill passed out of committee with flying colors — by a margin of 45-15.
In May, we got another signal that the SAFE Banking Act is being taken very seriously on Capitol Hill- the Congressional Budget Office (CBO) released a cost estimate, or “score” of the legislation. The report stated, “CBO estimates H.R. 1595 would decrease net direct spending by $4 million over the 2019-2029 period.”
Then, in July, we couldn’t believe our eyes and ears when it was announced that longtime cannabis opponent and Chairman of the Senate Banking Committee, Sen. Mike Crapo (R-ID) planned to hold a hearing entitled, “Challenges for Cannabis and Banking: Outside Perspectives,” to discuss the current banking challenges faced by the legal cannabis industry and to assess the unintended consequences and public safety risks associated with commercial businesses operating in an all-cash environment.
Chairman Crapo dedicated much of his time to understand how the SAFE Banking Act would regulate financial institutions and ensure the banking industry could and operate in compliance with a business selling a Schedule I product. Towards the end of the hearing, Crapo said, “I think the case has been made pretty strongly here today about the need to get the banking industry issues relating to cannabis resolved.”
This week, Congress returns to Washington, and we at NCIA are preparing for a House Floor vote on SAFE in the next one to two months. In the meantime, we need you to call your Representative and Senators and ask them to ask leadership to hold a vote on HR 1595/S. 1200, the SAFE Banking Act! You can findtips and talking points here.
Member Blog: Hemp And CBD Consumer Insights – Who, Why, And How
Hemp CBD became the fastest growing CPG product in 2019, following its legalization in the Farm Bill of December 2018. Consumers show great interest in its use for wellness, health & beauty applications and for pets. Its many distribution channels require integrating convenience store and shipment data not required for most dispensary products.
In U.S. Convenience Stores, total sales of CBD have increased 168% in the first half of 2019 while average weekly dollar sales increased by 235%.
The higher revenue growth accompanied CBD content per package increasing from 100mg on January 5, 2019 steadily to over 350mg on July 20, 2019, after having peaked briefly in June 2019 near 450mg per unit. See graph below.
Mg CBD per SKU at Retail
Medical Conditions Treated with Cannabis
Pain relief is the major reason cited as a medical condition for cannabis use, followed by nausea, PTSD, muscle spasms, IBD and opioid addiction as seen in the following table:
Source: Consumer Research Around Cannabis
Cannabis and Opioid Use Disorder
Of particular note is the growing number of consumers using Cannabis to treat Opioid Use Disorder (OUD). As of August 2019, seven states have approved medical cannabis for treating OUD: PA, NY, NJ, NM, MO, IL & CO. Twenty-one studies (2009-19) show the effect of cannabis on helping opioid users to reduce or eliminate the use of opioids to treat pain. NFL professional athletes have withdrawn from using opioids after they retire, with the aid of CBD and/or adult cannabis.
Consumer Purchase Drivers of OTC Hemp CBD
The top consumer drivers of OTC Hemp CBD are pain relief, reducing anxiety and helping sleep, as shown in the following graph.
Cannabis Product Composition and Patient Outcomes
Over the past several years, advances in technology have greatly enhanced the prospects for cannabis growers, processors, and dispensaries to provide medical cannabis products to patients that efficaciously treat the medical conditions and alleviate the incapacitating symptoms that they suffer.
Pre-clinical scientific research is determining the physiological effects of individual cannabinoids and terpenes on specific medical conditions and symptoms. Mobile apps are enabling the systematic querying of patients about the efficacy of specific cannabis strains and products in alleviating symptoms and conditions.
Collectively, these advances and other medical research are creating volumes of evidence to which human and artificial intelligence will be applied to develop insights for use by patients and medical researchers, growers, and processors in formulating products creating newer therapeutic options. Patients are already making informed decisions that improve individualized treatment of medical conditions progressively over time due to CBD being an approved over-the-counter consumer product.
Advanced Consumer and Patient Targeting to Improve Marketing and Medical Outcomes
Consumer attitudes, perceptions, and usage in local markets create richer, more actionable insights from customer segments, creating advanced quality scores and indices for scoring first-party internal data.
Cannabis consumer data is used for strategic and tactical product development, applications including:
Market Architecture: differentiating dimensions of product form and brand choice
Key Reasons for Use and Purchase
Affinity with Media, Channel, and other Product Categories
Multiple correspondence analysis of hundreds of consumer survey category questions is used to understand dimensional distinctions and differences between clusters. These key spatial dimensions for segmentation illuminate key differentiators, for use in innovation/new products, brand strategy, marketing execution, and digital media tactics.
Create Target Profiles
Merging cannabis consumer data with general consumer data such as Financial, Healthcare, Restaurants, Grocery/Drug Stores, and Media usage & exposure for each respondent facilitates creation of new consumer segments.
Using zip code identified respondent level data, the above Target Profile clusters can be integrated with other market and first–party data to prioritize personalization, enhance brand positioning, inform messaging, new customer marketing & acquisition efforts, and multi-touch attribution databases.
Mr. Stephen J. Gongaware is Sr. Vice President of Business Development at MSA (Management Science Associates, Inc.), a privately held diverse information technology development and service firm that for over 50 years has provided innovative solutions within its three core competencies of analysis, technology and data management. He has played a major role in developing and managing several MSA businesses in addition to his focus since 2014 on the medical value of cannabis for prospective patients, beginning with CBD and 20 other nonpsychedelic cannabinoids then measured by leading edge test labs. Other businesses he’s created and managed at MSA in the last 20 years includes services to develop/market pharma “rare disease” solutions, and MSA Casino Gaming solutions improving operation of slot floors, player satisfaction and also lead smart phone and sports book innovative projects with 6 of the Top 10 global casino operators and with several major gaming equipment manufacturers.
Prior to joining MSA, Mr. Gongaware was CEO of NetworkNext, an innovative national advertising firm; R&D Director at Cellomics, Inc. where he was awarded US Patent #US6365367; and an Electrical Engineer at Westinghouse Electric Corp. He received his BSEE degree from University of Pittsburgh in 1992 and his MBA from its Katz School of Business in 1995.
MSA is an Analytics firm with Big Data integration capability incorporated in 1963 to focus on improving government and management decisions. MSA has 800+ professionals with expertise in data science & AI, software development, test marketing, data management and management consulting and many of its innovations have become industry-standard solutions. MSA has served over 70 Fortune 500 Customers/Clients in the CPG, Media, Metals, Life Sciences & Pharma, and Casino Gaming & Sports Betting industries. It has been engaged in cannabis research since 2013 with the goal of providing the cannabis industry similar services to what has been now provided to the CPG, Steel, Tobacco, Casino Gaming, and Pharma industries for more than 50 years.
Post-Recess Predictions: Looking Into The Crystal Ball
by Andrew Kline, NCIA’s Director of Public Policy
Kids are back in school. The weather is starting to cool off. Congress’s August recess has come to a close. And it’s time to get back to the business of marijuana reform.
As 2019 starts to wind down and we gear up for 2020, it’s a great time to reflect on what we’ve accomplished, what challenges lie ahead, and what we think we can accomplish in the coming months.
Will we see Congressional action on myriad marijuana bills pending before Congress? Will we see new marijuana-related bills being introduced? Will Senate Republicans allow a floor vote on any marijuana-related legislation? Will House Democrats reach a consensus on marijuana-related priorities? Will the Presidential candidates reach consensus on the right approach for marijuana? The answer to all of these questions is… maybe. And the reason is not just that Republicans have been historically opposed to marijuana-related legislation. It’s because there is no consensus on the right approach. No consensus on a policy issue in Congress? Shocking, huh?
We’re starting to see this divide in Congress, with Democrats sponsoring legislation that de-schedules marijuana and Republicans supporting more incremental approaches like SAFE Banking and the STATES Act. Who will win the battle of the ages? It’s anyone’s guess. And while NCIA supports incremental approaches, they are plainly suboptimal. Below, I lay out two scenarios that are simultaneously at play. But first, let’s take a step back.
There’s no industry with a more impressive growth rate – and more potential than cannabis. Period. Whether you’re talking THC, CBD, CBN, or CBG, it’s all the rage. Recently, analysts called for $200 billion in yearly sales within a decade. And Congress should care about this issue because of the economics alone. But – and this is a big but, in order for the industry to reach those economic goals, or anything close to it, one thing must happen: The United States has to legalize all forms of cannabis at the federal level. And by federal legalization, I mean de-scheduling. And for those of you less familiar with Washington speak, “de-scheduling” means:
Removing cannabis from the authority of the DEA
Removing cannabis from a list of illegal drugs that have no medicinal benefits like heroin, LSD, and meth
Legalizing cannabis at the federal level so that there is no conflict with state laws
Legalizing cannabis at the federal level so that banks no longer a risk of federal money laundering charges by doing business with the industry
Legalizing cannabis at the federal level so that the federal tax code permits businesses to take small business deductions
And providing FDA and the Department of Treasury with regulatory authority like they do with alcohol, tobacco, prescriptions drugs, dietary supplements, and foods
There is no other long-term viable option for the cannabis community.
My role at the National Cannabis Industry Association (NCIA) is to lead public policy development for the industry. We’re working hard – on and off Capitol Hill – on comprehensive reforms that begin with de-scheduling. And if you’re committed to the growth of the industry, then you should join us.The Policy Council that I lead needs cannabis professionals to help us develop policies that support the best possible climate for entrepreneurs. If you care about being able to materialize the financial opportunity here, then you should care about creating the public policy climate that will allow the industry to really flourish.
Make no mistake about it: We’ve come an incredibly long way in the U.S. since the mid-90s when no state had legalized medical or adult-use marijuana, and support for legalization stood at roughly 25%. Today, two-thirds of respondents to Gallup’s annual poll favor legalizing recreational marijuana, with about 90% in support of medicinal cannabis. 33 states have approved medical cannabis in some capacity. Of these 33 states, a third (11) also allow adult-use consumption.
So, where is the federal government on this? Here are two possible scenarios.
Scenario One is that Congress passes some sort of incremental legislation in the near term.
There is a lot of cannabis-related activity going on in Washington D.C. these days. And there is good reason to believe that Congress will pass some form of cannabis legislation in the 116th Congress. But, if that happens, it’s likely to be an incremental approach – like SAFE Banking or the STATES Act – which provide protection for state-legal cannabis businesses from federal encroachment.
There was a hearing in the Senate Banking Committee on SAFE banking last month. Yes, you heard that right. There was a full committee hearing, chaired by a conservative Republican from Idaho. And Republican Senator Corey Gardner from Colorado testified in support of SAFE banking legislation. Senator Gardner is also a champion of the STATES Act, another incremental approach. This is an amazing feat, but does it mean that republican leadership has seen the light on cannabis? Maybe.
Or, maybe they just know the Presidential election will be decided by slim margins and the republicans can’t cede the marijuana issue to the democrats. Banking would be an easy win. And they wouldn’t have to support full federal legalization to support banking.
We also know that the House is poised to pass something soon. They have 206 co-sponsors for SAFE Banking. An impressive number. Word on the street is that that bill could move as quickly as this month in the House.
And think about this. Dozens of Attorneys General recently sued big pharma for knowingly selling opioids that are highly addictive and actually killing thousands of people annually. At the same time, three dozen Attorneys General sent a letter to Congress, asking that they pass the SAFE Banking Act for cannabis. Quite amazing.
Where there’s smoke, there’s fire, right? With all of this legislative activity, a bill must be coming to the floor, right? Maybe.
Mitch McConnell is not a cannabis fan, and he controls the legislative calendar in the Senate. But, hemp is a huge industry in Kentucky and NCIA has worked to have protections for hemp and CBD added to the SAFE Banking Act, so Mitch McConnell may now care more than he did just a month ago.
So, I do think that it’s likely that we will see some kind of legislative compromise on incrementalreform soon. And all signs appear to point to SAFE banking.
But, it’s unlikely that any such compromise will include de-scheduling.
And unless cannabis is made federally legal through de-scheduling, banks still risk federal money laundering charges by doing business with the industry, the federal tax code would still prohibit cannabis businesses from taking small business deductions, and possession of cannabis would still be federally illegal, setting people up for continued arrests for federal crimes that are state-legal in 33 states across the country. The economic impact of anything short of de-scheduling will continue to cripple any real small business growth.
So, while I actually think that we may see some legislative action in the coming weeks, it will likely not be the “end all be all” that some of us have been working toward. And it might not be enough to pacify investors or key constituencies.
But, it’s also possible that even small marijuana reform might not happen anytime soon.
So, here is scenario two: We don’t see any real movement in the coming weeks, notwithstanding some positive signs, for a handful of reasons:
Republicans generally aren’t fans of cannabis. Republicans have historically had a more negative view of cannabis than Democrats or Independents. In Gallup’s October 2018 poll, 75% of Democrats and 71% of Independents favored broad-based legalization, which compares to “just” 53% of Republicans – the party that controls the White House and Senate. And Senate Majority Leader Mitch McConnell, no friend to the industry, controls all of the cards in the Senate.
CBD regulations are stuck in a bureaucratic morass at FDA. Lawmakers are also taking their cues from the U.S. Food and Drug Administration (FDA), which has been contemplating how to regulate CBD for months. THC regulation will be harder. Much harder. And once Congress de-schedules, the FDA and Department of Treasury need to be ready to regulate. That is not tomorrow. Or next week. Or next month.
The U.S. Treasury is raking it in. Because cannabis businesses can’t take normal business deductions because of arcane tax rules, companies are paying an effective tax rate of more than 80%. So, the IRS is collecting massive taxes from businesses that are federally illegal. Once cannabis becomes federally legal, businesses can take normal deductions and pay less than half of the current tax rate. This would cost the U.S. treasury billions.
So, it’s possible that Congress does nothing in the short term.
No matter what, NCIA will continue to fight, on and off the Hill, for comprehensive reforms. And while we would be happy in the short term with some incremental relief, only de-scheduling solves myriad problems facing this burgeoning industry. It’s time for Congress to act. And there is no time like the present to get the ball rolling. NCIA will soon be releasing a white paper on how we believe that marijuana should be regulated at the federal level. And that plan starts with de-scheduling. We hope that Congressional leaders will take note.
VIDEO: Member Spotlight – Om Of Medicine
In this month’s video member spotlight, get to know Om of Medicine, a cannabis dispensary based in Ann Arbor, Michigan. Learn about their role in fostering a politically engaged and friendly community in their state of the art facility. Om of Medicine also collaborated with the University of Michigan conducting an IRB-approved pain study with hundreds of its patients which displayed a significant decrease in opioid use and an increase in quality of life.
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Patrick Chown
Gary Paulin is Director of Sales and Client Services for Lightning Labels, a Denver-based label printer that has been offering state-of-the-art affordable, full-color 
by Morgan Fox, NCIA Director of Media Relations
