Suppliers provide a product or service to a business and have an essential role in the entire product cycle – from sourcing materials to production. Cannabis businesses rely on and work closely with them to deliver the best product or service in the market.
With a newly regulated product like cannabis, there is even more scrutiny and cost that operators will have to deal with when it could be a supplier that fails or makes a mistake. Your entire operation could be compromised. To prevent this, it’s important for businesses to conduct supplier auditing.
What is Supply Auditing and Why Do You Need It?
A supplier audit evaluates the vendor’s competency to deliver the best quality raw materials or services. It’s the best solution to determine whether a particular supplier is contributing to the growth of your business. With a good system in place, it should streamline business operations and maximize productivity.
A company with a good supplier can deliver high-quality products and services. However, as the company grows, the risk does too. Whether it is for nutrients, soil, or other raw materials a regular audit may be needed to ensure that the supplier continues to deliver products that are of high quality or with up-to-date certification in order to be used for production or manufacturing.
You may perform an audit at least once a year or when a supplier needs to be monitored or evaluated. If your final product or service is not of the best quality, it could be because of the raw materials from the suppliers. In this case, it’s a must to perform a supplier audit. Otherwise, it could negatively impact your business. Keep in mind that it’s not only about your monthly or yearly sales targets. As a company, it’s your responsibility to take care of your brand. If you consistently deliver low-quality products, it could also affect your business as a whole.
Regular Auditing Ensures Suppliers Meet Your Standards
How do you know suppliers comply with your standards or contributes to the company’s main objectives? By regularly auditing them. All of your department’s operations must align with the company’s sales goals and that includes your suppliers. Keep in mind that they help you deliver the best products to your clients so it’s only right to make sure that they also deliver what was promised to you – and that is by providing you only with the highest quality raw materials for all of your products or services.
Regular Auditing is Cost-Effective
When a supplier fails to fully deliver, that could lead to a loss of a company’s revenue. A regular audit can help businesses prevent this costly problem. Supplier auditing can help them track whether the suppliers comply with level agreements. You can also identify potential problems and be able to remedy them before they could become costly business problems. Through supplier auditing, businesses can create contingency plans. By preventing a major problem, businesses won’t have to suffer a loss of revenue.
Regular Auditing Contributes to Quality Improvement
One of the most effective ways to find out if your company is consistent in delivering high-quality products is to audit your suppliers. As much as possible, make it a comprehensive audit to ensure that you have checked everything. Having a supplier quality checklist can surely help.
The supplier checklist will not be the same for all businesses. It can vary, depending on what industry you are in. Your checklist could include human resources, purchasing, delivery, production process, inspections, health & safety, risk management, quality control, regulatory compliance, supply chain management, food safety, control of materials, handling and storage, and KPIs. The checklist will serve as a guide for inspectors to evaluate all the important areas.
How Beneficial is Improving Supplier Quality?
Having a good supplier relationship can help businesses collaborate better with the suppliers. It provides complete transparency to both the company and the supplier. Regular auditing makes sure that the manufacturer or the supplier continues to meet business objectives. Other benefits include:
Customer Satisfaction
A business can grow or thrive in the cannabis industry if they know how to create awareness for their brand, reach out to their target audience and achieve their sales targets. And this takes more than just marketing, your production or manufacturing team also plays a role. When a business consistently provides the best and innovative products and services, rest assured that it will satisfy the customers. Customer satisfaction can help your brand. You will get repeat customers. With regular auditing, you are able to detect areas that may affect customer satisfaction. Before the problem turns into something serious or damaging, you would be able to alleviate it.
More Profits
Your end goal isn’t only to make your products or service known but to make your business more profitable. By being able to manage risks and quality through supply auditing, your company can maximize productivity and continue to deliver high-quality products to customers.
Investing in Compliance Automation Streamlines Business Operations
Digitalization can help your business effectively manage supplier compliance through automation. A cloud-based quality management software can help your entire staff become more efficient and effective by allowing teams to collaborate and raise actions against suppliers. Easily notify suppliers to submit certificates as they become due while conducting audits regularly and ensuring documentation is up to date.
Maria is the Director of Marketing & Communications at Isolocity. She first joined Isolocity at its inception as a marketing coordinator and has played a pivotal role in expanding the companies brand awareness across multiple industries. In her current role, Maria has aided in the development of strategic relationships and communications for the company. With Isolocity, she has been able to help cannabis companies streamline their quality compliance processes through digitization. Prior to joining Isolocity, she has also worked independently as a marketing consultant and in the consumer electronics industry. Outside of work, she enjoys spending her time with her watercolors or settling down with her partner to watch comic book films.
Isolocity’s quality compliance software holistically integrates over a decade of experience using quality principles from internationally recognized standards such as ISO 9001:2015, GMP, and more. It harnesses the power of automation to reduce work and resources needed by up to 50%. Its secure cloud technology allows users to implement and comply with complex quality control measures – from anywhere.
Video: NCIA Today – August 27, 2021
NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday here on Facebook for NCIA Today Live.
Grab your tickets NOW for the Midwest Cannabis Business Conference. Join us on September 22nd and 23rd in Detroit, Michigan. Current NCIA members receive discounted or even sometimes FREE tickets to our trade shows, depending on your membership level. Head to www.MidwestCannabisBusinessConference.com today to secure your tickets. You’ll soon be hearing more about our 7th Annual Cannabis Business Summit and Expo in San Francisco, as well, being held later in the year on December 15th through 17th, so stay tuned for those updates soon.
What would it take for cannabis to become a commodity? To answer this question, we must first understand what a commodity is. Commodities are often raw materials, such as mineral ores, petroleum, sugar, rice, corn, wheat, etc., traded in large quantities, with little restriction, with prices fluctuating based on supply and demand. These commodities are often traded on exchanges to facilitate transactions, as price and availability are the main factors, not product differentiation or branding. Thus, standardization of the commodity and minimum quality standards are essential to commoditization. Currently in the EU and UK, hemp raw materials and finished goods must be compliant with the Novel Food Regime to be sold. To be compliant, manufacturers must apply for Novel Food status which will then be approved by the Food Standards Agency. This is a perfect example of standardization beginning to take place. However, globally, there are ~800 recognized strains of cannabis, although realistically, that number is likely in the thousands. This is in comparison to most commodity markets which usually have less than a dozen different variations. We can break this down into three main sub-sectors: industrial hemp, medical cannabis, and adult-use cannabis, and the challenges to commoditization for each.
Industrial hemp is cultivated primarily for its seeds or fibers to make clothing, paper, biodegradable plastic, building materials, etc. Most CBD extracts also come from industrial hemp, so the hemp farmers can potentially be seen as commodity producers while the buyers, who then use the CBD extracts to produce their differentiated products, are not. However, one major issue is the lack of price stability and transparency for differentiation seen in other commodities. In the United States, prices for high-CBD cannabis biomass declined up to two-thirds in value in 2020 compared to the previous year.
Medical cannabis, which can be over the counter or pharma-grade, has various medical applications, some still yet to be discovered. On the pharma side, GW Pharma has the only cannabis drug that has been approved by the FDA, which treats different types of epilepsy. Cannabis is also being researched for its effectiveness in treating Alzheimer’s, cancer, eating disorders, mental health disorders, seizures, and many more. However, firms focused on medical cannabis often attempt to produce products with specific ratios of THC and CBD through crossbreeding and generating unique terpene profiles. However, for a company to develop pharma-grade products, the product must meet the minimum standards required by its prospective country. These are usually for a particular type of treatment, making commoditization difficult.
Adult-use cannabis has seen tremendous growth and legalization in the past years; however, products differ between producers. While there are thousands of strains of cannabis, even the same strain can vary widely between producers depending on cultivation methods and conditions. Naturally occurring terpenes also allow for differentiation. It can come in a wide range of different potencies, even due to farming techniques, thus making it challenging to produce premium quality cannabis at scale consistently. At the same time, countries are beginning to implement minimum requirements for its products, like the EU and UK’s Novel Food Regime explained above. As countries continue implementing these requirements, the ability to differentiate products will decrease.
As you can see, the most likely to be commoditized would be industrial hemp, as standardization would be a massive obstacle for both recreational and medical cannabis. However, other factors need to be resolved before cannabis can reach commodity status, including price transparency and legalization. There are benchmark prices for commodity products that are easily accessible, and currently, a platform to publish these benchmark prices has not been fully developed yet. Regarding legalization, in the US, cannabis with a THC content over 0.3% remains federally illegal, despite individual states allowing growth, processing, and sale. Multi-state operators cannot transport THC products across state lines, preventing the national distribution of branded products. The problem with interstate commerce would disappear when cannabis becomes federally legal, but it is currently a challenge and simply put, for now, a surplus in California stays in California.
While there are still many hurdles for cannabis to become a commodity, many tailwinds could lead to its successful commoditization. Federal legalization in the U.S. would likely remove restrictions in transactions, allowing for the free trade of cannabis within the country. On a global scale, the real barrier to global trade centers around the United Nations Drug Treaty. In December 2020, the U.N. Commission on Narcotic Drugs transferred cannabis from a Schedule 4 to a Schedule 1 drug. Schedule 1 drugs are still prohibited substances but are seen as having medicinal value. For cannabis to trade freely, the United Nations must move cannabis to a U.N. Schedule II or III drug. This is because countries must be compliant with the 1961 U.N. Convention to import and export cannabis, which requires a narcotic license. Additionally, once regulators such as the FDA come out with specific rules, CBD will begin to act more like a commodity with significant supply and demand. One World Pharma, The Cannabis Mercantile Trading Exchange (CMTREX), Panexchange, and Canxchange have begun developing exchanges for cannabis to trade on, with One World Pharma even beginning to offer limited futures contracts. On the positive side, cannabis has a head start in testing to meet minimum quality standards. Most jurisdictions already require it, although the threshold levels needed to sell the product still vary between locations. The regulations between different countries vary greatly, as countries in South America and places like Canada and Israel are very open to cannabis. However, in others, such as most EU and Asian nations, there is still a lot of stigma surrounding cannabis, which will likely take much longer to gain widespread acceptance. While there are still many hurdles to cross until commoditization, the current Biden administration has shown a willingness to legalize cannabis federally, the first and most crucial step towards cannabis becoming a commodity.
Ms. Della Mora is the Co-founder ofBLC, a financial advisory and investment firm based in Los Angeles with satellite offices in Houston, New York, London, Hong Kong, and Melbourne. During her tenure at BLC, she successfully invested, assisted in the capitalization, and helped business develop small cap oil companies in Kentucky, Texas, Louisiana, Illinois, Colorado, California, Wyoming, North Dakota, and Alaska. She has also structured oil & gas partnerships in several U.S. states, and in Ecuador, Central America. Ms. Della Mora has been involved in many LNG (Liquid to Natural Gas) projects in the U.S., as well as many commodity trades worldwide. She has personally advised also Chinese conglomerates in their U.S. oil & gas investments.
Black Legend Capital is a leading Merger & Acquisition boutique advisory firm based in California with offices worldwide. Black Legend Capital was founded in 2011 by former senior investment bankers from Merrill Lynch and Duff & Phelps. We provide M&A advisory services, structured financing, and valuation services primarily in the cannabis, technology, healthcare, and consumer products industries. Black Legend Capital’s partners have extensive advisory experience in structuring deals across Asia-Pacific, Europe, and North America.
NCIA Accepting Applications For 2022-24 Board of Directors Term
NCIA is accepting applications for eligible candidates to apply for its board of directors now through Thursday, September 30, 2021.
The National Cannabis Industry Association is a nonprofit organization run for and by its membership, so we hope you’ll consider this opportunity to apply for a seat on the NCIA Board.
Serving on NCIA’s Board of Directors is no small task. Board members are responsible for overseeing the strategic direction of the largest and most influential cannabis industry organization in the country. Board Members are also responsible for building membership, fundraising, and ensuring that NCIA continues to be the strongest force advocating for the fair and equal treatment of the industry on Capitol Hill.
Current NCIA members in good standing are eligible to apply for a seat on the board. NCIA members who are interested and qualified to serve on our board are encouraged to submit an application for review by our nominating committee before the September 30 deadline. Candidates may apply directly for a board position during the open application process. The application form asks for information about the candidate’s professional background, unique talents, skills, and viewpoints, and ability to contribute or raise financial resources for NCIA.
Who Qualifies To Run For A Board Position?
To be considered for a seat on the board, a candidate must be a fiduciary (e.g. owner, president, CEO) of a current dues-paying member business at any level of membership and must submit an application online by September 30.
What Are The Requirements For An NCIA Board Member?
Board members serve two-year terms and are responsible for overseeing the association’s overall strategy and budget, assist in the development of strategic relationships, and as ambassadors of NCIA, they represent nearly 2,000 member businesses. In general, the NCIA board meets in person twice and conducts 2-3 video conferences per year.
How Are The Board Positions Selected?
Once the application period closes, NCIA’s Nominations Committee will convene to carefully review and score all applications. The committee will ultimately select a slate of nominees to fill eight (8) available board seats that are best suited to bring additional talent, resources, and diversity to our growing organization, based on their qualifications. Our Nominating Committee will be comprised of the chairs of our 14 member committees as well as a select number of current board members whose terms are not expiring this year. Once the Nominating Committee selects the slate of eight, members will be notified later this year.
Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday on Facebook for NCIA Today Live.
Member Blog: We’re Out of the Weeds – CRC Releases Initial Rules & Regs for New Jersey’s Adult-Use Marketplace
New Jersey recently passed the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”). Among other things, CREAMMA permits adults 21 years and older to consume cannabis and allows New Jersey residents to operate six types of cannabis businesses within the state. The new adult-use marketplace, as well as the already established medicinal marketplace, will be administered by the Cannabis Regulatory Commission (“the CRC”). The CRC is a panel of five appointed members who will oversee the development, regulation, and enforcement of the use and sale of all legal cannabis in New Jersey.
The CRC recently approved its first set of rules and regulations on August 19, 2021. This will enable the start of the licensing process for personal adult-use cannabis operations in New Jersey. Here are the 15 takeaways from the initial rules and regulations:
What type of license can I apply for?
There are six different license types:
Class 1 – Cannabis Cultivator License
Class 2 – Cannabis Manufacturer License
Class 3 – Cannabis Wholesaler License
Class 4 – Cannabis Distributor License
Class 5 – Cannabis Retailer License (also includes consumption lounges)
Class 6 – Cannabis Delivery License
Businesses may also apply for a license to operate a cannabis testing facility or medical cannabis testing laboratory. License-holders may hold multiple licenses concurrently; however, there are limitations on the number and type of licenses that may be held concurrently.
Are there any caps on the number of licenses that may be awarded?
The State only placed a cap on Class 1 licenses for cultivators. In particular, there will be a statewide cap of a total of 37 cultivators until February 22, 2023. Keep in mind that state limits aren’t the end of the inquiry; municipalities may set restrictions on the number of businesses in their jurisdiction.
What are the fees to apply for one of the adult-use licenses?
In an effort to make the application fee reasonable, the CRC will require applicants to only pay 20% of the application fee at the time of application, and the remaining 80% will only be collected at the time the license is approved. The initial application cost may be as low as $100 but successful applicants should be prepared to pay additional fees ranging from a total cost of $500 – $2,000.
Are there any fees other than the initial application fee?
Yes. There are annual licensing fees, which can range from $1,000 for a microbusiness to $50,000 for a cultivator, with up to 150,000 square feet of cultivation capacity. This fee range only applies to the adult use marketplace. There is a different licensing fee schedule for the medicinal use marketplace.
Will anyone be given priority in the application process for a cannabis license?
Yes. The CRC will prioritize applicants who live in specifically definedeconomically disadvantaged areas of New Jersey or who have past convictions for cannabis offenses (“Social Equity Applicants”). It will also prioritize applications from minority-owned, woman-owned, or disabled veteran-owned businesses that are certified by the New Jersey Department of the Treasury (“Diversely Owned Businesses”). Businesses in impact zones will also take priority (“Impact Zone Businesses”).
What do you mean by “priority review?”
Applicants meeting the criteria described above will have their applications reviewed before other applications, regardless of when they apply. Remember, however, that priority review doesn’t guarantee selection.
When will the CRC begin to review applications?
No date has been announced, but the CRC promises that it will be soon. The CRC will publish notice in the New Jersey Register announcing its intent to review applications and submissions will be reviewed, scored, and approved on a rolling basis (pun intended), subject to the required priority review for certain applicants.
What should I expect from the application?
Applicants will be expected to submit a detailed application that includes specific details for the proposed site for the business (which must be owned or leased), municipal approval, and zoning approval. Applicants must also submit an operating summary plan detailing the applicants’ experience, history, and knowledge of operating a cannabis business. The scoring of applicants and awarding of licenses will be based entirely on the application materials.
What if I don’t have all of the materials to submit a complete application?
Don’t worry, you can apply for a “Conditional License.” A Conditional License is a provisional award that gives the holder 120 days to become fully licensed by satisfying all the requirements for full licensure, includingfinding an appropriate site, securing municipal approval and applying for conversion to an annual license.
What are the requirements to be considered for a Conditional License?
Conditional License applicants mustsubmit a separate application for each cannabis business license requested, along with a background disclosure, a business plan and a regulatory compliance plan to the CRC. At the time of the application, all owners with decision-making authority of the conditional license applicant will need to prove that they made less than $200,000 in the preceding tax year, or $400,000 if filing jointly.
Are there any advantages in being awarded a Conditional License?
Conditional License holders that convert to an annual license will not have to submit the sections of the application that, under statute, require applicants to demonstrate experience in a regulated cannabis industry. This flexible option offers an opportunity for newcomers to get into the cannabis industry.
What is a Microbusiness License?
Microbusiness licenses are for applicants who want to run a relatively small operation. Applicants may apply for a microbusiness license for any of the six license types. A microbusiness license limits the business to 10 employees; a facility of no more than 2,500 square feet; possession of no more than 1,000 plants per month; and/or a limit of 1,000 pounds of usable cannabis per month.
Can I rely solely on my local municipality for a license?
No. The state must award the cannabis license. Municipalities play a critical role, however, in the licensing process. For example, applicants will only be licensed by the CRC if the applicant has demonstrated support from the municipality, zoning approval, and has been verified to operate in compliance with any other local licensing requirement.
Can municipalities ban cannabis businesses from operating within their jurisdiction?
Yes. Municipalities may ban certain businesses from operating within their borders if they enact an ordinance regulating or banning cannabis businesses by August 21, 2021. Municipalities may update their ordinances at any time to remove any restrictions that they previously placed.
What happens if I don’t follow the CRC’s rules and regulations?
The CRC is authorized to inspect cannabis businesses and testing laboratories, issue notices of violations for infractions and issue fines. Standard fines can be no higher than $50,000, while fines for infractions implicating issues of public safety or betrayal of public trust can be as high as $500,000. Licenses may also be suspended or revoked. Don’t take the risk!
These 15 key points present only a quick summary of the CRC’s initial set of rules and regulations. We anticipate there will be a second set of rules released later this year, which will likely resolve issues that weren’t addressed in the initial set of rules and regulations, or CREAMMA. We expect the second set of rules and regulations to focus mainly on the needs of distribution and delivery service, and preparing for the acceptance of applications, before the Garden State is in full bloom…
Charles J. Messina is a Partner at Genova Burns LLC and Co-Chairs the Franchise & Distribution, Agriculture and Cannabis Industry Groups. He teaches one of the region’s first cannabis law school courses and devotes much of his practice to advising canna-businesses as well as litigating various types of matters including complex contract and commercial disputes, insurance and employment defense matters, trademark and franchise issues and professional liability, TCPA and shareholder derivative actions.
Jennifer Roselle is a Partner at Genova Burns LLC and Co-Chair of Genova Burns’ Cannabis Practice Group. She has unique experience with labor compliance planning and labor peace agreements in the cannabis marketplace. In addition to her work in the cannabis industry, Jennifer devotes much of her practice to traditional labor matters, human resources compliance and employer counseling.
Daniel Pierre is an Associate at Genova Burns and a member of the Cannabis and Labor Law Practice Groups. In addition to labor work, he likewise assists clients in the cannabis industry, from analyzing federal and state laws to ensure regulatory compliance for existing businesses to counseling entrepreneurs on licensing issues.
For over 30 years, Genova Burns has partnered with companies, businesses, trade associations, and government entities, from around the globe, on matters in New Jersey and the greater northeast corridor between New York City and Washington, D.C. We distinguish ourselves with unparalleled responsiveness and provide an array of exceptional legal services across multiple practice areas with the quality expected of big law, but absent the big law economics by embracing technology and offering out of the box problem-solving advice and pragmatic solutions.
Given Genova Burns’ significant experience representing clients in the cannabis, hemp and CBD industries from the earliest stages of development in the region, the firm is uniquely qualified to advise investors, cultivators, processors, distributors, retailers and ancillary businesses.
Committee Blog: What Retailers Can Do To Support Social Equity
Social equity can be boiled down to a way of seeking remedy for the harms caused by the racist war on drugs and to help individuals, families, and communities that have been disproportionately impacted by prohibition. A big part of this is making sure that no one is left behind by the economic developments created by making cannabis legal. As local, state, and federal governments continue to grapple with implementing policies that effectively address this issue, there is a lot the industry can – and should – do to help make sure that the opportunities in regulated cannabis markets are inclusive and equitable, and to help support businesses owned by members of marginalized communities.
As many as 70% of consumers want brands to take a stand on social and political issues. That’s a 66% increase from 2017, according to Sprout Social’s 2019 #BrandsGetReal survey. Customers are more likely to purchase from companies that take a stand on causes aligning with their values and more importantly, companies hold the power to make a difference; even if it’s encouraging people to take baby steps towards a larger solution. Data shows they might already be doing that, because 67% of consumers say brands are raising awareness around just causes, and 62% believe brands are educating them on important topics.
Here are just a few ways that cannabis retailers can help be a part of the social equity solution to economic unfairness created by the failed war on drugs:
Partner with Job Programs
Cannabis arrests or convictions can erect barriers in someone’s life. More specifically, they can affect housing, education, and career prospects. Consider partnering with city, state, and national programs and organizations that are creating pathways to cannabis ownership and employment – including the formerly incarcerated – to create job opportunities for underserved communities.
Expungement Days
Reach out to a local law firm or social justice organization and talk about hosting “expungement days.” Your efforts will help provide free legal measures for expunging low-level cannabis-related convictions. The Last Prisoner Project is a cannabis reformation project seeking to release prisoners currently convicted for cannabis-related crimes and help them assimilate back into society. However, local organizations may often have direct experience with this work in your communities and have well-established relationships with them to help better connect with the people who need these services the most.
Reach out to them and see what they recommend before planning your expungement day. You can also find out more information about expungement efforts nationally at the Collateral Consequences Resource Center.
Create shelf space
Socially conscious companies should show equity and racial justice on your stores’ shelves. Whether it is making a “social equity section” or finding ways to educate budtenders on the merits and stories behind the products, you will be moving sales in the right direction and promoting socially conscious consumer patterns. You can also provide tabling space for brand ambassadors to help promote social equity company products that you carry. This not only helps the brands but also creates greater loyalty to your store.
Find products that are both socially equitable and fit your dispensary’s needs. That way, you push the product because you love the product, not just because it’s trendy. But in doing so, you are contributing to positive social change and acceptance, and driving commerce toward BIPOC-owned companies. Remember, the goal is equity.
Form equitable partnerships for ownership
Are you a retailer, cultivator, or production company? Maybe you’re a vertically integrated, multi-state operation. You might not even touch the cannabis plant at all, but provide services to those who do. No matter who you are in cannabis, find ways to partner with social equity companies and help increase their recognition. Maybe it’s mutually beneficial joint venture projects on brands or another arrangement, but find ways to form fair and collaborative relationships.
Above all, keep it real
In the end, authenticity is key, and to take a stand in a way that inspires customers: your message can’t be filled with empty words. If you’re a company that’s looking for causes to rally behind, keep it in your wheelhouse and make sure your audience will resonate with the partnerships you’re creating.
Retail businesses have the power to become change agents and inspire customers to take action in their own backyards. Seek out opportunities like the ones we mentioned and provide opportunities for wealth generation, education, and social restoration in marginalized communities.
According to statistics, you’ll make a lasting impression on your audience, increase sales, and you’ll be a force for positive social change as you impact lives in your community and beyond. What’s better than that?
FDA Punts on Regulating CBD Again
by Morgan Fox, NCIA’s Director of Media Relations
Last week, the hemp and CBD industries took another blow from the Food and Drug Administration when the agency refused to grant a request from prominent CBD producer Charlotte’s Web to regulate the substance as a dietary supplement. This is the latest in a series of delays and setbacks on the part of the FDA when it comes to regulating hemp-derived cannabinoids and products since they became technically legal at the federal level under the 2018 Farm Bill.
Bloombergreports: “The company’s bid to sell its full-spectrum hemp extract with CBD as a dietary supplement won’t be considered because of the FDA’s own prior decision to treat CBD as a drug, according to a letter posted on the agency’s website Wednesday. This shouldn’t disrupt the business of Charlotte’s Web or prevent other companies from continuing to sell such products, which already exist in a gray area without the agency’s oversight. The decision shows the agency’s ongoing hesitancy to regulate cannabidiol, the non-psychoactive ingredient in cannabis plants better known as CBD… The FDA’s objection rested in part on its prior approval of Epidiolex, a CBD drug to reduce seizures, which the agency said precludes it from authorizing CBD for dietary purposes. Even if the drug hadn’t been approved, though, the FDA said in the letter to Charlotte’s Web dated July 23 that it “has concerns about the adequacy of safety evidence” that the company submitted.”
This position is likely to create serious problems for the CBD industry. Without allowing CBD products to be regulated as dietary supplements or food additives, the FDA will be forcing producers to get federal approval for their products under the Investigational New Drug program. This process can often take years and cost applicants millions of dollars.
This casts even more doubt on what the future of the CBD market will look like as producers continue to operate in an uncertain landscape. The legality of CBD combined with the lack of federal regulations has created a lot of opportunities for responsible producers to bring products to market without dealing with the often overly strict state cannabis programs, but it has also opened the door to irresponsible operators who have been accused of actions from making misleading or unsubstantiated health claims to selling mislabeled or adulterated products.
Furthermore, the lack of federal regulations has discouraged many larger retailers from selling CBD or hemp-derived products altogether, drastically limiting the market options for producers. Some industry insiders have theorized that lack of access to those retailers has directly led to some producers desperately searching for ways to unload their excess CBD, including processing it into unregulated Delta 8 THC and flooding the markets in both legal and prohibition states, creating concerns among regulators, lawmakers, licensed cannabis operators, and consumers.
This troubling news follows on the heels of another memo issued by the Farm Credit that suggests that financial institutions that provide financing to hemp businesses should only do so if the company is operating under the auspices of a USDA-approved state hemp program.
“While many states and federally recognized tribes have since submitted those plans, 20 states are still operating under an earlier provision: a hemp pilot program created by the 2014 Farm Bill. That program, which is still valid and would befurther extended under pending legislation that has passed the House and is pending in the Senate, requires less federal oversight than the new USDA-approved programs,” Marijuana Momentreports.
Some in the industry are concerned that the memo will lead to lenders dropping their hemp clients operating under the pilot programs, but others have suggested that it will not have a significant impact on the lenders who are already working with hemp businesses given the amount of reporting that they must already complete for the federal government and the lack of federal prosecutions for doing so historically.
It seems pretty clear by this point that the FDA will not move forward with regulating CBD in a timely and reasonable manner without outside pressure. You can add your voice to the chorus calling for sensible CBD regulations by visiting RegulateCBDNow and urging Congress to take action.
Committee Blog: Safety – Terpene Limits in Cannabis Manufacturing
by NCIA’s Cannabis Manufacturing Committee
From the taste of your fruits and vegetables to the aroma that travels from trees and flowers in bloom, terpenes are the organic compounds that play a vital role in the flavors and smells we experience daily. Terpenes are common ingredients that are used in many industries such as food, cosmetics, tobacco, and pharmaceuticals. Therefore, the information on the safety of terpenes in these industries can be used for determining the safe use of terpenes in a wide range of product applications.
Terpenes are currently being introduced into a variety of adult-use and medical cannabis preparations across the U.S. and hemp-CBD markets around the world for both flavor and functional purposes. Much research has been and still is being conducted on the therapeutic effects of terpenes and their synergistic effects when used in conjunction with cannabinoids. The strong research background supports the benefits of infusing terpenes into cannabis extracts, both in reference to endogenous terpenes found naturally in the plant and those terpenes that have been added back into preparations from other botanical sources. Therefore, almost every manufactured cannabis product contains a percentage of terpenes. However, the clear lack of understanding of the full potential of the terpene profiles, and misuse of these volatile, fragile compounds bring up various misconceptions regarding terpene safety versus their efficacy in creating an elevated user experience.
As terpenes make a significant contribution to the quality of cannabis products, which varies from one consumption method to the other, it is highly important to utilize the most advanced knowledge regarding terpenes in order to maximize their potential while maintaining product safety.
Inhalation
Bioavailability
Terpenes are a naturally occurring constituent in resin cannabis extracts. Terpenes have been incorporated into vaporizable formulations in the form of pre-filled cartridges. These terpene formulations are designed to produce specific effects based on the creator’s intentions, or the terpenes are simply reintroduced to mimic the source material since the extracts are often refined to the point that they have little or no taste (i.e., lost their original essence).
Inhalation of these volatile molecules leads to quick absorption of the compounds via the lungs and directly into the bloodstream. The high solubility of monoterpenes in the blood and hydrophobic medium suggests a high respiratory uptake and accumulation in fat tissues (Falk 1990a). This was confirmed by recent studies of uptake and elimination of a-pinene and 3-carene in humans (Falk 1990b, Falk 1991b). The bioavailability range via inhalation of alpha pinene, camphor and menthol has been studied and reported to be 54-76% (Kohlert 2000) which is relatively high compared to oral bioavailability. Therefore, terpenes via inhalation are an efficient route of administration which allows low dosage of terpenes.
General Guidelines
When examining terpene infusion, the points below should be taken into consideration:
From accumulated knowledge within the cannabis industry and considering terpenes’ natural ratios in cannabis (1 – 5%) and data on safety, it is suggested not to exceed a concentration of 10% in the final product.
As terpenes are volatile molecules, the final terpene-infused product is recommended to be used only with adjustable temperature vaporizers such that the oil will not be heated to high temperatures to prevent unnecessary heat-derived toxin production.
Aerosol testing for the final product is recommended to test for heavy metals leaching into the vaporizable product.
Terpenes are recommended to be used within their defined expiration date labeled on the suppliers’ bottle. The final vaporizable product must be tested in a certified lab under the requirements of the authority having jurisdiction to make sure it meets all quality and regulatory requirements.
Terpene Limits
By using position papers such as the ANEC Position Paper on E-cigarettes and e-liquids, suggestions regarding terpene limits can be made for cannabis inhalable products. It is important to mention that the final decision on added terpene amounts and determination of product safety is the sole responsibility of the manufacturer based on their assessments, internal procedures, and local regulations.
The following numbers are the suggested infusion percentage of specific terpenes in E-liquid. This suggestion was calculated by using DNEL (Derived No Effect Level) levels in inhalation as well as frequency of puffs a day.
On average, E-liquid users take 500 puffs a day (ANEC position paper), whereas cannabis users take around 9 puffs a day. Therefore, the suggested terpene limit percentage in cannabis inhalables may be higher than E-liquid due to the lower daily usage.
Substance
Suggested Terpene Limit in E-liquid According to ANEC
Linalool
0.34%
Menthol
7.8%
Beta Pinene
0.7%
Alpha-Terpineol
1.1%
Geranyl Acetate
7.4%
Carvone
0.14%
Ingestion
Bioavailability
Terpene presence in foods of plant origin and in herbs with functional properties has led to further exploration of their bioavailability following oral consumption. The research on terpenes’ bioavailability is commonly done through medicinal plants since they are subjected to digestion within the mouth and stomach before accessing the small intestine. Bioavailability through oral ingestion is affected by mechanical actions, enzymatic actions, and different pH conditions, Transformations into usually more water-soluble and more readily excreted in the urine compounds affect this process as well. These transformations appear mainly in the liver, but also in the gastrointestinal tissue, lungs, kidneys, brain, and blood (Furtado 2017) Several studies have shown that terpenes consumed orally are absorbed through the gastrointestinal tract and are bioavailable as soon as 0.5 h after intake, reaching their peaks between 2 and 4 h (Furtado 2017, Papada 2018).
General guidelines
Terpenes are commonly used as flavor ingredients and their usage guidelines are clear when used in foods, such as the FEMA values table below. However, when terpenes are used for therapeutic purposes, the suggested dose in food is not fully researched, and the balance between flavor and functionality is still yet to be determined. Basing the dosing according to flavor guidelines is a good place to start. Upper limits should be defined by safety limits such as the DNEL values table found below. It is important to use natural, Food Grade terpenes that are backed up with certificates of analysis and are safe to ingest.
Terpene Limits
The Flavor and Extract Manufacturers Association of the United States (FEMA) has developed an innovative program utilizing the GRAS concept to evaluate the safety of flavoring substances. The FEMA GRAS program began in 1959 with a survey of the flavor industry to identify flavor ingredients then in use and to provide estimates of the amounts of these substances used to manufacture flavors. This database provides information on all ingredients that have been determined to be “generally recognized as safe” under conditions of intended use as flavor ingredients. According to The FEMA GRAS assessment – aromatic terpenes used as flavor ingredients are ubiquitous throughout the food chain; and therefore, not surprising that they serve as effective flavoring ingredients.
The below table presents the average maximum usage levels of terpenes used as flavors in several product types as provided by FEMA.
Product
Lime Terpenes
Average Max (ppm)
Orange Terpenes
Average Max (ppm)
Grapefruit Terpenes
Average Max (ppm)
Limonene Average Max (ppm)
Myrcene Average Max (ppm)
Linalool Average Max (ppm)
Beverages, Nonalcoholic
750
1,550
500
31
4.4
7
Beverages, Alcoholic
1,000
1,000
1,000
NA
NA
50
Chewing Gum
20,000
20,000
20,000
2300
NA
200
Hard Candy
5,000
5,000
5,000
49
13
400
Soft Candy
5,000
5,000
5,000
NA
NA
10
ppm is an abbreviation for “parts per million” and it also can be expressed as milligrams per liter (mg/L) or in a percentage where 10,000 ppm is 1%. For example, the maximum suggested infusion for orange terpenes in chewing gum is 2%, where the suggested infusion in hard candy is 0.5%.
*Point of thought*: Since terpenes in the cannabis industry are mostly infused in cannabis-based products, the frequency of usage of such products is lower than regular food products.
Additional safety data can be gathered from reviewing reports from governmental agencies such as European Chemicals Agency (ECHA). The following data about the DNEL (Derived No Effect Level) in the category of General Population was collected from ECHA website. These numbers may be used as a guideline for maximum daily intake via oral administration:
Substance
DNEL (Derived No Effect Level)
Calculated Daily DNEL for 70kg subject (mg/day)
Linalool
0.2 mg/kg bw/day
14
Menthol
4.7 mg/kg bw/day
329
Beta Pinene
0.3 mg/kg bw/day
21
Alpha-Terpineol
no hazard identified
no hazard identified
Geranyl Acetate
8.9 mg/kg bw/day
623
Carvone
69.4 µg/kg bw/day
4,858
For example, a 70 kg person consumes a 1g cookie that is infused with 1% Pineapple Express terpene formulation and Linalool constitutes 10% of the formulation, then there will be overall 10mg of terpene formulation in the cookie, out of the 10mg there is 0.1mg of Linalool which doesn’t exceed the DNEL level.
Topical
Bioavailability
Terpenes are lipophilic, small, and nonpolar molecules that are considered to be the largest group of natural fragrances. Terpenes can easily penetrate the skin and enhance transdermal delivery (Aqil 2007) and can potentially aid cannabinoid transdermal delivery. Terpenes are also known to have several dermal benefits including anti-inflammatory (Maurya 2014), wound healing (d’Alessio 2014) and anti-acne (Yuangang 2010). Terpene bioavailability via transdermal delivery ranges between 3-12% depending on the type of terpene, medium and application (Brain 2007, Gilpin 2010). Following topical application, maximum plasma levels of terpenes are reached within 10 minutes (Kohlert 2000).
General guidelines
While some terpenes are known as dermal irritants, the severity of the irritation may depend on their concentration. These should not be used on any inflammatory or allergic skin condition and should always be appropriately diluted. The oxidation of terpenes can increase risk of causing skin reactions because the oxides and peroxides formed are more reactive. This can be seen with (+)-limonene, δ-3-carene and α-pinene and arise due to the formation of oxidation products, some of which are more sensitizing than the parent compound. For this reason, proper storage of terpenes is required to preserve their effectiveness and decrease the risk of adverse reactions.
The table below lists commonly known allergenic terpenes, and for this reason, should be declared on the packaging or in the information leaflet if the concentration of these allergenic fragrances is higher than the permissible concentration of 0.01% in shower gels and baths (rinse-off products) and higher than 0.001% in body oils, massage oils and creams (leave-on products)
Allergenic Terpenes
Citral
Citronellol
Eugenol
Farnesol
Geraniol
Isoeugenol
D-Limonene
Linalool
Terpene Limits
The International Fragrance Association (IFRA) defines which compounds represent a potential allergy risk and determines their maximum concentration to produce safe cosmetic products. IFRA also issues recommendations for the safe use of fragrance ingredients, which are published in the IFRA Code of Practice and its guidelines. In the below table, there can be found specific infusion recommendations for specific terpenes.
Substance Name
Restriction Limits in the Finished Product (%) according to IFRA:
Lip Products
Body Lotion, Cream & Oils
Hand Sanitizer & Hand Cream
Body Wash
Citronellol
2.20%
12.00%
3.20%
24.00%
Citral
0.11%
0.60%
0.15%
1.20%
Farnesol
0.21%
1.20%
0.29%
2.30%
Eugenol
0.45%
2.50%
0.64%
4.90%
Geraniol
0.85%
4.70%
1.20%
9.20%
Alpha Bisabolol
0.42%
2.40%
0.60%
4.60%
Testing of terpenes in dermal products can be achieved safely by making a sample product with terpene formulation infused at 0.5% to 5% concentrations in petrolatum. Patch testing can be a useful technique to detect and avoid skin reactions.
Video: NCIA Today – August 13, 2021
Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday on Facebook for NCIA Today Live.
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Committee Blog: Cannabis And Cancer – As We Go Forward (Part 1)
No part of the following information should be construed as medical advice on the part of NCIA.
As a cannabis industry professional, you’ve probably been asked the question: “Is it true that cannabis cures cancer?” If we know someone who has cancer and benefited from using cannabis, we may say “cannabis aids in the treatment of cancer.” However, medical research has not indicated that cannabis cures cancer. NCIA’s Scientific Advisory Committee is reviewing the scientific data related to cannabis as an additional treatment to traditional care in the management of cancer.
Our three-part blog aims to give you accurate andup to date information about cannabis and cancer by looking at the federal regulations governing cannabis research; reviewing past, current, and future research; a review of how our cells and the endocannabinoid system (ECS) work together to disable cancerous cells; and looking at institutions involved in cannabis studies.
According to the CDC, cancer is the second leading cause of death in the United States and second on the WeedMaps list of most common conditions that qualify you for a medical cannabis card. This is interesting, but really not a surprise as archeological evidence suggests this sacred plant has been used for medicinal purposes for thousands of years. According to the Pen Tsao Ching, written nearly 5,000 years ago, cannabis is recommended for many of the same diseases and conditions that occupy the current composite qualifying lists in the states where cannabis is legal for medical purposes. This history magnifies the significance of the endocannabinoid system, a little-known, but incredibly important system that maintains balance in our bodies at the cellular level.
Cancer is a disease that begins when the cells of our body go completely out of balance. Instead of following the instructions of their genes, cancer cells become destructive to the body they live in. Cancer starts when one or a small group of cells begin growing out of control. It takes many forms, including blood cancers (leukemia, lymphomas), bone cancer, skin cancer, and solid tumors (e.g., stomach, lung, breast, prostate, ovary). Depending on how aggressive the cancer is, it may metastasize, meaning it can spread throughout the body.
Cancer Diagnosis
If you or someone you know is diagnosed with cancer, always get a second opinion. Be sure when choosing a doctor or Cancer Center that they have solid knowledge of all treatment options for your type of cancer, and understand that diet and lifestyle are critically important for healing.
If you want to use cannabis as a cancer treatment, find a doctor who is knowledgeable about how cannabis can affect the metabolism and effectiveness of chemotherapy and understands the invaluable medicinal benefits. For example, cannabis can alleviate symptoms associated with cancer treatments including pain, nausea, vomiting, weight loss, numbness, tingling, and anxiety. A summary of patterns of cannabis use among cancer patients in the United States can be found here, along with a brief review about patterns of use of medical cannabis among Israeli cancer patients.
Cancer treatment depends largely on the type of cancer, its stage, and what your doctor recommends. The most common treatments are surgery, chemotherapy, and radiation therapy. There are several more advanced treatment options but few insurance companies cover them. Chemotherapy and radiation therapy have significant and unpleasant side effects because healthy cells are often destroyed in the process of killing cancer cells.
The Current State of Cannabis and Cancer Research
Under the existing political and legal landscape, cannabis research has faced multiple hurdles. Currently, little to no research on the medical benefits of cannabis has been done in federally funded institutions due to its federal illegality.
The most serious hurdle is the lack of experimental data proving there is great medicinal value in the plant. Even so, there are numerous physicians, scientists, and other professionals who believe there is no plant on earth with greater medicinal value than cannabis.
Next Steps in Cannabis Research
Hopefully, more clinical trials will be performed as political and legal requirements are improved and clarified.
The National Cancer Institute hosted a“Cannabis and Cannabinoids and Cancer Research Symposium”in December 2020 to “address current barriers to research and strategies to navigate these hurdles to ensure the feasibility of rigorous studies designed to address gaps in knowledge as well as potential research opportunities in the area of cancer-related cannabis research.”
In essence, we’re missing consistent and reproducible evidence that cannabis can treat cancer and treat the side effects of conventional cancer treatments. Also, we need more doctors educated on cannabis use amongst patients with cancer. Oncologists (cancer doctors) want more information about medical marijuana and cannabis.
Recent surveys reveal 30% of oncologists feel they can advise their patients about cannabis formulations in conjunction with their therapy.
The majority of oncologists as well as the American Cancer Society state, “do not forgo conventional therapy in favor of cannabis products only.” Dr. Donald Abrams, an integrative oncologist, discussed this issue in an article, “Should Oncologists Recommend Cannabis?’
In our next blog post, we will explain how the ECS and cells in our bodies interact with cannabis to disable threats from cancer cells.
Ann Allworth, PhD, is a cell biologist, who for more than 35 years has been educating adults, first in medical schools as an anatomy professor; then in the natural product industry, teaching the immense value of phytonutrient-rich foods and herbs to optimal health and well-being. Upon learning of the endocannabinoid system, she founded Cannabis Education Solutions, a company dedicated to illuminating minds to the vast nature of the endocannabinoid system and its unparalleled role in human health. Ann is now semi-retired and will soon be making a transition to a partnership in a new organization involved in medical cannabis advocacy.
Cynthia Shelby-Lane, MD, is an emergency physician, board-certified in anti-aging and functional medicine, and a certified Marijuana Doctor practicing medicine in Detroit, Michigan. Dr. Shelby-Lane has certified more than 10,000 medical cannabis patients in the State of Michigan. She coaches patients on their use of cannabis in conjunction with their current medications and medical conditions. She has been a member of NCIA and the Scientific Advisory Committee for the past five years, in addition to membership in multiple cannabis associations and organizations. She speaks at conferences/webinars and in the community on the use and benefits of cannabis and the evolving landscape of cannabis research. Dr. Shelby-lane has worked closely with the Last Prisoner Project.
As the cannabis industry scales and more states legalize for adult-use, the demand for consumable cannabis products increases. To keep up with the demand, manufacturing facilities have to not only scale, but stay ahead of the curve as far as conserving resources, constantly innovating facility design to meet regulations and third-party compliance, e.g., ASTM Cannabis Certification Program and Good Manufacturing Practices (GMP).
Here are a few areas of environmental, product quality, and worker impacts to consider when planning for the future of your manufacturing facility.
Energy
As with any manufacturing facility, cannabis manufacturers pull power from shared electrical grids, meaning there is increasing pressure to reduce energy usage as they scale their operations. There are many design strategies for facilities to consider, whether they retrofit or build new, to reduce environmental impacts and position their operation for a sustainable future. One example for the cannabis industry is to recapture and repurpose heat generated from the processing equipment used for manufacturing products. Another example is incorporating climate control technologies to reduce the amount of energy required in extreme environments. More and more energy companies are starting to incentivize cannabis operations to reduce their energy usage and offer guidance on how to do so. Furthermore, regulators are beginning to enforce energy usage requirements for manufacturing facilities.
There are many ways to reduce your facility’s energy usage from efficient lighting to control system maintenance and making sure your odor and emissions control systems are designed to your facility’s specific emission load and mechanical design. Whenever possible, installing cloud-based smart systems with the ability to capture energy usage and system maintenance data will help to improve your facility’s energy efficiency. More areas of impact and best management practice guidance can be found in the NCIA’s Environmental Sustainability Report, released in October 2020.
Air Quality
Manufacturers of Infused Products, or MIPs, are Colorado’s manufacturing facilities, which is one example of a market segment facing regulatory enforcements for air quality control. The large-volume use of solvents for extraction leads regulators to monitor the volatile organic compounds (VOCs) emitted from the use of these solvents, as VOCs are contributors to low-level ozone formation, poor air quality, and public health issues. These solvents are also potential contributors to water contamination if wastewater is not discharged properly from the facility and are consequently on the radar for regulators to tightly monitor. The EPA states “the main concern indoors is the potential for VOCs to adversely impact the health of people that are exposed. While VOCs can also be a health concern outdoors, EPA regulates VOCs outdoors mainly because of their ability to create photochemical smog (or low-level ozone) under certain conditions.”
Luckily, smart technology such as cloud-based platforms using the Industrial Internet of Things (IIoT) for control equipment is increasingly being installed in manufacturing facilities, allowing for the collection and monitoring of facility data, such as emissions. Furthermore, the same technologies that are used for odor mitigation, such as molecular filtration systems (aka carbon scrubbers) also remove VOCs in the facilities’ air space from both the products and the solvents in the facility. The ability to prove this removal to regulators with real-time data will help reduce facilities’ contributions to VOC emissions when regulators require reporting.
Worker Health & Safety
In addition to environmental impacts from VOCs, along with other emissions inside of a cannabis manufacturing facility, there is also the issue of indoor air quality and worker health. There is not a lot known about the potential impacts of the processing of cannabis on indoor air quality. What is known is that terpenoids that are emitted in the cultivation and processing of cannabis can contribute, through a series of atmospheric reactions, to the production of known air pollutants. Terpenoids, such as monoterpenes (C10H16) and sesquiterpenes (C15 H24), are highly reactive compounds with atmospheric lifetimes ranging from seconds to hours. These compounds on their own are non-toxic. However, the atmospheric reactions they participate in can result in a range of low volatility products that create aerosols or ozone. These two compounds have clear implications for indoor air quality and thus occupational health.
Uncertainty remains as to the extent of the formation of these pollutants since previous studies have been hampered by a lack of reliable data and are predicated on conditions and practices prevalent in illicit operations. Given that the methods employed in these illegal operations are driven by different needs, the methods currently used in legalized facilities may produce vastly different conditions. This speaks to the urgent need for rigorous new scientific research and evaluation to aid this new industry and relevant regulatory bodies in assessing the current occupational environmental threats of marijuana processing and provide solutions to mitigate those impacts.
Quality by Design
The competitive licensing process, regulatory requirements, and lack of knowledge on scaled cannabis production has contributed to facilities that were not designed to properly ensure control of environments, the process flow that minimizes risks of cross-contamination and the adequate storage for the many types of raw materials, work in process, and final products. The result is an inefficient operation that may have been spared significant Capital Expenses (CapEx), but requires significant Operational Expenses (OpEx) to maintain.
The concept of Quality by Design (QbD) was first developed by the quality pioneer Dr. Joseph Juran.It posits that quality should be designed into a product and recognizes that most quality issues are a result of poor initial design. It is supported by long-standing evidence that increased testing does not necessarily improve product quality.
Currently, there is an overarching emphasis on final product testing as the determinant of whether cannabis products are safe for release into the marketplace. This has pitted labs, regulators, and producers against each other, leading to accounts of lab shopping, exclusive contracts, and other nefarious activities. This approach does not serve anyone, and is in stark contrast with the concept of Quality by Design.
Transitioning from a Quality Control Approach to Quality by Design
Transitioning from our current processes into a proactive Quality by Design approach requires an understanding of Good Manufacturing Practices or GMPs.The first set of GMPs for finished pharmaceuticals were established for enforcement by the United States FDA in the Federal Register in 1963. Since then, GMPs have been created for and adopted globally for nearly all products that can be consumed or applied for human and veterinary use –- categorized under dietary supplements, food, cosmetics, and of course, pharmaceuticals. GMPs represent the minimum sanitary and processing requirements to ensure safe and consistent products. Consider the road map and cross-over between major FDA cGMP (current Good Manufacturing Practices) by industry sector.
GMP regulations are written by the FDA and adopted in the code of federal regulations under the authority given to the FDA by various laws. Almost all of these regulations are performance standards. There are dozens to potentially thousands of substantially different products regulated under each category of GMP standards. It is up to each manufacturer to ensure their unique processes meet the GMP standards. In this way the regulations are flexible yet force all manufacturers to operate with a minimum level of rigor that includes programs that proactively mitigate risks that can lead to product failures and cannot be controlled simply through final product testing. They take a holistic approach to facility operations, starting with the facility culture, design, layout, placement, and selection of equipment, along with ongoing training, supplier qualification, environmental monitoring, and executive commitment.
The current status quo of manufacturing facility design has been built on a quality control approach. Most facility owners believe cannabis will be assigned a cGMP category based on the final product type and have been trying to build compliant facilities under this assumption. Some States have incorporated by reference the federal GMP regulations. However the competitive application process and focus on final product safety via testing has created an environment in which facility owners feel compelled to do as much if not more than the other facilities in order to meet regulator expectations and all focus is on the final product, not the process. In order to win the application, businesses want to look ‘better’ than the other applicants so they tack on as many hazard controls as they can think of. This has given regulators unrealistic expectations as to the best practices required to operate responsibly. Instead of quantifying hazards by collecting data and making informed decisions as to how to best eliminate risks, facilities are simply copying hazard controls they have seen used in other industries with hopes they meet the regulators’ expectations of what a GMP facility looks like. This culture of adding as many hazard controls as possible is a quality control approach focused on the final product, not a Quality by Design approach focused on the process. As a result, envelope in an envelope style facilities in which the manufacturing process is entombed in layers of energy and resource consuming hazard controls are commonplace.
There are other ways of designing compliant facilities; ways that could be more efficient and use less energy and resources. With a Quality by Design approach, these options become explorable. With quantified hazards the process can be approached holistically and significant design questions asked, e.g.. how much energy goes into the outer envelope and how much product quality/safety is gained from that?
In the Southwest deserts, there is consideration given to opening canopy/atrium style extraction spaces that would use less energy while providing the safety of unconstrained open atmosphere ventilation. The important question to ask when considering alternative facility designs is – How much energy/resources goes into containing human contamination versus the likelihood and the actual consequences? Perhaps manufacturing facility workers can wear long sleeves, pants, and hair restraints and that will be sufficient versus wearing a full body gown?
Quantification of Risks
Quantifying the processes and proven hazards of the cannabis manufacturing industry will allow for more informed design and operational choices versus prescriptive solutions that may potentially over-mitigate the risks and possibly introduce additional risks. Moreover, this data would provide validation that the design and operational choices made are in fact the best practices. Instead of scrambling to follow each standard in a quality control approach, Quality by Design considers the whole process, how the 10 principles of GMP standards apply and focuses on finding the most efficient strategies to eliminate risks.
A Way Forward
Training is vital for the manufacturers to know the next steps and why they are critical for the future of cannabis extraction and post-processing. Knowledge is required to put valuable technology, tools, and equipment in place with the least operational downtime. Further, it is necessary to accept guidance from verified knowledgeable support, such as from a vetted supplier. Lastly, risk mitigation education is necessary to highlight the reality of long-term savings and sustainability versus the common short-sighted tendency for immediate cost savings, which can result in significant consequences for a business such as TerrAscend Canada’s 2021 recall of infused gummies due to mold contamination.
NCIA Member Benefits: Advocacy, Education, and Community
by Madeline Grant, NCIA’s Government Relations Manager
Over the last year, NCIA’s Membership Department has dedicated a lot of time to revamp our membership tiers and benefits to ensure the best value for our members. We gathered feedback from members, conducted market research, and learned what value cannabis businesses sought in this fast-growing industry. I want to spend a little time today going through your benefits to be sure you are utilizing them to the fullest. As we represent the cannabis industry as a whole, we made sure there was a tier that could represent every cannabis company, small or big. Our three tiers are Seedling, Blooming, and Evergreen. To offer an array of benefits for your business, NCIA has three main buckets of benefits; networking & education, marketing & business resources, and policy & advocacy. Let’s take some time to go over all three.
Networking & Education
NCIA offers the opportunity to network and meet other cannabis professionals in the industry. It’s our job to provide events and tangible platforms so our members can grow their networks and businesses. Through our networking platform, NCIA Connect, we offer an exclusive online community to chat daily with other cannabis professionals. Here you can post questions, provide resources, share articles and utilize the platform to build relationships across the country. As an NCIA member, you are eligible to apply to speak at any NCIA virtual or in-person event. Depending on what tier you join you receive a certain amount of complimentary admissions to our trade shows and regional events, which you can check out here. As you move up to our Evergreen tier, there is the opportunity to attend exclusive VIP networking events, private meet-and-greets with celebrity keynote speakers, and a guaranteed seat on one of NCIA’s committees.
Marketing & Business Resources
As a cannabis business, it is important to have access to resources, especially as the industry is rapidly growing. Through membership, we offer discounts for Simplifya SmartCabinet compliance software, discounts on NCIA’s digital marketing and event sponsorship, a listing with a link to your company’s website in the online member directory, and access to BDSA Greenedge market intelligence platform. Through our digital platforms, we offer the ability to submit educational content to NCIA’s Industry Insights blog or post news about your business on our website and the eligibility to apply to be a guest on NCIA’s top-rated Cannabis Industry Voice and Cannabis Minority Report podcast. As we move into the Blooming and Evergreen membership levels, we offer company logo impressions and links posted to all NCIA social media platforms with over 200K total followers and featured in our newsletter sent to 40K e-mail subscribers annually. Our benefits offer great marketing opportunities to network and grow your business.
Policy & Advocacy
With momentum building across the country as more and more states are legalizing every year, we are simultaneously seeing more policy movement in Washington, D.C. It is more important now than ever to support cannabis policy on Capitol Hill. As a member of NCIA, your dues are directly supporting our ability to lobby and advocate for an industry we can be proud of while investing in the cannabis industry’s national policy agenda. All NCIA members have the opportunity to come out to our Annual Cannabis Industry Lobby Days (which is the best event to attend in my opinion). In D.C., you’ll meet with congressional offices and discuss the challenges you face as a business owner and meet other NCIA members from around the country. As a member at our highest tier, Evergreen, companies have private monthly updates with our Government Relations team, private briefings with key congressional offices, the opportunity to provide input on NCIA’s policy white papers, and direct access to NCIA’s registered lobbyist in D.C. Our support from the Evergreen tier allows us to allocate more resources to meet our goals on Capitol Hill, therefore, allowing us to continue to be as influential as possible.
Speaking of policy on Capitol Hill…
Just last month, Majority Leader Chuck Schumer (D-NY), along with Sen. Cory Booker (D-NJ) and Senate Finance Committee Chair Ron Wyden (D-OR), unveiled long-awaited draft legislation that would remove cannabis from the schedule of controlled substances while allowing states to determine their own cannabis policies.
This legislation called the Cannabis Administration and Opportunity Act (CAOA), is actually a discussion draft and has not been formally introduced (yet). If you’re interested in learning more about the bill and seeing the text, check this blog out.
But now, we need your help! As a discussion draft, we have the ability to weigh in on the CAOA’s proposed language and provide our feedback as an association. As members of NCIA, your input and expertise are essential and critical to us as we prepare our submission. Your submissions will be reviewed by NCIA and incorporated into the feedback our team is simultaneously compiling.
Use this form to send our government relations team your thoughts! I can’t wait to hear from you.
Overview
It’s important to understand and utilize all of your benefits as an NCIA member. If you ever want a quick refresh on your benefits please check out the membership matrix found here. Of course, if you have any questions please feel free to email me at Madeline@TheCannabisIndustry.org. I’d love the opportunity to hear from you!
Committee Blog: Re-Thinking Cannabis Track and Trace Models – How State-Mandated Track and Trace Integration Capability is Failing the Cannabis Industry
This is the second in a three-part blog series. The first part can be read here.
Highly regulated industries typically require key information to be readily available to regulators related to the production, movement, and sale of products, which is the case in the cannabis industry. The two main reasons for “seed-to-sale” record keeping are (1) to reduce the diversion of cannabis products to the unregulated market and (2) to protect consumer health with an efficient track and recall product method.
However, cannabis operators are facing many challenges with the state-mandated track-and-trace requirements, causing their business operations to suffer inefficiencies, delays, and sometimes even interruptions, which can ultimately impact consumers and patients. This is the second blog in a series highlighting the issues that cannabis operators and regulators are facing with the current centralized state-mandated track-and-trace model from NCIA’s State Regulations Committee, Technology and Compliance Sub-Committee.
The point of frustration begins with the method in which the track-and-trace requirements are implemented. Most U.S. states with some form of legal cannabis sales (medical and/or adult-use) have selected a single mandated technology platform that all operators must use to track and trace their cannabis seeds, plants, and products. The track-and-trace system selected by the state is independently configured to match the adopted cannabis regulations for that region. Because each state has adopted different cannabis regulations, there are variations in what can and cannot be accomplished within the selected track-and-trace systems, even within the states that have selected the same technology provider.
What is an API?
While the definition of an API may seem complex, at its most basic level, the API is the communication pathway between two systems. API stands for “application programming interface,” which means that it is a software intermediary that allows two systems to “talk” to each other, meaning communicating and sending or receiving information. The communication pathway is intended to be two-way, with third-party business management software being able to retrieve (“GET”) information in the track-and-trace system, as well as send (“PUT”) updated information back into the system.
Let’s turn to an everyday example of an API integration that most consumers would be familiar with: travel booking applications that aggregate flight information. Let’s say you are planning a flight for a summer vacation and you have two options: go directly to each airline website to search for and compare flight options, or use a third-party travel booking application to simultaneously access all flights across all airlines within your search parameters. The ability to search and review all the available flights, across many airlines, is because of the airlines’ and applications’ APIs. When you use the travel booking application, it sends the search parameters to the airlines it is connected with via the API. The airline API then sends available flights, seats, and prices to the travel booking application. In the more sophisticated travel booking applications, you can also purchase the ticket for your flight through the travel booking application, which then also utilizes other APIs for your secure banking/payment information. If all of the APIs are open to send and receive data between the systems, then the transaction is seamless, and all of the required information (identity verification, payment method, etc.) is shared with the airline for your booking.
Understanding API Limitations in Cannabis
State regulators intend for the cannabis track-and-trace technology to serve as a way to accurately collect and record information about the flow of goods in the cannabis industry from seed to sale. What is consistent across all states, regardless of the track-and-trace technology selected, is the acknowledgment from regulators that the mandated systems are not intended to serve as an operator’s compliance solution or business management software system. The state-mandated track-and-trace systems are not built in a way that would allow a business operator to manage day-to-day operations and transactions between operators and retailers to consumers.
This acknowledgment of the business management limitations within the track-and-trace systems and the need for interoperability with operators’ own software is often stated outright by regulators and policymakers and/or codified in regulations, such as in California’s Business and Professions Code (Clauses (b) and (c)). Instead of directly managing operations within the track-and-trace systems, cannabis businesses utilize third-party software that has been vetted and certified to connect with and communicate important transaction details to the state systems. Cannabis operators are then relying heavily on third-party software and API integrations for the communication and transmittal of that important information and data.
State-Mandated Software Providers Set Regulators And Operators Up To Fail
Now let’s think about how cannabis businesses utilize APIs on a regular basis: for example, point-of-sale (POS) software. Regulations require that the cannabis retailer record all sales in the central, state-mandated track-and-trace system, but the actual on-site transaction is conducted through POS software at checkout. The retailer is therefore encouraged to use POS software that provides the necessary sales tools and controls that make running the business manageable for all employees, while also providing API integration with state-mandated track-and-trace systems.
Without the API integration, a retailer would be forced to manually enter all of the details of all of the POS transactions into the track-and-trace system on a daily basis. Hundreds of daily sales without an API integration means many hours of data entry and countless opportunities for human errors in the track-and-trace system. Opportunities abound for inaccurate reporting in the track-and-trace systems with manual entry. Regulators rely on the track-and-trace system they selected to ensure compliance and consumer safety, although operators are essentially utilizing third-party software to communicate with the track-and-trace system. This is exactly why it is important that the cannabis industry has an open and operating track-and-trace system API at all times. Any time the track-and-trace API malfunctions (limited in communication pathways, delayed in responding to POS requests for information, or just completely down), the cannabis retailer operations are severely impacted, if not altogether halted.
In current situations where the state has mandated a specific software provider, the vendor approves specific POS and other software vendors, but the agreements the vendor has with the state does not allow for direct support to the approved vendors. This causes challenges as a licensee’s POS vendor cannot talk directly to the vendor to get API issues resolved. There is also no direct line of communication to the approved vendors about changes happening in the state-mandated software provider’s system that affects the API. These types of issues can cause the licensee (cannabis operator) to be out of compliance without even knowing it.
From The Operator’s Perspective
Imagine that you are a budtender trained on your employer’s POS software, compliance and track-and-trace requirements. Very rarely will you access the statewide system directly because the POS is fully integrated with the track-and-trace API. You are working during your daily shift processing retail transactions through the POS, but unfortunately, the track-and-trace API is experiencing high call volumes from all of the other retailers in the state, and the API is not responding to your POS requests. You cannot complete the transaction in the POS as usual, so you are forced to complete and track the transaction manually. Later on, you have to spend hours manually entering which unit of product came from which box in the back storeroom, along with all of the customer’s information and time stamps. This takes hours of labor and could lead to mistakes (hey, we’re human!). As we stated, manual records and entry invite human error. Now the inventory listed in your POS software does not match the statewide track-and-trace system. You spend many more hours trying to find and correct this mistake. The circle of conducting sales transactions, recording and tracking it manually, and fixing errors, widens, all putting your cannabis business at risk.
Because cannabis businesses at every point of the supply chain (i.e., cultivation, manufacturing, distribution, and retail) rely on third-party software to manage their operations effectively and efficiently, a hiccup in the track-and-trace API has ramifications for an entire statewide industry at once. While this sounds like a “perfect storm” scenario that only happens every once in a long while, in reality, track-and-trace API performance issues happen on a regular basis.
In California, a group of third-party software integrators reviewed track-and-trace API performance over a period of six months (April 2020 through October 2020) and found that the API was generally up and fully responsive approximately 91 to 98 percent of the time. While an API performance ranking in the high nineties may seem acceptable, the technology industry considers 99.999% uptime as the standard for high availability. An availability of 94 to 98 percent means 2-6% downtime, which is effectively 3 to 8 hours of downtime per week.More recently, the California Metrc API (CCTT-Metrc) experienced consistent outages for approximately 17 consecutive days (February 16, 2021 – March 5, 2021). This extensive outage caused all third-party software integrators serious Metrc-sync issues for packages, transfers, and more. Operators were forced to keep their staff on extensive overtime for more than two weeks in order to manually enter and/or correct information that was entered into the system while sync issues were occurring. As a result, cannabis businesses suffered as operations were interrupted, additional labor was required, and additional costs were incurred that had to be absorbed by the business.
From The Regulators’ Perspective
Cannabis is a highly regulated industry and regulators are very concerned about the path from a cannabis seed to final sale to a consumer. The perceived public safety concerns are immense, which is what prompted the implementation of, and requirements, around track-and-trace. Put simply, regulators rely on the track-and-trace system they selected and the system is only as good as its uptime.
Many regulators focus on the track-and-trace server uptime reporting from their technology providers as an indication of how well things are running. If the server is up, then an operator can still access and update the track-and-trace system manually, and that is where most regulators stop in their understanding of the issues. API connectivity and performance is just as critical as track-and-trace server uptime in order to ensure business continuity and accurate data; and accurate data is the entire intent of the state’s mandated technology platforms. It is important that regulators assign key technical leads with the sole responsibility of reviewing track-and-trace API limitations and performance issues for their regulated industry.
Without skilled technical staff on the state’s side, when the track-and-trace API has issues, no one is aware of the problem besides technical teams at third-party software providers. The onus is on the software providers to notify all operators and inform the regulators. This leads to a delayed and fragmented flow of information to operators who are scrambling because their third-party business platforms are shut down. The responsibility of transparent notification around API performance should be on the state-mandated system provider, and no one else. The current lack of transparency on API performance and downtimes also leads to complete blind spots for the regulators, having also not been timely notified that cannabis operations in their state have halted due to API connectivity. The operators and the state should know the health of their track-and-trace systems at all times so that they can attempt to mitigate the amount of damage an outage inflicts on businesses. As with many other online platforms with APIs (i.e., SAP, Twitter, Intercom, etc.), this is typically done through the establishment of an API status page. At this time, there are no current API status pages for key track and trace vendors and, as stated above, performance issues are largely tracked and reported to regulators by the operators. In California, there are currently no performance reports required of Metrc for their system’s API availability (not including general server/equipment uptime).
Conclusion
The performance deficiencies of track-and-trace API’s are burdensome to the entire legal cannabis industry because it can cause third-party inventory management applications to collapse. Then operators are forced to duplicate and/or correct entries directly in the track-and-trace system. This amounts to countless hours lost and perpetuates inaccuracies of the data being entered into the system. Ultimately, the effectiveness of the track-and-trace system diminishes with any amount of downtime. Unfortunately, downtime and interruptions are all too common and the cannabis industry’s needs as a highly regulated industry demand a much higher success rate for its systems.
In our next blog in this series, we will compare the current centralized state-mandated track and trace model with the alternative distributed model.
Interested in joining us in establishing an effective and scalable track and trace framework for regulators and operators in the legal cannabis space? Click here to stay updated on the State Regulations Committee, and the efforts that its Technology and Compliance Subcommittee are taking to improve and advance track and trace nationally. Let’s close the information gap between operators and regulators, and help the entire industry move forward together.
Stay tuned for the next blog post in our multi-part series!
NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday on Facebook for NCIA Today Live.
Committee Blog: ‘Corporate to Cannabis Crossover’ – An Interview with Portland’s Cannabis Czar, Dasheeda Dawson
by Elise Serbaroli of Strimo, interview conducted May 2021
Elise Serbaroli is a member of the NCIA’s State Regulations Committee, “Informing Local Governments” subcommittee, which aims to bridge knowledge gaps between operators and regulators in the cannabis industry. This is done through interviews with current cannabis regulators in various U.S. states, sharing best practices and lessons learned.
Dasheeda Dawson is a cannabis regulator in Oregon and co-founder of the Cannabis Regulators of Color Coalition (CRCC). As cannabis czar for the City of Portland, she is the highest government official overseeing and advising on cannabis regulation for the municipality. Ms. Dawson brings an incredible breadth of experience to the cannabis space. A self-proclaimed “corporate to cannabis crossover”, she is perfectly positioned to navigate and lead the complexity that is the legal cannabis industry. Before becoming a best-selling author (“How to Succeed in the Cannabis Industry”), she held leadership roles at Victoria’s Secret and Target. Her career is built off of a solid educational foundation, including a Princeton degree (Molecular Biology & African-American studies) and an MBA from Rutgers.
Can you tell us how you got into the cannabis industry?
For the five years prior to formally getting into the industry, I was what you would call a “closeted cannabis consumer/patient.” I have early signs of MS and my mom was actually the one that insisted I give it a try. At the time, I was working at Target in Minnesota. Cannabis was my saving grace for maintaining productivity and overall capabilities. My mom passed away unexpectedly in 2016 and it jolted me out of the standard corporate trajectory I had been on. I ended up moving to Arizona and became a medical cannabis patient there, jumping into the advocacy side of the industry. Arizona legalized adult-use this past November!
From Target to Cannabis Czar! Did you always plan on becoming a regulator?
Certainly not! Straight out of the gate, I got a lot of work as a consultant in the industry, using everything that I had done in my corporate career, including business strategy and supply chain management. I had owned everything for my categories at Target and when you’re the business owner, you lead and oversee the entire cross-functional team. I applied that to the cannabis space as quickly as I could, working for a lot of clients and gaining an entrepreneurial education from working with large cannabis enterprise clients, small operators, multi-state operators, Native American tribes, even government. I gained the truest sense of how NOT to do it. In a corporate role, you usually write a report about what you have learned, insights, etc., and then you move forward. My workbook, now in its 3rd edition, was really built off of those lessons learned.
When COVID hit, my book tour was abruptly stopped overnight! At the same time, I was selected to become the Cannabis Program Supervisor for the City of Portland. I was only the third Black woman at the time to be selected to oversee a cannabis regulatory office. I believe that now there are more, but women and people of color are scarce in these positions. Most of the regulators are white men, many of whom come from another regulatory agency, like liquor or law enforcement. In order to assure that cannabis regulation is equity-centered, you need people at the table that will center equity. This last year has been amazing. I have a lot of runway and support to be exactly who I am, which is the Weed Head (TM). I refuse to be anything else and I’m in a bureau that allows me to do that.
What exactly is a cannabis czar?
On the state level, the Oregon Liquor Control Commission is currently passing legislation to become the Oregon Liquor AND CANNABIS Commission (OLCC), primarily because cannabis is providing substantial revenue for the state. Most of those people are liquor regulators, and they have organized a sub-group, focused only on cannabis. It started off with four people and now there are 50!
As Portland’s cannabis czar, I am a municipality leader, similar to Cat Packer in Los Angeles, and operate independently of the OLCC. Portland represents approximately 40% of the total cannabis revenue for the state and I oversee the entire cannabis program, including regulatory, licensing, compliance, community impact, and equity initiatives for Portland’s medical and adult-use programs.
In the city of Portland, cannabis regulation and oversight was placed in the Office of Community and Civic Life, as opposed to in the Office of Finance and Revenue or the Office of Business Development Services, which is where they license other businesses. This placement is partly due to the idea at the time that the cannabis industry was going to be disruptive to the community. Many individuals were worried about safety for communities. Our office has been trying to decrease the stigma and canna-phobia around the plant, offering education and equity initiatives. We were the first city to have community reinvestment grants tied to our cannabis tax revenue. These grants are administered through the SEED (Social Equity and Educational Development) Initiatives and grant fund.
CRCC and CannRa are two independent organizations, which happened to both launch at the same time. This caused some confusion in the industry. They are not mutually exclusive memberships! In fact, two of our founding members are also founding members of CannRa. The regulators roundtable was the predecessor of CannRa and that association aggregates insights and learnings state by state. The Oregon Liquor Control Commission (state-level) is a member of CannRa.
CRCC centers equity and support of legalization, while also aggregating insights and learnings state by state. If you are a regulator of color, at the state or local level, it makes sense to join the Cannabis Regulators of Color Coalition. We know that legalization is a requirement to start to undo the harm done through the war on drugs.
Centering equity involves re-thinking how we regulate this industry. One challenge is getting people to realize that this is a regulatory agency, like any other government regulatory agency. The Department of Motor Vehicles (DMV), a regulatory agency, gives out licenses and adjusts to assure that no group is precluded from access (adjusting for wheelchairs, visual and hearing impairments, etc.). Yet, in cannabis, we are regulating the industry without dealing with the inequities in the industry. Some of these inequities are directly linked to the historical prohibition of cannabis and the war on drugs, which we define as the racially-biased enforcement of cannabis prohibition.
Supporting equity also includes gender inequities, economic inequities, and disability inequities, to mention a few, that will positively impact everyone in the industry, including and especially patients themselves. Exclusionary practices would not be tolerated if it was an agency like the DMV. With cannabis, we are over-regulating the industry and excluding many people from participating, which is to the detriment of the market and the community. CRCC is focused on equity-centered regulation for the cannabis industry.
What is one thing that you would like to see in the legislation for cannabis businesses at the federal level?
Well, there’s a misconception about the size of companies in this industry. As an industry, we have to be careful about supporting legislation that only benefits large corporations. More than 75% of cannabis businesses have annual revenue of $2 million or less. Compared to small businesses in other industries, for example, in agriculture ($6 million or less) and retail ($14 million or less), cannabis businesses are very small, so everyone needs to push for legislation to benefit these small businesses in whatever regulatory framework is set up on a federal level. This is one step in leading the industry towards a more equitable path.
One aspect of inequity is how cannabis businesses of different sizes are treated. On average, very small cannabis companies have an after-tax rate of 70%, so when you’re going to the table for the regulatory framework, push back on the tax structure, push back on mechanisms that are inherently disadvantageous to small businesses. Surprisingly or not, most Black, Indigenous, or Latinx businesses are also small businesses, so you are positively impacting racial equity.
If you, as a cannabis business, think you’re a big fish, trust me, Big Tobacco, Big Alcohol, Big Pharma, Big CPG (“consumer packaged goods”) – Target has $70 billion in annual revenue – are coming, so a big fish in this cannabis pond is setting itself up to be eaten by much bigger fish and bigger sharks. If we leave back doors open for the larger cannabis businesses, we’re leaving that same back door open for a Walmart or an Amazon. Large corporations are already investigating and supporting cannabis. They plan years in advance for large takeovers and once it starts, it’s a stampede of well-financed, organized strategic efforts.
At a state level, the industry and those who want to support the industry, need to be careful to not overtax the small businesses and to vote to provide a framework of support mechanisms for small cannabis businesses.
What are some examples of frameworks that support or negatively impact small cannabis businesses?
Some of the early legalization efforts required vertical integration. Because of the way the state and local jurisdictions are regulating and taxing, forcing vertical integration is not a small-business-friendly approach to licensing. This was the case in some earlier states, but we’re also seeing newer states like Georgia taking this approach.
By breaking up the licensing into different parts of the supply chain (like California), you open up possibilities for smaller businesses to operate. If the state is giving out micro-business licenses, there should also be a track to grow into a larger size so that there is no ceiling on those businesses’ growth prospects. For example, in New Jersey, advocates fought to amend provisions that failed to create a way to sell out of a micro-license for a growth event.
Everybody has a different opinion depending on which economist you talk to about how you tax up and down the supply chain. I’d like to see states have tiered tax by production weight. Once you start doing it by the percentage of THC, you’re negatively impacting businesses and patients. It’s meant to be a deterrent and is an example of the government intending to overregulate in an area that it doesn’t fully understand. But usually, those penalties wind up impacting the smaller craft businesses. Too many people are assuming that consumption in the adult-use market is just for recreational purposes, but there are plenty of small niche operators aimed at a specific medical community and they are producing small batches, for example, with high THC, but their clientele may be negatively impacted, simply as a function of the way the tax law was written.
Thanks, Dasheeda, for taking the time to speak with us! If readers want to get involved in changing legislation and connecting with regulators, where should they start?
It’s certainly a long and hard process when dealing with big issues and change. For operators, NCIA is a good place to start. There is also the M4MM and the MCBA. Folks should really try to connect with the local- and state-relevant organizations. Building and operating in coalitions can be very powerful. On a national level, be sure that any group you are part of is actually going to D.C. and is having conversations with the legislators, because at the end of the day, whether it’s cannabis or any other business, you need to be involved with influencing the policies that impact your industry. Everything starts with the law and civic engagement.
Elise Serbaroli leads Global Business Development at Strimo, where she provides cannabis businesses with software solutions around inventory management, cost accounting, QA, and compliance. She’s back in the USA after over a decade of experience in Spain, Germany, Switzerland and Ecuador.
Understanding the importance of efficiency, scalability, and profitability, Elise created solutions to financial and legal processes for the R&D team at CPW, a joint venture of two of the world’s largest food companies, Nestlé & General Mills. As a systems coordinator, she gained a deep appreciation for food safety, GMPs and regulatory compliance. Her supply chain software experience builds off of her Business Development role at Tradeshift, the world’s largest network for digital B2B payments.
August Action Alerts for NCIA Members: CAOA and SMS
by Rachel Kurtz-McAlaine, NCIA’s Deputy Director of Public Policy
STOP what you’re doing and ask yourself 2 questions:
Have I read the discussion draft or summary of the Senate bill to legalize cannabis at the federal level and now have an opinion on how NCIA should approach the bill? (Tell NCIA.)
Has my SMS/text messaging service gotten more expensive, become unwieldy with rules, or been taken away altogether? (Tell NCIA.)
If you answered yes to one or both of these questions, please take a quick moment to let us know! Click on the unique link next to the relevant question. If you want to learn more about either issue, keep reading.
Senate Legalization Bill Discussion Draft: Your Thoughts?
We are at the precipice of federal legalization, but as you know, in such a highly regulated industry, how legalization gets implemented can have a significant impact on your business. So it’s important that your voice is heard when these laws and regulations are being discussed. We’ve created this simple form for NCIA members to easily give us feedback on the CAOA. If you’re a committee member, you can provide feedback through your committee as well.
Text Messaging Service Disruptions: the Cannabis Industry Can Fight Back
You may remember reading my article, Text Messaging (SMS) Crackdown Impacting the Cannabis Industry, published back in May, written when we were first learning the scope of the issue. Although many companies seemed to be able to move on with workarounds, we’re hearing even workarounds are disappearing. And even when businesses are still able to operate, they get charged high fees or are severely hampered in what they can do with the messages.
Because this issue has been affecting so many of our members in one way or another, we want to help, but we need to hear from you. This isn’t a law that we can lobby to change, it is a convoluted policy that telecommunications giants are enforcing on their customers, ostensibly to cut down on customers complaining about spam, but in some cases, they are applying blanket bans on cannabis companies.
As an industry, we can fight back. We are organizing a working group to take on the telecommunications giants, including a potential class-action lawsuit. If you want to be part of this or learn more, please email me.
Those workarounds going away, or extremely expensive and cumbersome. It can seem overwhelming to fight back.
At this point, time to organize and use strength in numbers against giant telecommunications companies.
New Risk Management and Insurance Committee Manual: Introduction to Cannabis Insurance
The cannabis industry is one of the fastest-growing industries in the U.S., maturing at more than 25% annually. As the cannabis industry continues to emerge and flourish from state to state, there remains uncertainty as to the immediate future of federal legislation to remove cannabis from the schedule of controlled substances.
The cannabis industry will continue to experience the convergence between state and federal government regulations until a uniform regulatory and compliance framework can be established. Fundamental services such as banking, financing, and insurance, along with IRS 280E tax regulations, will continue to burden state-regulated cannabis businesses. And, with the industry still in its relative infancy, emerging and shifting regulatory backdrops create risks to these businesses.
Cannabis businesses can manage these risks in a variety of ways. Perhaps the foremost among them are the procurement of appropriate insurance coverage. While just a few years ago, insurance coverage options for cannabis operators were incredibly limited, today there are dozens of insurance carriers serving the industry.
Cannabis operators have to be proactive in developing a risk management program that conforms to local and state compliance and security requirements. As the industry continues to evolve, we will need to be more diligent in controlling and managing risk.
To assist with this process, NCIA’s Risk Management & Insurance Committee (RMIC) is pleased to provide the first in a series of Insurance Manuals that will help guide you through the various coverages and definitions used in the cannabis insurance industry. This first edition of the RMIC Insurance Manual will outline the basic and entry level knowledge base for the cannabis insurance industry, and explore the various insurable risks attributed to the cannabis supply chain. Future additions will dive deeper into more specific insurance topics.
NCIA’s Risk Management & Insurance Committee is a multidisciplinary group of risk management professionals convened to draw on expertise and experiences of professionals dedicated to the cannabis community. Primary contributors for the first installment of the Insurance Manual include:
Committee Blog: Cannabis Auto Insurance – Best Practices, Claims Processes, and More!
by Jesse Parenti, Programs Director of Nine Points Strategies, Stephanie Bozzuto of Cannabis Connect Insurance Services, Matthew Johnson, Vice President of QuadScore Risk Services, and Helkin Berg, CEO of Strimo Members of NCIA’s Risk Management and Insurance Committee
If your company has an “auto exposure” such as delivery, distribution, or employees simply running company errands, your company needs a robust risk management program.
Managing a fleet is essential to ensure drivers are given the necessary tools to be safe and responsible while on the open road. Implementing a vehicle maintenance program is also a necessary component of fleet management.
Proper automotive risk management starts with driver guidelines on how you hire your drivers and what is required to qualify to be employed by your organization. Best practices on age, driving experience, motor vehicle reports, and training make for a great start. Even though your employees may think they are only delivering or transporting cannabis, they are commercial drivers, and they need to take that duty very seriously. Morbid as it may sound, death is not the worst thing that can happen…
Here are some best practices:
Drivers should ideally be at least 25 years old with five years of driving experience. For the best insurance pricing and experience, you should hire drivers that are between 35-55 years old. Note that commercial drivers over a certain age will face increased pricing from insurance companies much like their youthful counterparts. Keep that 22-year-old with four speeding tickets off your policy, even if they are the business owner’s relative!
Only hire drivers with squeaky clean driving records. Experienced drivers with a clean record are more likely to continue to drive this way when working for your organization. If you hire drivers with violations or points on their records, expect this level of driving to continue when working for you. Drivers don’t often change driving habits just because of their employment status. Note that age and driving records directly affect commercial auto rates.
Set up an Employee Pull Notice Program or Motor Vehicle Reportpull program through the DMV. A “pull program” ensures that you are aware of your drivers’ violations in real-time, whether the violations happen during or outside of work. Suppose a driver is out of compliance based on your insurance carrier guidelines. In that case, your insurer can deny a claim based on your driver’s record or violations that happened while employed by your organization, even if the violation occurred outside of work. If you are not monitoring your drivers, you would never be aware of these concerns or problems. Secured motor vehicle records (MVR) storage is also crucial to protect your employee’s personal information. Make sure you backup all your records in the cloud or a protected server network. Identity theft can happen quickly, and unprotected data will create cyber liability exposures if not protected correctly.
Take cell phone, texting, or distracted driving violations very seriously. Distracted driving is the #1 cause of death and accidents since 2012 and is increasing yearly as time goes on. The NHTSA reports that an estimated 1.6 million accidents in 2020 were caused by distracted drivers too busy eating, texting, smoking, etc., to keep their eyes on the road. Suppose one of your drivers has a distracted driving violation. In that case, you can rectify it by having them take a distracted driver class to understand the gravity of such infractions. Then put that driver on probation with consistent monitoring of their MVR for 18-24 months to ensure they don’t continue to have these violations.
Onboarding driver training must include how to drive defensively, what to do if you are held up for a robbery, and what to do if you are pulled over by the police. This training makes a world of difference when or if any of these take place. In addition to robust onboarding training, training needs to continue over time as safety never stops, and good practices always need to be reinforced.
Here are some examples of claims to give you an idea of what could happen to you:
A large distribution company hires a driver and has them complete some training in a large, empty box truck. This training helps the driver understand how to drive and brake with a(n empty) truck. The next day the driver goes out with a full load of cannabis flower and concentrates in their truck. The driver notices that the truck is handling differently than when it was empty. A wind picks up just as the truck is taking a turn. The truck rolls onto its side and totals the box on the truck, damaging the product inside. The company could have avoided this accident had they trained their driver in real-life experiences, with actual loads.
A driver is delivering cannabis to a customer’s home. While en route, the driver accidentally hits a pedestrian crossing a sidewalk on a poorly lit street. The driver did nothing wrong, but the accident still caused permanent disability to the man who was the head of the household, and the insurance company paid out over $7M. If the insured didn’t have the $10M in auto liability, they would have had to close their doors.
You and your employees can do everything right, but accidents can and will still happen. That is why culture, safety, and accountability are essential when working in the transportation and delivery space. If you don’t take this seriously, your company will pay the price. To avoid these costly mistakes, work with your legal team, insurance providers, and software vendors to ensure ideal policies, training requirements, and data storage.
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Nine Point Strategies is a national risk management firm specializing in all forms of commercial auto for the cannabis industry. We can help you with anything you need concerning hiring, training and maintaining all your required driver compliance you need to be a safe and profitable organization. Contact us to discuss how we can better protect your cannabis auto exposures.
QuadScore Insurance Services is the nation’s leading insurance provider for marijuana businesses. QuadScore offers comprehensive property & casualty solutions as well as a full suite of risk management services for large cannabis companies around the United States.
The Strimo™ team is comprised of industry veterans. We are both practitioners in cannabis and long-time experts in software. We have supported companies in rapid growth and deeply understand that your software needs to grow with you. Strimo is the leading enterprise cannabis SaaS platform.
Cannabis Connect Insurance is a specialty division of Bozzuto Insurance, an insurance firm serving businesses since 1978 and part of Acrisure, LLC the 4th largest insurance brokerage in the United States. We specialize in connecting cannabis business owners with custom built insurance programs.Cannabis Connect was founded on basic principles of honesty, integrity, and trust. We are actively involved in the cannabis industry on both a local and state level. We are involved in multiple cannabis associations and continue to remain informed on policy forms and legislative changes to ensure our clients best interests come first.
Video: NCIA Today – July 30, 2021
NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday here on Facebook for NCIA Today Live.
Equity Member Spotlight: iFlyWellness – David Rodrigues, CEO
This month, NCIA’s editorial department is reviving the monthly Member Spotlight series by highlighting our Social Equity Scholarship Recipients as part of our Diversity, Equity, and Inclusion Program. Participants are gaining first-hand access to regulators in key markets to get insight on the industry, tips for raising capital, and advice on how to access and utilize data to ensure success in their businesses, along with all the other benefits available to NCIA members.
Tell us a bit about you, your background, and why you launched your company?
I have been using cannabis for 20 years, and got into the industry in 2011, before METRC was implemented, and before adult-use legalization. I was working in cultivation, budtending, purchasing, and managing. At the time, I was seeing firsthand the products dispensaries were providing, and began developing a vision of what the San Jose community needed versus what was out there. Stepping back from my position at a successful dispensary, I made a choice to go all in on my visions and build a delivery service and lifestyle brand in San Jose. I created iFlyWellness for the people.
iFlyWellness delivery service will connect the legendary Humboldt County to the Bay Area. Offering a unique flower menu from Humboldt County to Indoor exotic flower, iFlyWellness will cater to the everyday smoker/user, specifically the people of San Jose. There are over 1.1 million people in San Jose, with a high percentage of cannabis users. Connecting the “farm to blunt” is the method behind iFlyWellness. Patients are currently buying jars at ninety dollars an eighth. The everyday consumer has struggles affording such medicine. The logic is to figure out a way for patients to consume top-tier flower at an affordable price.
What unique value does your company offer to the cannabis industry?
I know quite a few cannabis growers and will go straight to the source. This is the “farm to blunt” experience. The indoor cultivation side and the Humboldt side both make a supply chain connection from the Emerald triangle all the way to the Bay Area. This is really good medicine for the people.
What is your goal for the greater good of cannabis?
It’s about getting on the ground. Talking directly to the people in the community that you want to make a social impact with. I am working with Daniel Montero and Javier Armas of BALCA (Bay Area Latino Cannabis Alliance), and I am connected directly with Humboldt farmers and legacy growers.
Our vision is for the patient to feel a direct connection with the flower they are smoking. Big corporations in this industry fail to recognize that this industry has been here for over 100 years. They are looking at the industry as a money grab. You can make it as a small business owner, but it comes with many more challenges. Forming alliances among us and going directly to the people helps us face these challenges.
What kind of challenges do you face in the industry and what solutions would you like to see?
Capital is big and can dominate the industry. I am working right now with Javier Armas of BALCA to acquire a building and license in Oakland, CA. With the minimal amount of licenses the city of San Jose has to offer, if you don’t have deep pockets, it can be challenging applying for the same license that a multi-million dollar corporation is applying for.
Why did you join NCIA? What’s the best or most important part about being a member?
I joined NCIA through the DEI Scholarship Program to learn and network, as the cannabis industry is constantly changing and I need to stay up to date. When I was working for dispensaries in San Jose, I was networking a lot but representing someone else’s company, not representing my vision and dreams of connecting and catering to the everyday cannabis consumers. It’s time now to build my vision and with the strength of great associations like NCIA and BALCA, I’m confident it will happen.
Video: NCIA Today – July 23, 2021
NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday here on Facebook for NCIA Today Live.
While marijuana has been around in Mexico since the 1600s, the real story begins in the 20th century during the Prohibitionist Era. After Mexico news outlets widely reported stories of cannabis users committing violent crimes, a cannabis stigma was created, resulting in Mexico banning the production, sale, and use of cannabis in 1920, followed by a ban of exports in 1927. The movement of cannabis was first regulated by the three U.N. conventions on narcotic drugs, beginning with the Single Convention on Drugs in 1961. The prohibition gave rise to the cartel’s involvement in the illegal cannabis industry in the ’80s, and these cartels have consistently supplied the U.S. market since. After the war on drugs significantly increased violence in Mexico and gave the cartels more power than before, Mexico began to alter its stance. In 2015, the country decriminalized cannabis use, and in 2017, legalized medical cannabis containing less than 1% THC. In 2018, the Mexican Supreme Court deemed the prohibition unconstitutional, and in December 2020, the U.N. Commission on Narcotic Drugs transferred cannabis from a Schedule 4 to a Schedule 1 drug under the Single Convention. As of now, Mexico is on the edge of legalizing recreational cannabis use. This bill, “The New Federal Law on the Regulation of Cannabis,” is awaiting approval by the Senate and then only needs to be signed by the President to be passed into law.
With a population of 130 million and over 10 million regular cannabis users, Mexico will generate $1.2 billion in annual tax revenues while saving $200 million annually in law enforcement and creating thousands of new jobs. One estimate has cannabis legalization bringing up to $5 billion to the economy annually. One issue Mexico will face will be keeping the cartels from transitioning to the legal cannabis market. While those with criminal records can’t obtain any cannabis license, cartels have a deep network, and Mexican officials can’t always determine whether someone is connected to a cartel. Mexico’s legislators believe the cartel will be forced to operate legally over time as they won’t be able to compete in the illegal market and keep as much power as they currently have.
There are also many questions regarding how Mexico’s cannabis legalization will affect the U.S. market. The USMCA, formerly known as NAFTA, currently does not include cannabis, raising the question of whether Mexican producers will be able to import cannabis into the U.S. for a much lower price than the U.S. can produce domestically. However, the U.S. will likely implement trade barriers to protect domestic companies. Currently, the U.S. places trade barriers on tomatoes in Mexico, and many see similar actions being placed on cannabis.
The United States will likely place a trade barrier on cannabis from Mexico to protect domestic companies
There’s no doubt that cannabis legalization in Mexico will create investment opportunities in the U.S. It mostly comes down to whether the U.S. creates trade barriers with Mexico regarding cannabis. If they don’t, the U.S. cultivation and manufacturing sectors will be hurt badly as Mexico can produce much cheaper. The absence of trade barriers will also hurt testing labs as cultivation moves out of the country and uses testing labs in that same country. However, U.S. companies with distribution networks, retail operations, or strong brands will benefit from Mexican legalization through lower costs of goods sold. One solution that would benefit U.S. companies would be legalizing interstate commerce in the U.S. without federally legalizing cannabis. This means other countries wouldn’t export finished products or raw material with THC above 0.3% into the U.S., and the U.S. industry would develop and consolidate. Once the U.S. federally legalizes cannabis, they must create tariffs or some trade barriers against all the developing countries legalizing cannabis, or the U.S. companies will suffer.
Companies are also greatly affected by banking laws. Currently, companies touching the flower in countries where it is not federally legal cannot access regular banking and can’t list publicly on the NASDAQ or NYSE. However, Canadian companies touching the flower can list in the U.S. since it is federally legal in Canada. These laws mean companies operating in Mexico will also be able to list in the U.S publicly. However, the SAFE Banking Act recently passed the House of Representatives in April 2021 and is up for debate in the Senate. Passage of this act would grant banking access to cannabis companies touching the flower and open the door for these companies to list in the U.S publicly. This would create a large flow of money into U.S. cannabis companies and allow them to scale at a much quicker pace than previously available. One important thing to note is that the large U.S. stock exchanges are technically able to accept cannabis companies’ listings if they meet the exchange requirements. However, they don’t accept them to avoid punishment from the federal government. Therefore, as the government moves towards allowing these companies federal banking access, the main question regarding U.S. companies is raised. In absence of government pressure, will these exchanges allow U.S. companies to list and access their own public markets?
The SAFE Banking Act would reduce risk for cannabis companies transacting with only cash
Overall, companies and investors looking to take advantage of the booming cannabis market need to stay up to date on the fast-changing cannabis legalization process in many countries. Those that truly understand it will position themselves to benefit from what is projected to be one of the fastest-growing industries over the next decade.
Ms. Della Mora is the Co-founder of BLC, a financial advisory and investment firm based in Los Angeles with satellite offices in Houston, New York, London, Hong Kong, and Melbourne. During her tenure at BLC, she successfully invested, assisted in the capitalization, and helped business develop small cap oil companies in Kentucky, Texas, Louisiana, Illinois, Colorado, California, Wyoming, North Dakota, and Alaska. She has also structured oil & gas partnerships in several U.S. states, and in Ecuador, Central America. Ms. Della Mora has been involved in many LNG (Liquid to Natural Gas) projects in the U.S., as well as many commodity trades worldwide. She has personally advised also Chinese conglomerates in their U.S. oil & gas investments.
Black Legend Capital is a leading Merger & Acquisition boutique advisory firm based in California with offices worldwide. Black Legend Capital was founded in 2011 by former senior investment bankers from Merrill Lynch and Duff & Phelps. We provide M&A advisory services, structured financing, and valuation services primarily in the cannabis, technology, healthcare, and consumer products industries. Black Legend Capital’s partners have extensive advisory experience in structuring deals across Asia-Pacific, Europe, and North America.
Crazy for Cannabis Administration and Opportunity Act (CAOA)
Photo By CannabisCamera.com
By Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations
Last week was undoubtedly one of the most exciting weeks in federal cannabis policy ever! On July 14, Senate Majority Leader Chuck Schumer (D-NY), along with Sen. Cory Booker (D-NJ) and Senate Finance Committee Chair Ron Wyden (D-OR), unveiled long-awaited draft legislation that would remove cannabis from the schedule of controlled substances while allowing states to determine their own cannabis policies. Let’s take a look at what we know:
What is it?
You’ll recall that back in February, the trio of Senators announced that they were working on a comprehensive cannabis bill. Since then, NCIA and other advocates have (im)patiently been waiting to see what shape that would take – I was calling it the best-kept secret in Washington! However, at long last, the discussion draft of the Cannabis Administration and Opportunity Act (CAOA) was released.
A discussion draft is exactly what it sounds like – prior to introducing this language as formal legislation, the Senators have shared it in this form, allowing stakeholders, the public, and others the opportunity to weigh in and provide their expertise and feedback.
What’s in it?
As I mentioned above, the CAOA removes cannabis from the list of controlled substances, effectively legalizing it at the federal level while still allowing states to set their own policies. According to the bill’s detailed summary, it has a few goals:
“… [it will] Ensure that Americans – especially Black and Brown Americans – no longer have to fear arrest or be barred from public housing or federal financial aid for higher education for using cannabis in states where it’s legal. State-compliant cannabis businesses will finally be treated like other businesses and allowed access to essential financial services, like bank accounts and loans. Medical research will no longer be stifled.”
The bill also includes:
Restorative measures for people and communities who were unfairly targeted in the war on drugs.
Automatic expungements for federal non-violent marijuana crimes and allows an individual currently serving time in federal prison for nonviolent marijuana crimes to petition a court for resentencing.
An “Opportunity Trust Fund” funded by federal cannabis tax revenue to reinvest in the communities most impacted by the failed war on drugs, as well as helping to level the playing field for entrepreneurs of color who continue to face barriers of access to the industry.
An end to discrimination in federal public benefits for medical marijuana patients and adult-use consumers.
Respect for state cannabis laws and a path for responsible federal regulation of the cannabis industry. Like with federal regulations on alcohol, under CAOA, states can determine their own cannabis laws, but federal prohibition will no longer be an obstacle. Regulatory responsibility will be moved from the U.S. Drug Enforcement Agency (DEA) to the Alcohol and Tobacco Tax and Trade Bureau (TTB), the Bureau of Alcohol Tobacco Firearms and Explosives (ATF), as well as the Food and Drug Administration (FDA) to protect public health.
A federal tax structure – CAOA would impose an excise tax on cannabis products in a manner similar to the tax imposed on alcohol and tobacco. The general rate of tax would be 10 percent for the year of enactment and the first full calendar year after enactment. The tax rate would increase annually to 15 percent, 20 percent, and 25 percent in the following years.
What’s next?
The discussion draft comment and feedback process will be ongoing until September 1. Until then, NCIA will be working with our board, Policy Council, committees, and our members (particularly our Evergreen members!) to solicit their expert input on some of the areas the Senators have expressed interest in. After that deadline, the Senators will take their time to review submissions and subsequently formally introduce the revised language later this year. Stay tuned via our newsletter, blog, and upcoming events to learn the latest on this and how you can actually submit your thoughts to us!
Member Blog: The Hidden Gem of Licensing and Endorsement Deals in Cannabis
Sitting here on July 14, 2021, the Senate Majority Leader of the United States Chuck Schumer just introduced legislation to (among other things) federally legalize cannabis. Yet, despite the Senate’s official entrance into the path to legalization, many states, businesses, and importantly here, athletes and celebrities, or “talent,” continue to behave as if legalization has already occurred. Side note – it has in many states!
Talent throughout the country have engaged in a variety of licensing and endorsement deals within the cannabis industry, ranging from Martha Stewart, Keith Haring, Bob Marley, Seth Rogan, Berner, Travis Scott, Rick Ross, “Sugar” Sean O’Malley, Jonathan Adler, to Gary Payton. A common theme among talent newly entering the space seems to be a default to the plant itself, i.e., partnering with cannabis producers to either endorse or license intellectual property (“IP”) to create cannabis strains and products. Here, I would like to first describe what licensing and endorsement deals are and then discuss a hidden gem of the cannabis licensing and endorsement space. That is, talent partnering with cannabis ancillary businesses, meaning, businesses that sell cannabis accessories and products but do NOT ‘touch the plant.’
Before I dive into a discussion of cannabis accessories, it is important to quickly outline “licensing and endorsement deals.” At a high level, a licensing deal is the process of an individual granting another party the right to use his or her name, image, and likeness, for a particular purpose, in exchange for certain consideration (payment). For example, publicly-traded cannabis accessory distributor Greenlane (NASDAQ: GNLN), where I serve as the Associate General Counsel, has remitted consideration to the owner of the artist Keith Haring’s IP, to use images of his artwork on a line ofsmoking accessories. A licensing deal allows an owner of IP to capitalize on its value by finding the right partner who can harness the IP in a way to create a profitable outcome. It allows an IP owner to find a partner with the production and distribution capacity and operational know-how that an IP owner likely does not possess. In a licensing deal, the end consumer is often under the impression that the end product is coming directly from the IP owner, which can add huge value to the talent’s brand; whether the talent is alive or deceased. This perception for the end consumer can be different with endorsement deals where there is usually a clear delineation between the talent and brand.
An endorsement deal is where talent is used to create awareness for a particular product or service; this can be seen in commercials, Instagram or Twitter posts, and public appearances. Unlike a pure licensing deal, an endorsement deal will commonly make it clear that the product being endorsed is not coming from the talent directly, but that he or she is merely promoting the underlying product in exchange for consideration. Nevertheless, despite the distinction, licensing deals and endorsement deals often merge into one and the same. For instance, Greenlane’s cannabis accessory house brand and retail arm Higher Standards did a licensing and endorsement deal with UFC MMA fighter “Sugar” Sean O’Malley. In this deal, Higher Standards secured a license to use Sugar Sean’s IP to create alimited-edition water pipe and promote this water pipe using his IP on all of its promotional mediums. As part of the deal,Greenlane also caused Sugar Sean to promote the Higher Standards brand on his social media platforms through a select number of posts and mentions. This is a prime example where talent and brands will often dip their toes into a deal that incorporates both a licensing and endorsement component.
So, now that I have established what a licensing and endorsement deal looks like, I want to shift to a discussion of the benefits of working with cannabis accessories. For clarity, cannabis accessories can include rolling trays, roach clips, rolling papers, vaporizers, water pipes, jars, grinders, lighters, packaging, and in certain cases, clothing. So, why should talent focus on licensing and endorsement deals with cannabis accessories?
Cannabis accessories can allow for a unique form of creative control for talent. Talent can create a product from scratch, like an ashtray, jar, or water pipe, and have a direct impact on the structural design. Additionally, accessories can be sold in a plethora of different locations. Unlike cannabis products, accessories can be found in department stores, headshops, smoke shops, convenience stores, clothing stores, and upscale interior design boutiques. In addition to the broad array of available doors, accessories can also allow certain talent to enter the cannabis space in a way that more closely aligns with their primary non-cannabis-focused brand. A great example of this is Greenlane’s licensing deal with iconic designer Jonathan Adler. It would be impossible for Jonathan Adler to partner with a plant-touching product and still be able to sell those products in his stores throughout the world. By partnering with Greenlane, Jonathan Adler is able to enter the cannabis space while maintaining his traditional brand and his ability to sell theseproducts in his interior design boutiques.
An additional appeal of the cannabis accessory space is timing, flexibility, and speed. While talent could quickly endorse an already developed and cultivated cannabis strain or other plant-touching product, the process could be timely. In contrast, to go back to the Sugar Sean example, Greenlane and Sugar Sean were able to move swiftly and nimbly to promote a line of water pipes for a launch in direct correlation to an upcoming fight. The deal moved quickly and highlighted the maneuverability and flexibility of working with accessories. Often, a template or mold for a product is already developed, with the talent’s unique branding and direction the last piece of the puzzle. For plant-touching products, talent may want to be a part of the cultivation process; focused on taste and effect on consumers. This process will usually take a bit more time and can present far more variables and regulatory concerns and limitations.
Ultimately, there are fascinating and innovative deals to be made for both plant-touching and non-plant-touching products, but moving forward, I believe the hidden gem of cannabis endorsement and licensing deals is with the non-plant-touching cannabis accessories.
Dan Shapiro is the Associate General Counsel at Greenlane Holdings, Inc. (NASDAQ: GNLN), one of the largest global sellers of premium cannabis accessories and CBD products. Prior to joining Greenlane, Dan worked at CAA in the Sports Business & Legal Affairs division. Dan is the Founder and Inaugural Chair of the Cannabis Division of the American Bar Association Forum on Entertainment and Sports Industries and a member of the National Cannabis Industry Association’s States Regulations Committee.Dan is a member of the New York Bar and Authorized House Counsel in Florida, and holds a JD from Cardozo Law School where he served as the President of the Cardozo Sports Law Society, and a BA from The George Washington University.
Member Blog: Does Your Cannabis Brand Need Social Media? Yes, But Not For the Reasons You Think
Every cannabis brand needs social media. But, the reasons to be on social media, and how you should approach your accounts might surprise you.
Social media is a powerful tool for all businesses today. Even in the cannabis industry, where most paid advertising opportunities – including paid social – are off the table.
It’s an effective way to communicate with customers directly. Social media lets your cannabis brand or dispensary start meaningful conversations – it’s a place to develop and nurture a community. But should you look at social media as a primary business driver? Probably not; hear me out.
Five years ago, when I started managing social media accounts for cannabis brands, organic engagement wasn’t easy, but it was easier than it is today. Marketers (like me) remember the era of chronological Instagram feeds and simplified Facebook algorithms fondly. Five years ago, getting organic attention from your followers was more straightforward. It was also easier to build an audience quickly.
Strict regulations are a constant battle for cannabis businesses marketing on social media. We’re violating every platform’s terms of service and community guidelines just by being there. Every cannabis brand wants social dominance. I’m here to deliver unfortunate news; social media dominance is off the table for most of you.
Today, you can only expect to reach about 3%of your audience on most social media platforms. And that’s if your content is excellent. But even with amazing content, algorithms are your enemy, and hashtags only get you so far.
It can feel like an impossible challenge. We’re tasked with bolstering brands but walk a tightrope of rules to keep posts and accounts from getting the boot.
Do cannabis brands still need to be on social media? Yes. Here’s why.
You can access a limitless direct-to-consumer digital platform if you can manage to grow and maintain a social media following. But, of course, it’ll take time to build an engaged community (for many of you, it’ll take years of hard and consistent work), and you need to be realistic – don’t put all of your cannabis marketing eggs in the social media basket; there are other ways (email and programmatic advertising for example).
Still, social media is a business necessity today, just like printer cartridges or desk chairs. You must be there – even if the task is seemingly impossible.
What makes excellent social media content?
Every marketing “expert” on the internet will tell you the key to social media success is excellent content. And that’s true. But, what makes for awesome content is relatively subjective – it’s not for you or me to decide. So, who gets to decide what makes terrific content? Your customers, that’s who.
How do you determine if your customers think your content is excellent? They’ll reward you with engagement. And engagement is virtually the only thing almighty social media algorithms care about.
Maybe your customers love ridiculous memes; perhaps they prefer higher-brow lifestyle content. If you run a dispensary, your customers might love seeing their favorite budtenders highlighted on your feeds. If you’re a cultivator, your customers probably think drool-worthy strain content is excellent (be careful, Instagram is advanced enough to find flower images, and that violates TOS and community guidelines).
Here are a few social media post types you should consider:
Expert Budtender Recommendations
Cultivation Behind-the-Scenes
Aspirational Lifestyle Imagery and Content
Humorous Memes for Cannabis Enthusiasts
General Cannabis Education
Product Education
Consumption Tips and Guidelines
You need to deeply understand your customers (that’s why we’re persona development sticklers) and craft a content strategy explicitly designed for engagement. Of course, I’m vastly oversimplifying this process – it takes time and a lot of testing to determine what will work best for your cannabis brand. But the results are often worth the work. Let your customers tell you what they want.
Even with excellent content, you need to be realistic.
I’m going to break some hard news to you – even with genuinely excellent content, you can still really only expect to reach around 3% (as I mentioned earlier) of your total audience. So whoever told you that organic engagement on social media is easy lied to you.
Most people think there’s one overarching algorithm controlling what we see on our social media feeds. But, in the case of Instagram, for example, several algorithms work together, making tiny decisions in real-time to determine the posts you see.
Adam Mosseri (head of Instagram) talks about how their algorithms work in a recent blog:
“One of the main misconceptions we want to clear up is the existence of “The Algorithm.” Instagram doesn’t have one algorithm that oversees what people do and don’t see on the app. We use a variety of algorithms, classifiers, and processes, each with its own purpose. We want to make the most of your time, and we believe that using technology to personalize your experience is the best way to do that.
When we first launched in 2010, Instagram was a single stream of photos in chronological order. But as more people joined and more was shared, it became impossible for most people to see everything, let alone all the posts they cared about. By 2016, people were missing 70% of all their posts in Feed, including almost half of posts from their close connections. So we developed and introduced a Feed that ranked posts based on what you care about most.
Each part of the app — Feed, Explore, Reels — uses its own algorithm tailored to how people use it. People tend to look for their closest friends in Stories, but they want to discover something entirely new in Explore. We rank things differently in different parts of the app, based on how people use them.”
Instagram wants to personalize content for users, so it’s constantly making small decisions to reach its goal. Your job (and ours, as marketers) is to understand our customers deeply enough to create unique personalized experiences (I prefer to use the word experience over content in this scenario). Still, the algorithms pose a challenge which is why you need to understand that it’s going to take a lot of time, a lot of trial and error, and more content than you think you can possibly create in a lifetime to build and manage a loyal – and engaged – community.
It’s not impossible, but it’s not easy – many of you will fail. But still, you must be there because your customers expect you to show up for them in the places they hang out digitally. Of course, it doesn’t hurt to have the support of an experienced social media marketing team.
Aaron isHybrid Marketing Co‘s Content Director, and he loves to write blogs. He’s written so many blogs that he’s lost count. And beyond his skills as a copywriter and storyteller, he’s an obsessive reader and researcher. Aaron writes on subjects ranging from cannabis to collaboration, social equity to HR software, interior design to cybersecurity. His words attract, engage, educate, and convert. Btw, Aaron hates the phrase “content is king” (even though content is king – and queen).
Hybrid Marketing Co is a Denver-based branding and marketing agency that specializes in building custom strategies that supercharge growth and drive revenue. Working with brands and businesses across the U.S. and Canada, Hybrid’s partners run the full-spectrum of the cannabis world including dispensaries, manufacturers, cultivators, and ancillary businesses. Visithybridmarketingco.comto learn more about the Hybrid approach.
Video: NCIA Today – July 16, 2021
NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. This week Bethany is joined by NCIA’s GR team in Washington D.C. to discuss the Cannabis Administration and Opportunity Act discussion draft introduced by Senate Majority Leader Chuck Schumer. Join us every Friday on Facebook for NCIA Today Live. Registration to our Midwest Cannabis Business Conference in Detroit is now open with special limited-time super early bird pricing on tickets available, head to www.MidwestCannabisBusinessConference.com today.
Even With So Much Progress, We Must Remain Diligent
By Rachel Kurtz-McAlaine, NCIA’s Deputy Director of Public Policy
What a time to be in the cannabis industry! Federal legalization feels like it is finally on the horizon, especially with the big news that tomorrow will be a press conference to introduce a draft discussion bill that has been promised by Senate Majority Leader Chuck Schumer Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ).
When I first started cannabis reform advocacy 25 years ago, cannabis legalization seemed unattainable in my lifetime, given the stigma we were, and still are, up against. But medical cannabis was just starting to pass and more of us were coming around to believing in the potential of the plant and being horrified at the war on drugs to the point that we devoted our lives to ending it. That includes the founders of this organization and many who went on to start businesses that are now members of NCIA.
Running a business in the cannabis industry can be a daily challenge, from banking to text messaging to supply chain issues, so it may be hard to notice the sea change happening with cannabis bills around the country. Four state legislatures legalized cannabis just within the first six months of this year, for a total of 18 states and Washington, D.C., that have legalized cannabis for adult use over 21 years of age. (You can check out our state policy map to learn more about the status of different states.)
Believe it or not, that sea change is happening in Congress, too, and we want to make sure we’re doing everything we can to inform you about what is happening and to hear you.
As Michelle wrote about previously in the Government Relations blog, Give Us MORE, the MORE Act of 2021 was reintroduced at the end of this Spring in the House of Representatives. Read Michelle’s excellent summary, but more importantly, read the bill! An almost identical version of the MORE Act passed the House last Fall, only to be held up by a GOP-led Senate, but showed the real momentum happening in Congress.
Despite the hold up in the Senate, there is some bipartisan support. A Republican bill was even introduced in the House, the “Common Sense Cannabis Reform For Veterans, Small Businesses, and Medical Professionals Act,” that would have similar legalization efforts to the MORE Act, such as descheduling cannabis from the Controlled Substances Act and punting on regulations to federal agencies, but would not have any of the provisions that address industry equity and retribution from the years of harm caused by cannabis prohibition.
Support for legalization is now so mainstream that even Amazon is now backing cannabis legalization, expressing support for the MORE Act, although it remains to be seen if they will continue supporting MORE or get behind Sen. Schumer’s bill.
The SAFE Banking Act of 2021 is still in play and remains a crucial bill given that it could have the highest likelihood of passing the soonest. It can be overlooked given the trajectory of descheduling bills, but NCIA’s Government Relations team remains committed to SAFE and continues lobbying for it because, even though we’re planning what descheduling looks like now, it could take a few years to get there. In the meantime, banking is in emergency status.
As federal descheduling appears on the horizon, I encourage you to read the bills, including the Schumer bill, and consider how they will affect you and your business. I’m not saying legislation will necessarily pass this year, but right now is when ideas are being discussed, amendments are being drawn up, decisions are being made.
Consider how much we need to do federally versus getting the states to standardize their regulations versus having a set of voluntary self-regulatory measures that shows we are a self-aware industry and want to be safe for our customers. Keep in mind that much of the alcohol industry is self-regulated, and why would we purposely advocate to regulate ourselves more than the alcohol industry when cannabis is demonstrably safer? I appreciate the thriving alcohol market, the innovation and craft, but I know we can do even better while minimizing harm and acknowledging the past harm, but we have to be diligent.
NCIA is proud and honored to be representing the broad spectrum of the industry, from multi-state operators, to small legacy farmers, to those that have been hurt by past prohibition and want to be part of this thriving industry – all of the industry. That means hearing from you, your concerns, your ideas, your insights. Please feel free to contact me at Rachel@TheCannabisIndustry.org.
I encourage you to read the bills, including Sen. Schumer’s draft discussion bill being released tomorrow, keep reading blog posts, watching webinars, checking out NCIA’s industry buzz, and stay informed because a new day is dawning, but it’s going to be a long day, so we better be prepared for it.
Partner Blog: The International Cannabis Business Conference Is Coming Back To Germany
The International Cannabis Business Conference is coming back to Berlin, Germany on August 25-27, 2021. Offering world-class industry networking opportunities, the Berlin International Cannabis Business Conference is the largest B2B cannabis trade event in Europe and is also the longest-running cannabis B2B conference on the continent. The conference will once again feature a unique blend of cannabis policy, advocacy, industry, and networking.
“We are particularly excited about this year’s conference in Berlin. It is going to be extra special for our team to be able to get back to offering world-class cannabis industry and policy education, networking, and entertainment to attendees,” says Alex Rogers, founder of the International Cannabis Business Conference.
The National Cannabis Industry Association’s (NCIA) Director of Government Relations, Michael Correia, will be speaking at the conference in Berlin. Correia’s presentation is titled, ‘Being a Voice for the Cannabis Industry.’
The presentation will provide tips and strategies for ensuring that the cannabis industry always has a seat at the table when it comes to the process of crafting laws, rules, and regulations.
In addition to the Berlin B2B event the International Cannabis Business Conference will also offer a one-day Global Investment Forum (GIF).Germany is home to the largest economy in the European Union and is poised to serve as the cannabis industry capital of Europe going forward. The cannabis industry is evolving rapidly in Germany, with the country’s medical cannabis program increasing in size with every passing day.
Cannabis industry opportunities that are popping up in Germany and on the European continent have tremendous profit potential, and the Global Investment Forum is the perfect place for entrepreneurs to try to secure capital to take their pursuits to the next level. It is also an unparalleled opportunity for investors to learn more about pre-vetted investment opportunities.
“We know how hard it is for quality investors to link up with vetted cannabis industry companies offering valuable investment opportunities,” Rogers stated. “That is why we are bringing the Global Investment Forum to Berlin. It’s a prime networking opportunity for both cannabis industry investors and entrepreneurs.”
The International Cannabis Business Conference is the leading B2B cannabis event series on earth. Events have been held in the United States, Canada, Spain, Germany, and Switzerland. Additional locations in other countries are being identified and will be announced in the future.
Event festivities begin on August 25 with the start of the Global Investment Forum at the amazing Vienna House Andel’s Berlin. Speakers and the official GIF schedule will be announced soon. Attendance at the International Cannabis Business Conference Global Investment Forum in Berlin will be limited to 200 attendees.
The following morning the 2-day curriculum portion of the conference will begin with a conference overview from Alex Rogers, founder and Executive Producer of the International Cannabis Business Conference. Rogers will welcome conference attendees and provide an overview of the schedule, including the panels and speakers that will be providing presentations and interviews. Attendees at the conference portion of the event will be limited to 1,000 people.
In addition to the previously mentioned panel featuring NCIA’s Michael Correia, other topics that will be covered at the conference include:
European cannabis regulations
Mergers and acquisitions
Novel Food
CBD
Imports and exports
Extractions
Branding
The topics covered at the conference via panels and presentations will be led by the top cannabis experts in the global cannabis space. The International Cannabis Business Conference in Berlin, Germany will include (but is not limited to) the following speakers:
Peter Homberg – Partner, Dentons
Daniel Gauci – Chief Business Development Officer, Juicy Fields
Jan Peter Witte – Managing Director, Vayamed, and Director, Medical Sanity Group
Sita Schubert – Secretary General, European Medicinal Cannabis Association
Cornelius Maurer – Founder, Demecan
Georg Wurth – German Hemp Association (DHV)
Tim Feike – CEO WEECO
Luc Richner – CEO and Founder, Cannavigia
International Cannabis Business Conference events are attended by leading policymakers, executives, and entrepreneurs from all over the world, with over 60 countries being represented at previous events. The event series is the best way for innovators and inventors to get their products or services in front of the top influencers and decision-makers in the cannabis space, as well as for investors to network with aspiring entrepreneurs.
The conference series consistently features world-class speakers that cannabis entrepreneurs, advocates, and consumers from all backgrounds can learn from and be entertained by. International Cannabis Business Conference events include after-party festivities that feature some of the most entertaining musical acts and celebrities from across the globe.
A cannabis industry revolution is sweeping Europe, and Germany is at the center of it. If you’re serious about succeeding in the cannabis industry, check out the International Cannabis Business Conference’s flagship program in Berlin in July. Leading cannabis entrepreneurs and policymakers from around the world will be in attendance and the networking and educational opportunities will be unparalleled.
You cansecure tickets now and take advantage of the early bird pricing discount.
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About the International Cannabis Business Conference
International Cannabis Business Conference events are the premier cannabis events for entrepreneurs across the planet. With events in Canada, the United States, Switzerland, Spain, and Germany the International Cannabis Business Conference is where the world meets cannabis. Find out more at InternationalCBC.com and on LinkedIn, Twitter, Facebook, YouTube, and Instagram.
NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday on Facebook for NCIA Today Live.
Registration to our Midwest Cannabis Business Conference in Detroit is now open with special limited-time super early bird pricing on tickets available, head to www.MidwestCannabisBusinessConference.com today!
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Maria is the Director of Marketing & Communications at Isolocity. She first joined Isolocity at its inception as a marketing coordinator and has played a pivotal role in expanding the companies brand awareness across multiple industries. In her current role, Maria has aided in the development of strategic relationships and communications for the company. With Isolocity, she has been able to help cannabis companies streamline their quality compliance processes through digitization. Prior to joining Isolocity, she has also worked independently as a marketing consultant and in the consumer electronics industry. Outside of work, she enjoys spending her time with her watercolors or settling down with her partner to watch comic book films.
Ms. Della Mora 
Charles J. Messina 
Jennifer Roselle 
Daniel Pierre 
By 
by Morgan Fox, NCIA’s Director of Media Relations
by NCIA’s Cannabis Manufacturing Committee
by Ann Allworth, Ph.D. And Cynthia Shelby-lane, M.D.
Ann Allworth, PhD, is a cell biologist, who for more than 35 years has been educating adults, first in medical schools as an anatomy professor; then in the natural product industry, teaching the immense value of phytonutrient-rich foods and herbs to optimal health and well-being. Upon learning of the endocannabinoid system, she founded 
by Madeline Grant, NCIA’s Government Relations Manager
by NCIA’s 
Elise Serbaroli leads Global Business Development at 
by Rachel Kurtz-McAlaine, NCIA’s Deputy Director of Public Policy
The cannabis industry is one of the fastest-growing industries in the U.S., maturing at more than 25% annually. As the cannabis industry continues to emerge and flourish from state to state, there remains uncertainty as to the immediate future of federal legislation to 
It’s about getting on the ground. Talking directly to the people in the community that you want to make a social impact with
Dan Shapiro is the Associate General Counsel at 
Aaron is
The National Cannabis Industry Association’s (NCIA) Director of Government Relations, 