Member Blog: 8 Ways Not to Blow it with Cannabis Customer Acquisition
by Jim Coyle, Coyle Hospitality Group
Cannabis dispensaries are at a crucial inflection point: as dispensaries become ubiquitous in consumer markets, the stigma of purchasing cannabis products is declining rapidly. What does this mean? Cannabis consumers with significant discretionary income are ready to begin with their first dispensary experience.
It is absolutely crucial to acquire these customers early in the lifecycle before your competitors capture them. The good news is that this first experience offers incredible potential to create a loyal and accretive customer. The bad news is that it is really easy for the cannabis dispensary to completely blow it.
Let’s take a page out of the luxury hotel operator playbook. They really get to know new guests, and they use what they learn to mint those guests into repeat customers who continually increase spend and refer like-minded customers.
Hoteliers talk and strategize about the Guest Journey. They track the touchpoints that guests encounter during the stay, and create service standards (like the 10&5 Rule described below) for these ‘moments of truth.’ For your staff, the Guest Journey begins with arrival and ends with departure.
Here’s how the best hoteliers prosper, and how cannabis dispensaries can participate.
Watch What You Say. Words Matter.
Terms like users, consumers and customers are words that don’t exist in hotels. Their customers are guests. And here is why that is both useful and critical. Every person in every culture receives guests, not customers, into their homes. Your staff needs to be thinking that the dispensary is their home and they are receiving guests there.
The 10&5 Rule: Know it, Love It.
When guests are in the proximity of a staff member, staff makes eye contact at 10 feet and greets first at five feet. Also called ‘having your radar on,’ ensure your staff understands this golden rule and practices it. Never burden your guests with having to begin a guest interaction. Extra credit if your staff acknowledges guests in line.
Make Curb Appeal, Curb Capture.
Details matter. Signage is where new guests’ eyes go first, and it should look professional – perhaps even homogeneous. Funny names, caricatures and double-entendres risk alienating new customers before they pull into your lot. The quality of the signage must absolutely be pristine. Chipped paint, dirt, or poorly lit signage sends out a constant radio signal that a business doesn’t pay attention to presentation or detail.
At a luxury hotel, the grounds are impeccably maintained and the point of entry is like a stage. You don’t need a grove of regal palm trees in your drive to make a good impression, but neatly cut grass, a perfectly maintained parking area, sidewalks free of cracks, and a front door that looks well cared for are table stakes.
Make Your Doorman a ‘Welcome Man.’
Often, dispensaries have a staff member at the door checking identification. It’s a mistake to view this interaction simply as compliance. If the door staff are provided a seat or something to rest on, have them rise to their feet when a car pulls in and make sure they hit the 10&5 every time.
Have you ever arrived at any hotel and seen the door staff sitting down? People interact naturally with each other standing up, ‘in-person.’ New guests are going to learn a lot about your dispensary from this initial encounter with your staff. Don’t blow it by making it solely about checking ID. Checking an ID is a transaction. Welcoming a guest is engagement. Speak in full sentences and start with a greeting. “Good morning/afternoon/evening” works every single time, and why not add the word ‘welcome’ to set the tone? Eliminate the meaningless ‘How are you?’ and do away with the command, ‘ID Please.’ First impressions are everything!
There is no need to be stiff or formal, but retire phrasing like ‘no problem,’ ‘thanks guys,’ and ‘how are you doing’?
‘The Luxury Concierge’ Starring Your Budtender.
The concierge is central to the luxury hotel experience. Concierges are experts as it pertains to everything a guest needs, but they are much more than that. A concierges’ main purpose is to surprise and delight guests. Why? Because surprise and delights create deeply emotional reactions that not only last a long time, they lead to storytelling.
In order to surprise and delight, the concierge/budtender must first be disarming and approachable (10&5 Rule, again). A real smile, focused eye contact and at-the-ready posture tells the guest ‘you can trust me.’
Next, the master concierge/budtender will engage and connect by reading the guest for cues, asking relevant questions, and then – and only then – beginning the collaboration. In a hotel, the family of four shlepping suitcases gets the same greeting as a tense-looking businesswoman… but the master concierge offers them very different surprises and delights.
‘What and how’ questions are the cornerstone of collaborative guest interactions. Asking questions that can be answered with a simple ‘yes’ or ‘no’ is not only unproductive, but it can be misleading. ‘What brings you in today?’ is so much more powerful than ‘can I help you?’
With the above said, it is so important for your staff to be authentic. Stay away from scripts, and insist on outcomes. Let the guest do most of the talking; your staff needs to be using their eyes and ears – not their mouths – as meaningful guest interactions start to unfold.
For instance, when a guest asks a concierge for a restaurant recommendation, it doesn’t just end there. The concierge will instead ask what kind of restaurants they like, if there are places in which they are already interested, who will be dining, or if there is a special occasion. Within 30 seconds, the concierge can learn that the guest is celebrating a birthday and that people in the party don’t like noise.
A good rule of thumb is to answer a question with a question that advances trust and engagement. ‘Do you have edibles?’ is better answered with, ‘Certainly, we have a lot of varieties that are popular, what types of edibles are you interested in?’
Guest Appreciation Equals Business Appreciation.
Okay, so the guest has arrived and had a positive first impression; your budtender probed a bit and has the guest excited to go home with some really great products. Don’t let this end on a transactional note dictated by the payment process.
Appreciation needs to be shown before the payment begins, making it a singular, impactful act. Don’t let meaningful guest appreciation get muted or lost in the process of exchanging payment for goods. So many retail transactions end with the tasks of discussing payment, bagging products, and closing out the sale.
Thank the guest for coming in today. You can compliment and/or thank them for sharing useful information with you. You can express your enthusiasm for the purchase decisions they made.
Your new guest has just agreed to trust you and your team with their health and lifestyle. Again, avoid scripts, but challenge your staff to create an outcome where the guest really feels appreciated.
Ask for More Business.
What’s the best thing you could hear when you have had a great stay somewhere? An invitation back.
People love to be invited back. Instead of, ‘thanks, come again,’ why not tell the guest that you can’t wait to hear how they like the gummies, or ask for feedback when they return. Pairing the invitation to come back with a request for feedback is how a relationship with your customer is made.
Hire What You Cannot Train.
Time and again, top hotels hire great people. And while training and learning/development is central to hospitality, there are some things you simply cannot train people to do or be. When we ask leaders about their best staff members, the following traits consistently arise:
An Innate Desire to Help.
The best staff are the first to hold a door, offer directions and clean up the dishes. They don’t have to be trained to jump in and help.
The best hotel staff lean in, they like talking to people and are not afraid to chat with surgeons, duck hunters, auto mechanics, and hospital patients about anything.
Passion for the Experience.
Ask a potential hire what they love most, and they will undoubtedly talk about great experiences and great relationships. They like having a great time and they want others to feel the same.
Founded in 1996, Coyle Hospitality Group is a market leader in designing and implementing mystery shopping, quality benchmarking, brand compliance and market research programs globally. The company has facilitated over 200,000 evaluations since its inception through its worldwide panel of over 35,000 professional evaluators representing its clients’ true customer profiles. Areas of expertise include cannabis dispensaries, restaurants, hotels, resorts, retail, cruises, spas, timeshares, and other high-touch experiential industries.
Jim Coyle has developed and deployed customer experience and brand measurement programs for over 500 companies in travel, property management, cannabis and healthcare. Jim is especially passionate about hospital patient experience and the ever-evolving consumer interest in experiences.
Member Blog: How to Avoid Compliance Issues with Your Cannabis Business
By Jo-Anne and LaKia, Greenspace Accounting
All businesses must adhere to tax rules and regulatory compliance, but for cannabis companies, the laws are significantly more challenging to navigate. The cannabis industry has specific tax rules that differ from other sectors, and failing to follow them can result in severe financial and legal implications.
At Green Space Accounting, we know that managing your finances as a cannabis company can be much more complicated than the average start-up. Keeping a compliant financial system in place is not always easy with constantly changing state laws and regulations.
Here are a few tips on how to avoid compliance issues with your budding cannabis business.
Have Your Business Documentation in Order
One of the first steps to staying compliant is to have all the appropriate financial information and licensing for your business on hand.
Always be prepared with copies of your cannabis license, information from your seed-to-sale tracking system, and your point of sale software records. Having this paperwork, along with legal documents like operating agreements, Articles of Incorporation or Organization, and EINs will ensure that you have a fully compliant relationship with your bank, as well as local and state government.
It’s also a good idea to have detailed records on all sales transactions within your business, especially ones dealing with cash. Cash is used more frequently in cannabis dispensaries than in other retail industries. Having proper cash-handling procedures in place can save you from theft and keep you ready for any unexpected auditing.
Stay up to Date with State and Local Regulations
It’s important to remember that regulations surrounding cannabis change over time, so monitoring your state legislature and all applicable state and local agencies is crucial to keeping your business compliant. By making yourself aware of the rules for the cultivation, manufacturing, and distribution of cannabis, you can avoid the risk of fines or legal action and build a better relationship with your local government, law enforcement, and, most importantly, customers.
One way to stay up to date with regulatory compliance laws is to consume state and industry news surrounding cannabis daily. Not only do these publications keep you informed on business and consumer trends, but they also avoid complicated legal jargon, speaking directly to business owners in a way that’s easy for them to understand.
Here are a few recommended industry news sources:
Another great way to stay on top of state and local cannabis laws is to network and build relationships with your local regulators. While maintaining compliance internally is the biggest goal, creating an ongoing relationship with the regulators in your area can help you better understand the changes within the industry and the steps you can make to conduct business more transparently.
Develop SOPs, Training, and Reporting Systems
Think of these SOPs as a set of rules that all employees need to abide by to keep your company’s production, sales, and accounting processes consistent and safe. Having a set of standard operating procedures can help you recognize potential compliance issues and fix them before they occur. These procedures can include an employee handbook on proper handling and storage of cannabis consumables to installing a seed-to-sale tracking system for inventory management purposes.
The best way to stay on top of your SOPs is to create reports, checkbooks, and logs in all aspects of your operations to show regulators that you are a transparent business that has a complete understanding of your state’s compliance laws. Frequent compliance training sessions are also an effective way to educate your entire team on the legal and tax regulations associated with your business.
To avoid issues concerning payroll, installing time tracking software for employees is also a great way to keep your staff organized and stay on top of the 280E tax code. The 280E law denies cannabis businesses federal income tax deduction for operating business expenses, which means that the wages for some employees may be deductible, and some may not be. By introducing software where employees can specify the tasks they’re doing and track the salaries they’re receiving, you’ll stay compliant with the tax code and better understand the productivity your team is generating.
Frequently Audit your Business
Hiring an outsourced accounting team to audit your cannabis business is a great way to avoid any potential risks regarding compliance. Auditors serve as an additional, unbiased set of eyes that will examine all areas of your organization and identity aspects that might need improvement.
If you are looking to stay on top of the legal and tax regulations for your cannabis business on a tight budget, self-auditing your company is a great way to check whether or not your training, bookkeeping, and SOPs are being appropriately implemented.
Entrepreneurs who belong to the National Cannabis Industry Association can receive discounted access to an acclaimed compliance management platform created by Simplifiya, which gives licensed operators a self-audit checklist that helps them identify, track, and mitigate potential issues before it’s too late. The platform also provides templates for creating SOPs customized for each license type and tied directly to your state regulations.
The Bottom Line
Whether you are a start-up, a growing business, or a multi-state operator, complying with federal and state compliance laws is essential. By following the above tips and staying transparent with your employees, partners, and investors, you’ll be ready for any audit that comes your way.
Whether you’re looking for cash flow management, business planning, or internal controls, our team is dedicated to helping you achieve peace of mind when it comes to your company’s finances and compliance. We understand that the financial side of your business can be daunting, complicated, time-consuming, and most of all: stressful. You don’t need to go through it alone. Our team is prepared to help you achieve your financial goals. Whether you’re looking to earn more revenue, scale your business or achieve a little peace of mind, you can trust Green Space Accounting to guide you.
Video: NCIA Today – September 17, 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.
Member Blog: Want to Open A Dispensary In Oklahoma? Here’s What You Need to Know.
by Tommy Truong of KayaPush
In Oklahoma, the cannabis business is thriving. Yes, the controversial plant that users were prosecuted for using so very recently, is on a roll. You could even say, there is a cannabis rush.
In this article, we will cover how you can go about opening a dispensary, including how to acquire a license, and some laws you should be aware of. And we will also touch on how to set up your dispensary operations and software! Let’s dig in!
What do you need to open a dispensary in Oklahoma?
The process of opening a dispensary should go smoothly if you fill out an application form and follow the Oklahoma Medical Marijuana Authority’s guidelines. Although the costs of opening a cannabis dispensary in Oklahoma are significantly lower than elsewhere, it is critical to have accurate information and to review some of the most relevant regulatory constraints.
Let’s start at the beginning, if you intend to learn how to open a dispensary in Oklahoma for commercial purposes, you must be at least 25 years old before proceeding. You must also make the following items available:
- Proof of Oklahoma residency
- A tax ID number, as well as a general business license
- Valid identification documents
You’ll need to assess your commitment after you’ve got everything in place. Not only must you be informed of current cannabis production and sales regulations, but also of proposed legislation and revisions that may shortly come into force.
Now that you’re certain you’re ready to make this big move, it’s time to proceed to the next step: finding a suitable property.
You should check the following:
- Rent cost
- Cost of license
- Licensing application fee
- Employee salary
- Transportation and storage of product
How to get a dispensary license In Oklahoma.
Licenses for growers in Oklahoma come in the form of a certificate and are issued through the OMMA website. The charge to producers, processors, and dispensaries for applying for a license is $2,500. You must provide the following to apply:
- A business plan
- A financial plan
- An inventory control plan
- Patient education
- Record keeping
- Security plans
There are distinct rules in every state in the United States about opening dispensaries. Each state sets its own standards. You will need to study the rules that apply in Oklahoma.
The general requirement for opening a dispensary in Oklahoma is that you undergo marijuana dispensing training and acquire a license.
How to keep your dispensary compliant in Oklahoma.
You must abide by all of Oklahoma’s strict marijuana regulations to keep your dispensary compliant. These include:
- Complying with Metrc
- Operating under a recognized license
- Enlisting compliance software’s assistance
- Consider a compliance manager
Marijuana dispensaries in Oklahoma are prohibited from selling more than the following amounts in a single transaction:
- Three ounces of cannabis
- Concentrate of one ounce
- 72 ounces of cannabis
Oklahoma dispensary owners, like any other legitimate business, must pay taxes and ensure that they give the following information:
- All cannabis-related information with other permitted firms
- Details of batch numbers that show the weight of cannabis acquired at wholesale
- The number of plants that have been approved for relocation to other locations
- Batch numbers showing the weight of cannabis sold
- Record of all items that have become obsolete
Substantial fines are imposed for noncompliance. There is a $5,000 punishment for a first infraction while a second offense will result in license revocation. Because of this, you are going to need the assistance of technology to automatically update you if the OMMA cannabis rules change.
Understanding Metrc in Oklahoma.
Metrc is an integrated system for tracking and tracing marijuana products in real-time. Every plant and its wholesale shipment has a unique tag attached by licensees. To uniquely identify each plant, these tags use readable text, barcodes, and radio frequency identification (RFID) chips for easy identification.
Metrc is already being used in Oklahoma following the state’s legalization of marijuana. The OMMA can only see and track inventory once it has been entered into Metrc by a commercial licensee.
To get started with Metrc in Oklahoma you should:
- Watching their training videos and schedule training.
- Request online access and complete the New Business System Metrc training with your dedicated Metrc Account Manager.
- Connect all of your employees with Metrc and make sure they have the permissions they need for their jobs.
- Request Metrc plant tags, package tags, and other UID tags and document the physical receipt of requested Metrc UID tags.
- Assign UID tags to your cannabis items.
- Access the Beginning Inventory Guide in Metrc for proper guidelines and references to other important factors.
What are the dispensary laws in Oklahoma?
Cannabis laws in Oklahoma are the guidelines that every cannabis dispenser must heed while dispensing medical marijuana. Every prospective cannabis retailer will be guided by these same rules, and it is one of the first things you discover when learning how to operate a dispensary in Oklahoma.
Some of these rules include:
- To legally sell cannabis, you’ll need a state-issued license, but CBD oil made from industrial hemp is permitted without one.
- Patients must first obtain an authorized medical marijuana card to acquire and consume medicinal cannabis.
- Possession of paraphernalia is a misdemeanor that carries a maximum sentence of one year in prison and a fine of $1,000.=
- Individuals under the age of 18 are only allowed to enter a dispensary with an adult who has a valid medical card.
- The sale of fewer than 25 pounds of marijuana is a felony punishable by a two-year prison sentence and a $20,000 fine.
Who can your dispensary sell to in Oklahoma?
Only medical cannabis patients (or their caregivers) with valid patient licenses can shop at an Oklahoma dispensary. Medical cannabis is available to Oklahoma residents over the age of 18 who have a physician’s recommendation.
A physical medical marijuana ID card or the state’s database can be used to verify a patient or caregiver. Out-of-state persons or companies are not permitted to purchase medical marijuana from licensed dispensaries. Licensed processors can sell to other licensed processors and licensed dispensaries.
Oklahoma dispensary market size and opportunity.
Despite its accomplishments, the cannabis industry in Oklahoma is still in its infancy, and the environment is rapidly changing. Marijuana laws in the state are continually changing to make it more accessible.
Another feature that distinguishes Oklahoma from other states is that it allows cannabis smoking and vaping anywhere that tobacco can be lawfully consumed, such as on the sidewalk or in a bar that allows smoking. As a result, Oklahoma has morphed into an industrial cannabis state with a variety of dispensary options.
There are only a few challenges to overcome. Any sort of cannabis — from raw flowers to topical lotions, from oils and gels to vaporization and patches — can be sold by anybody who pays $2,500 for a dispensary license.
Cannabis legalization has resulted in a significant expansion in legal cannabis cultivation and distribution, as well as an explosion of related service providers in many states. Cannabis has become a lucrative business prospect for many inhabitants in the state.
What cannabis software do I need to run a dispensary?
To run a compliant dispensary in Oklahoma, you will need the following business software:
- A compliant POS system
- Scheduling and time tracking software
- HR software
- Dispensary payroll software
- A Website
- Inventory management software
- Security system
What should I look for in cannabis software?
POS compliant system.
One of the most important technologies in a dispensary is a point-of-sale system. A compliant POS system will make sales transactions easier for your dispensary’s staff and provide the greatest payment options for customers. A POS can help run the following tasks:
- Regulate inventory control and legal compliance
- Manage customer check-in and ensure that your customers follow the daily sales tracking guidelines
- Assists you in automatically rejecting transactions for people who are not authorized to buy.
- Integrate with the Metrc system, and keep you compliant.
- Integrate with your workforce management system and give you sales insights.
- Integrate with your scheduling software and provide labor forecasts for scheduling.
- Produce all sales and customer reports for the approval of cannabis authorities.
Dispensary payroll software.
Integrated dispensary payroll software will assist you in managing your employees’ pay. It manages all expenses and interfaces with other systems such as personnel administration and payroll tax deductions. It makes direct contributions to the IRS and compensates employees via direct deposit.
Another benefit of using an integrated payroll system is that you can integrate your company’s payroll with the rest of your workforce management suite; performing tasks like approving clocked hours to payroll, and running payroll in the click of a button. Dispensaries who used this type of system report saving 5 hours per week on running dispensary payroll.
Scheduling and time tracking software.
Also known as workforce management software, integrated scheduling and time tracking software makes creating staff schedules, and managing staff hours very hands off. With this type of software, you are able to create schedules remotely, and staff can request shift swaps or time off. With time tracking, staff can sign into work using facial recognition technology, and staff-approved hours can be streamlined to payroll – so staff who clock into their shifts, get paid with the click of a button.
Dispensary HR software.
Recruiting, hiring, interviewing and onboarding can take up a lot of time. Especially when staff have important documents they need to sign, and criminal record checks that need to be completed. With dispensary HR software you can automate recruiting, and onboarding, by having staff onboard themselves and sign digitized documents.
A Security system.
A good security software system with cameras to monitor what goes on inside and outside your dispensary should be paramount to ensure your dispensary remains compliant. You will need a system where you can monitor all the affairs of your dispensaries at one glance without being in different places at the same time.
Inventory management software.
You require some software to help you manage your inventory, and the process of placing orders and confirming inventory counts from your vendors. You’ll also need a system that will remind you when new orders are needed when it detects product shortages.
If you are in a state that allows e-commerce for dispensaries, a website should be a top priority for competing for top rankings in today’s market. Because of technological advancements, you may now open an e-store where customers can buy cannabis online and have it delivered to their doorsteps.
Your website should be able to collect KYC information from your consumers to verify their identities and eligibility to acquire cannabis products, so you can be confident you’re following the cannabis serving guidelines. If you deliver a cannabis product to someone who isn’t eligible for it, you’ll be breaking the rules guiding cannabis consumption, and this might be a huge risk for your new business.
Metrc, also known as Marijuana Enforcement Tracking Reporting Compliance is a regulatory compliance system and was built to keep track of cannabis cultivation, preparation, and packaging. Basically, Metrc is a database for tracking cannabis from seed to sale, and identifying it using RFID tags.
In Oklahoma, you must submit data to Metrc to run a compliant dispensary. Reporting to Metrc can be done manually, however cannabis-specific POS systems are offering a Metrc integration, meaning it is done automatically for you as you sell your product.
What else do I need to know?
Now that we have covered all the technical and operational bases, the rest is up to you.
Other key parts of opening a dispensary include considering where your store might be located, what your brand value and vibe will be, and how your product and store will look.
Marketing should also be a consideration, as well as staff training, and company culture.
Many new cannabis entrepreneurs hire consultants to help them navigate these areas.
For now, we hope this has been a helpful way to get you started.
Tommy Truong is the Director of Partnerships at KayaPush; the cannabis software helping dispensary owners manage their HR, scheduling and payroll all from one easy to use platform. KayaPush also integrates with leading dispensary POS systems, giving you an end-to-end solution.
Tommy loves hot sauce, fried chicken, and running with his Boston terriers.
Video: NCIA Today – September 10, 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 on Facebook for NCIA Today Live.
Equity Member Spotlight: Next Level Edibles – Anthony Jenkins Jr.
This month, NCIA’s editorial department continues 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 me a bit about your background and why you launched your company?
I was born in Hayward, California and spent most of my childhood in Mesa, Arizona, and in the Bay Area, in Northern California. After high school, I spent some time at The Farm (Stanford) and graduated from The House (Morehouse College).
Next Level was started almost 10 years ago. During a particularly trying part of my life, a medical professional recommended antidepressants and anti-anxiety medicine for symptoms I was experiencing. Taking these drugs made me feel slightly better, but came with a host of other problems; twitching, irritability, weight gain. I needed another solution.
In college, I experimented with cannabis and as an adult, I found that it alleviated my symptoms without the side effects. Unfortunately, the halflife for cannabis is only 90 minutes which wasn’t nearly long enough to cover my full workday. I learned about edibles and how they can last for 4 to 6 hours and I was really attracted to their lack of smell. As a business professional, a deal could be broken if I smelled like cannabis. Edibles did not have a negative connotation and were perfectly discreet for my work environment.
Unfortunately, edibles only came in two different types at this time period: tasty, but completely lacking on potency, or absolutely disgusting and potent. No one should ever need a chaser for their edibles. The industry was ripe for a company with absolutely delicious products that could also provide a strong dosage.
What unique value does your company offer to the cannabis industry?
Next Level empowers people to infuse any food or beverage and accurately dose it for higher tolerances. With our products, the home cook can imbue any dish her heart desires and the morning warrior can add a kick to his favorite hot beverages.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
When we started this venture, there was not much information out there about equity cannabis companies. Realizing there are probably many other minority entrepreneurs trying to start a cannabis business, I started a Facebook group called CES (Cannabis Equity Success) to help disseminate information about equity programs across America and to raise the profile of equity companies to support. In addition, I’ve been assisting new entrepreneurs to get connected with resources to see their vision come to light. As a minority-owned business, it is very important that we celebrate and support other businesses owned and operated by women, veterans, those with disabilities, and people of color.
It is Next Level’s vision to support these minority-owned businesses. Partnering with women-owned businesses, like Changemaker Creative, not only makes good business sense as they are local leaders in the industry, but also allows us to gain key insights into our target market. The owner and head creator, Lilli Keinaenen, is able to provide details and cater designs that appeal directly to her demographic. Other awesome women-led companies that are our strategic partners include our copacker, the Galley, and Supernova women.
In our distribution chain, we work with BIPOC owned companies like Local Equity Distribution and Breeze which provide jobs and revenue to the people and communities negatively impacted by cannabis arrests.
What kind of challenges do you face in the industry and what solutions would you like to see?
The biggest challenge we face in the industry is getting dispensaries to buy small company products. We are a small “mom and pop” owned by family members from Oakland, CA. It’s more challenging to get dispensary buyers to sit down with us because they prefer to save their time and shelf space for the larger established brands. One possible solution for this problem is to have each dispensary dedicate a certain portion of its stock to legacy brands/small mom and pops/equity companies.
The other challenge we face is getting access to capital. This is a bootstrapped venture, and issues in cannabis take a lot more time and money to solve than other industries. Unfortunately, there are not a lot of angel investors or investment companies putting money in cannabis and even less in minority entrepreneurs. The solution for this is to make the investment world much more equitable and inclusive.
Why did you join NCIA through the DEI Scholarship Proogram? What’s the best part about being a member?
I joined NCIA through the DEI Scholarship Program for an opportunity to learn best practices for my industry and to network with the finest minds in cannabis.
Across the Country – State Cannabis News and Movement
by Madeline Grant, NCIA’s Government Relations Manager
As the deadline to submit feedback for the Cannabis Administration and Opportunity Act approached last week, our Government Relations team worked tirelessly to submit a detailed analysis and recommended improvements on behalf of the legal cannabis industry. The full comments and an executive summary can be downloaded here. The Cannabis Administration and Opportunity Act (CAOA), submitted in July by Majority Leader Charles Schumer (D-NY) and Senators Cory Booker (D-NJ) and Ron Wyden (D-OR), would remove cannabis from the schedule of controlled substances, create a regulatory structure and federal guidelines for cannabis products and state-legal markets, and is intended to support restorative justice for the people and communities that have been disparately hurt by prohibition while ensuring fair opportunities in legal cannabis markets for small businesses and marginalized communities.
The introduction of the comprehensive draft language was a pivotal moment for the United States Senate and NCIA will continue to do whatever we can to ensure value-driven policies for the cannabis industry. Meanwhile, we continue to see movement at the state level as support for cannabis legalization efforts continues to grow. Here are some important updates happening at the state level.
California officials announced that they are soliciting proposals for a program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts. The California Department of Fish and Wildlife’s (CDFW) Cannabis Restoration Grant program will release applications this fall and remain open through spring 2023. The $6 million in potential funding, which comes from cannabis tax revenue, must go to government agencies, California nonprofits, or Native American tribes who would then work with cultivators on environmental efforts.
The newly inaugurated governor of New York says she wants to “jumpstart” the implementation of cannabis legalization. Governor Kathy Hochul took a major step by making two key regulatory appointments to oversee the state’s cannabis market. Soon after they were quickly confirmed by the Senate during a special session. Former New York Assemblywoman Tremaine Wright (D) will serve as chair of the Cannabis Control Board, and former Drug Policy Alliance (DPA) staffer Christopher Alexander will be the executive director of the state’s Office of Cannabis Management.
Ohio activists can begin collecting signatures for a 2022 ballot initiative to legalize marijuana in the state. The Coalition to Regulate Marijuana Like Alcohol (CTRMLA) launched its ballot effort last month. The new initiative is a statutory proposal and if supporters collect 132,887 valid signatures from registered voters, the legislature will then have four months to adopt the measure, reject it, or adopt an amended version. In the case of lawmakers not passing the proposal, an additional 132,887 signatures will be required to place the proposal before voters on the ballot in 2022.
Another adult-use legalization proposal has been filed. Legal Missouri 2022 submitted the latest measure to the secretary of state’s office, and it will now go through a review period before potentially being certified.
The Cannabis Control Division announced applications are now open for businesses interested in legal cannabis producers licensed by the state of New Mexico. After an application is submitted, regulators will have 90 days to issue a determination.
Colorado voters will decide on an initiative in November that would raise cannabis taxes to fund programs that are meant to reduce the education gap for low-income students. The secretary of state confirmed that the campaign behind the measure collected more than the required 124,632 valid signatures to make the ballot. The measure would give low and middle-income families a $1,500 stipend to have school-aged children participate in afterschool programs, tutoring, and summer learning programs.
As states continue to legalize medical and adult-use cannabis, be sure to check out our state policy map for updates. Our Government Relations team will continue to educate congressional offices as states move forward. It’s vital to have accurate information and resources for members and Congress and staffers on Capitol Hill. With advancements at the state level, we continue to relay the importance of cannabis legalization at the federal level. Please stay tuned for more updates from our Government Relations team.
Committee Blog: Managing Your Workforce During Fall Harvest
It’s that time of year again, the busy fall harvest season. While indoor growers can harvest year-round, the fall can create significant workforce challenges, especially for outdoor producers and processors. Here are three tips to make sure you are ready to go for the fall harvest!
Plan ahead! If you have not already thought through your fall harvest plan, you will want to figure this out immediately. Most cannabis companies need additional workers during harvest season, unless their grow schedule is structured where they are harvesting on a regular basis, depending mostly – if not entirely – on their permanent employees for harvesting, de-leafing, trimming, etc. However, given the increased demand for workers by outdoor growers, even in a normal year, the demand for labor often exceeds the supply, placing added pressure on anyone competing for this talent.
Every fall we receive a rash of calls from producers, who failed to plan ahead, requesting workers that same week, if not the same day. Unfortunately, by this time, nearly all the available labor, especially those with experience and skill, have already been scheduled and committed elsewhere. In rare cases, staffing companies might be able to provide workers if they had another client in the area back out, at the last minute due to a heavily damaged crop or not being ready for harvest at the time they originally projected, however, cannabis growers shouldn’t count on this. A good rule of thumb is to provide at least 2-3 weeks’ notice, minimum, to request your harvest crews during the fall, and the further in advance the better. Many cannabis companies that have struggled in the past with worker shortages during the fall have started locking in their fall staffing as early as spring.
COVID-19 has created an even more significant labor shortage. Before 2020, we saw thousands of workers coming into the United States from other countries to take their ‘vacations’ working on unregulated market farms doing harvest work and trimming and getting paid cash. Due to COVID-19 travel restrictions keeping much of this seasonal labor out of the U.S., the regulated and unregulated market were increasingly forced to compete for the same domestic talent with the unregulated market often winning this battle as they were paying tax-free cash at higher wages, given their relatively lower costs compared to the regulated market. Thus, many cannabis companies ran into situations last year where, unless they were able to pay premium rates for harvest workers, their in-house staff were forced to work a ton of overtime to make up for the shortfall. We hope that in 2021 this won’t be the case, however with COVID-19 numbers rising again, this is something that cannabis companies should plan and budget for just in case.
If your cannabis operations are relatively remote or not within an easily commutable distance from a large population center, you may need to go the extra mile to make it easier for workers and staffing companies to assist you. If nothing else it is essential to take an inventory of nearby resources and be prepared to communicate them easily. For example, if you can’t provide lodging to your seasonal workers, you will want to create a list of local hotels/motels, RV Parks, and campgrounds that offer services. Many of these workers are accustomed to traveling from site to site in RV’s, camping, etc. Create a list of grocery stores, gas stations, and other retail establishments the crews may need to access. If there aren’t any lodging options close to your farm, and you have the means, you might want to consider buying some land nearby and building some basic lodging. We have even seen some cannabis companies open a cafe or restaurant close to their farm when there weren’t any good or healthy options in the area so that workers would have a place to go on their lunch breaks or after work. The more of a positive experience you can provide to these workers, even though they are seasonal, the better. Production will typically be quicker, you may gain a customer and even an ambassador for your product, and that worker may be excited to return for years to come, which will keep you from having to deal with some of the labor shortage issues other producers struggle with.
Have a contingency plan. Many of you already know this, but you should always have a plan B and plan C, maybe even a plan D. 2020 and 21 have definitely been years of fires, hot temperatures, and floods. If air quality is deemed especially poor in your area, due to smoke, many harvest workers won’t be able to work outdoors as worker’s compensation policies won’t cover workers laboring in such conditions and few people will want to. We’ve also noticed an uptick in state governments coming out with restrictions and safety guidelines during times of poor air quality or extreme heat. If you’re in an area that has a fire season, you’ll want to have a plan for workers during this time. Perhaps you will need to have them work indoors when the air quality is poor, focusing on things like bucking, trimming, and packaging; then back outside to continue the harvest when conditions allow.
Given the increase in COVID-19 cases, you’ll definitely want to have SOPs and contingency plans in place in the event your crew is exposed to COVID-19. To be proactive, you should also take precautions to protect workers from exposure before it occurs including having masks and hand sanitizer supplies on hand in abundance. Contingency plans could include having a partnership with a staffing firm to provide workers for your fall harvest or offering overtime and bonus incentives for your regular workers to pick up the slack, if necessary. If you’re working with a staffing company, most crews of harvest workers will have a team lead who is there to assist with any HR-related issues that might come up (i.e., sick workers, injury, etc.). However, if for some reason there is not a team lead assigned for your crew, you’ll want to make sure that the workers have a point of contact at your company for any HR-related issues that come up.
Last but not least, if you’re looking for great, experienced harvest talent, especially when it comes to trimming, you will need to budget for the kind of talent you want. With the most talented crews, you’ll likely need to pay some form of a retainer upfront as many of them have trimmed more seasons than adult-use has been around and have not always been paid for their work. Last year, we typically saw trimmers making $15-$25/hour. This was before bonuses. Companies who want to incentivize things like speed and quality increasingly offer bonuses for the quantity and quality of output. This has resulted in the best workers making nearly $50/hour!
The Godmother of Cannabis Industry Recruiting, Kara Bradford, MBA, MM, is Co-Founder & CEO of Viridian Staffing. Founded in 2013 as the first professional, full-service staffing, recruiting & HR consulting firm in the Cannabis industry, Viridian Staffing has led the way in providing temporary, temp to hire, direct placement & HR outsourcing services. Kara has been an HR professional, specializing in Talent Acquisition, Talent Management, Workforce Planning, Employer Branding, Compliance, Federal/State Employment Laws, and Organizational Design for over 15 years. Her career has spanned multiple Fortune 100 companies & start-ups in a wide variety of industries. More importantly, she has more experience recruiting in the cannabis industry than any other Recruiter globally. Kara has an MBA in Human Resources & Organizational Behavior and is LinkedIn Recruiter Certified. Kara is active in many organizations, including NCIA, The Cannabis Alliance, Women of Weed, etc., and was the Founding Chair of the NCIA’s Human Resources Committee.
Video: NCIA Today – September 3, 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.
Member Blog: Commercial Property Assessed Clean Energy (C-PACE) – A Competitive Funding Source for the Cannabis Industry
by Dr. Teresa Smith, Ebee Management Group
The state-by-state level of legalization and expansion of cannabis continues to pick up momentum across the United States, however, the adoption at Federal level is a much slower movement. The absence of federal legalization has created a situation where federally insured lending institutions like banks and traditional investment capital markets are prohibited from funding cannabis projects. The direct result of this restriction in capital has historically forced the cannabis industry to rely exclusively on private loans and individual investors as the primary sources of development and operating capital. These sources of capital are limited in capacity and can garner interest rates from 15-25%. While the legalized cannabis industry has made great strides in removing much of the negative stigma surrounding the products and their uses, resulting in the opening of some additional funding sources such as crowdfunding and angel investors, the cost of these capital sources is still significantly above the conventional market rates. At Ebee Management Group, we would argue that the most underutilized yet best financing tool presently available for the cannabis industry is the Commercial Property Assessed Clean Energy (C-PACE).
C-PACE is an innovative financing tool that gives owners of commercial, industrial, and multi-family properties access to long-term fixed-rate financing for energy efficiency, water conservation, and renewable energy projects. The C-PACE legislation authorizes municipalities or counties to partner with private capital providers to deliver financing options to commercial property owners for energy qualified improvements with the collection of the debt repayment through a special assessment on the property’s tax bill. The C-PACE funds provide upfront capital with 100% financing for qualified improvement often with terms up to 20 years. The resulting energy savings and reduced operating and maintenance costs typically exceed the amount of the assessment payment and often contribute to a positive cash flow to the operating budget.
The primary caveat to the use of C-PACE for cannabis is that the property must be in a state that has passed the legislation that empowers local municipalities to provide C-PACE as a funding tool. C-PACE can be funded directly by the municipality through a bond issuance; however, most projects are presently being funded by the private equity markets. Typical terms on a C-PACE-funded cannabis transaction are 100% financing, fixed for a term up to 20 years at interest rates ranging from 7%to 9%. The maps below illustrate the current enactment of state-level policy for both cannabis and PACE.
Map provided and maintained on the NCIA website
Map provided and maintained on the PACENation website
C-PACE can be utilized for any improvement that saves energy with maximum lending limits influenced by individual state legislation and program guidelines. Typically, the maximum loan amount is capped at 20-25% of the completed appraised value and restricted to funding only qualifying improvements. Typical qualified improvements include lighting, HVAC systems, and building controls, doors, windows, roofs, and alternative power generation like wind and solar. PACE can be used for retrofitting an existing building, new construction, and in some states, refinance of existing debt. For the established cannabis market, the refinance option is an extremely attractive tool because it can be utilized to pay off higher-cost investor debt and is non-recourse to the owner. The debt is tied to the physical facility as a special assessment, not a mortgage lien, and is thus fully transferable at sale. You heard me right. If you have a short-term hold strategy for a facility, any remaining obligation you have associated with your PACE assessment does not have to be paid off at closing. The balance of the debt follows the tax bill and transfers directly to the new owner like any other existing tax-based assessment.
The table below outlines the benefits and features of C-PACE
|Owner Benefits||Financing Features||Qualified Equipment|
|• Lower cost capital
• Non-recourse to owner
• Preserves owner’s capital
• Debt transfers at sale
|• 100% financing of qualified improvements
• Long-term fixed-rate up to 20 years
• Competitive interest rates ranging from 6.5%-9.5%
• Debt securitized by a special assessment on the property
• Doors & Windows
• Power factor conversion
• Alternative energy generation
The future of a wider array of funding options for the cannabis industry will clearly be impacted by both the ongoing adoption on a state-level and the possible federal-level legalization. Presently the pressure from states like New York and Chicago that house the two largest capital markets in the United States is leading to the expanded conversations about tapping into some of these sources of capital. That being said, arguably the best real-time solution for structuring a cannabis capital stack is C-PACE. New construction, building retrofit, or refinance, C-PACE can fill a gap or serve as a lower-cost replacement of other investment capital or equity.
Dr. Teresa Smith leads the Strategic Growth & Development for Ebee Management Group where she is recognized as an industry expert in sustainable development, leveraging PACE financing solutions for qualified energy efficiency projects throughout Ohio and Michigan. Prior to joining Ebee in 2019, Teresa was the Business Development Manager for the Toledo-Lucas County Port Authority where she built a robust growth process that delivered a 280% annualized increase in Property Assessed Clean Energy (PACE) loan transactions, driving loan balances from $3 million in 2011 to $47 million in 2019. Teresa obtained a Bachelor Degree in Economics from Eastern Michigan University, a MBA in Executive Management from the University of Toledo and a Doctorate Degree in Business Management with a specialty in Leadership from Capella University.
Ebee Management Group is a full-cycle construction, finance, and energy management firm, offering our clients the most cost-effective and appropriate development strategies — never compromising integrity and quality. We oversee every aspect of the project with a proprietary process and unique energy financing programs, delivering a custom designed, state-of-the-art energy savings solution with a guarantee to save you time, energy, and money. Ebee offers a wide array of financing solutions for the Cannabis Industry that reduce equity requirements and replace much more expensive sources of capital. Our flagship financing tool for new construction, renovation and refinance of commercial facilities is Commercial Property Assessed Clean Energy (C-PACE). This financing tool makes it possible for owners and developers of commercial properties to obtain low-cost, non-recourse, long-term financing which is paid back through an annual assessment on the organization’s property tax bill. For more information, contact Teresa Smith at 419.340.0420, firstname.lastname@example.org or visit our website at https://www.ebeeco.com/
Committee Blog: Successful Retail Outcomes of SAFE Banking
By NCIA’s Retail Committee
Have you ever wondered where or how a cannabis retail business banks? You should know that it’s complicated because of federal prohibition. So what do you do? Some are finding workarounds and loopholes, others are able to obtain services with smaller financial institutions for exorbitant costs, while many others struggle to maintain an expensive, risky, and dangerous cash-only ecosystem.
The 2020 elections set the creation of four new regulated state cannabis markets in motion, and four more state legislatures followed suit in the first half of 2021, making the last year arguably one of the most consequential and momentous periods for the cannabis industry and policy reform.
However, cannabis is still illegal at the federal level, classified as a Schedule I substance under the Controlled Substances Act, despite state-level regulated cannabis markets in more than half the country. This prevents banks from doing business with cannabis companies because of fear of prosecution or reputational risk, as these businesses aren’t viewed as legal under outdated federal laws.
The cannabis industry is optimistic about the future, though, thanks to an increasing interest in cannabis, public safety, and economic development in Congress. Lawmakers in both chambers are actively debating comprehensive legislation to remove cannabis from the schedule of controlled substances and regulate it federally while repairing some of the harms caused by prohibition, but there are also incremental reforms in play that have a track record of success in the House as well as bipartisan support. Chief among them is the Secure and Fair Enforcement (SAFE) Banking Act, which would provide safe harbor for financial institutions that wish to work with state-legal cannabis businesses and allow them to provide services to the industry without fear of prosecution. This legislation originally passed the House in 2019 and was the first piece of standalone cannabis policy reform legislation ever to receive a vote or be approved by a full chamber vote.
Since then, cannabis banking has been approved in the House three more times in various forms, mostly recently when it passed the SAFE Banking Act again – and with record bipartisan support – earlier this year. The bill is now awaiting consideration in the Senate, but has yet to be taken up by the Senate Banking Committee.
So, what does the SAFE Banking Act mean for retail cannabis businesses?
Loans, capital markets, and credit card processing are common interests for cannabis companies. Access to traditional lending is particularly important for small businesses that usually lack connections to angel investors and venture capital. However, some of the benefits of this legislation are of special interest to cannabis retailers. Check out what some of the Retail Committee members are considering to be important aspects of broadened access to banking and financial services:
“As a retail cannabis business operator, safety is of our top priorities as it directly affects our staff, our patrons, and our bottom line,” said Larina Scofield, director of retail operations at Lucy Sky Cannabis Boutique dispensary chain in Colorado and vice-chair of NCIA’s Retail Committee. “We are required to operate as a predominantly cash business in a high-risk industry that can sometimes lead to criminal targeting; this can put not only our business at risk but also the potential individuals on-site if a targeted crime were to take place.
“There is also no doubt that operating a cannabis business is costly, due in part to the fact that we do not receive the same benefits and protections that other businesses have; cannabis companies are also subject to higher fees in order to get similar services, if those services are available at all. Lucy Sky is fortunate enough to have banking and armored services, as well as a cashless ATM service to allow for safer money handling, but this does not come without a price… a high price. Our company pays top dollar every year in order to have banking and secured payment delivery (something that is not seen in traditional businesses), in order to provide safety for our business and to the individuals who frequent our facilities.
“SAFE Banking would mitigate that and allow for retail cannabis companies to operate without having to “constantly look over their shoulders” so to speak. It would provide an enormous sense of security in an already high-risk business, it would allow for small business owners to receive proper funding to allow for safer operations, and it is truly crucial in the progression of the industry as a whole.”
Less Cash on Premise
“Less cash during COVID-19 is always a plus. The goal is to limit contact, and we all know cash is constantly being passed from person to person. There are plenty of studies highlighting how many germs really are on physical cash. Researchers found plenty of questionable microbes on $1 bills in a more recent study. In a world where we are all concerned about our physical health, the time is now to reduce physical cash in cannabis businesses. Or at least, give people the choice to go cashless if they want to. Let’s also not forget the security benefits of carrying less cash on the premises”, said Byron Bogaard, CEO of Highway 33, a cannabis dispensary in Crows Landing, California, and chairperson of NCIA’s Retail Committee.
Contactless Delivery for Retail
“Golden State Greens had a spike in deliveries during the COVID pandemic but were still forced to collect cash and signatures from customers. When online orders can process card transactions we can make a true contactless delivery where both payment and signature are managed from the customer’s device. This will increase the safety of our drivers by maintaining safe distancing practices and allow new types of deliveries to drop boxes or to customers’ homes similar to Amazon,” said Gary Strahle, chief growth officer for California dispensary Golden State Greens.
Beyond these major issues, there are a number of potential outcomes that could impact retailers as well.
Revamping the relationship between cannabis businesses and banks will likely trigger higher competition for banking services, resulting in lower fees. This would clearly benefit small businesses but could also have an impact on the frequency and nature of mergers and acquisitions in the cannabis space.
Regulatory frameworks will certainly change, and outstanding litigations will most definitely become more complex. Chargebacks from credit transactions will be a constant problem, due to the level of surveillance and data collection they will more easily be disputed.
Better access to banking also positions technology companies for success, as there will be a high demand for mobile wallets, online ordering, and automatic recurring memberships. We can’t predict everything, and there might be more hurdles to cross than we realize, but the technologically-agile retailer may benefit most. Studies show that most of the Top Fortune 500 Companies use software platforms such as Salesforce to manage their enterprise, however many of the canna-specific solutions are missing much of the integration and scalability needed to immediately handle broadly increased access to the banking system.
Speak your voice.
The SAFE Banking Act is critical to the cannabis industry’s success, and your voice will tip the scales. Reach out to your members of Congress, especially your Senators, and tell them what safe banking means to you as a cannabis retailer. Remember, policy needs to support logic over emotion. Emotions are important, but remind Senators of the logic behind implementing safe banking solutions for cannabis businesses:
- Reducing the risk of robbery & theft with less cash on the premises
- Supporting the demand cannabis businesses receive, which in turn supports the local and national economy and helps minimize the unregulated market
- Reduce pathogen transmission by limiting physical cash transaction
If your senator already supports the SAFE Banking Act, please politely ask them to prioritize this legislation in the current session.
Member Blog: Reducing Risks In Cannabis With Supplier Auditing
By Maria Lam, Marketing Director of Isolocity
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:
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.
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.
Member Blog: Cannabis Commoditization
by Claudia Della Mora, Black Legend Capital
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.
Reference: Grower Talks
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.
Member Blog: “Food Safe” Gloves Cause Cannabis Recall
by Steve Ardagh, CEO of Eagle Protect
A pesticide-free cannabis producer and processor from Washington was recently forced to issue a recall after the chemical o-Phenylphenol (OPP), traced back to their “food safe” gloves, was found on its products. OPP, listed under California Proposition 65 as a chemical known to cause cancer, was found in the food-safe gloves they were using to handle their crop.
In a statement announcing the recall, the company said, “Nothing ruins your day like testing your product, confident it will be clean, only to find it contaminated with some crazy, toxic chemical. The gloves were the last thing we tested, we just never imagined something sold as food safe could transfer such nastiness. The discovery was just the beginning… recalls are costly in more ways than one.”
Why “food safe” gloves can cause a recall
After initial approval, non-sterile FDA compliant food grade gloves are not subject to ongoing controls to ensure the reliability and consistency of raw material ingredients or quality processes during manufacturing. Opportunity exists for glove manufacturers to use cheap raw materials which lower glove durability and can introduce toxic compounds, which can transfer not only to products handled but also to glove users.
Demand for lower costs from the end-user pressures glove manufacturers to sacrifice quality, and substitute other compounds to meet these demands. This can include increased levels of cyanide, fungicides, inexpensive phthalate plasticizers, or others on the Prop. 65 list of chemicals known to cause cancer.
Steve Ardagh, CEO of Eagle Protect, a specialist glove supplier explains, “People assume ‘food grade’ gloves are clean and toxin free, but that’s not necessarily the case. The actual FDA Compliance does not even require gloves to be tested clean or sanitary which surprises most people. Having tested 25 different brands of gloves, we’ve found everything from feces, fungicides, Staphylococcus, yeast, and mold,” says Ardagh, “due to putrid water sources and unhygienic manufacturing conditions.”
Recalls & brand reputational damage
Single-use gloves, even those FDA compliant, can be a risk to product recalls and brand reputation. Peer-reviewed scientific studies have identified harmful toxins and contaminants in and on single-use gloves. These “food handling” gloves pose risks for companies producing consumer products, especially in industries such as organics and cannabis whose products must be clean if tested.
Staff & consumer risks
In addition, staff wearing contaminated gloves are at risk of absorbing toxins, as are the consumers of products contaminated by gloves. The contaminants have often been identified as causing cancer, and reproductive and hormonal damage.
Mitigating glove contamination risks
Gloves are often purchased with little thought or foresight into their risks. Cost is commonly the determining factor in their procurement decision-making. However, sourcing gloves from established companies who partner directly with glove manufacturers to ensure consistent quality is essential for all cannabis companies. Gloves may seem trivial, but can cause fines up to $200,000, put consumers and staff at risk, and damage brand reputation.
This is especially important currently in the post-COVID world as the glove market is being flooded with counterfeit and reject quality gloves. The new glove suppliers, traders, and brokers who came into the COVID PPE space with little or no experience, with an intention to simply trade and make quick money, are now bailing out of their poor quality junk gloves and dumping them into the U.S. market. Consider the following before purchasing gloves:
Is your glove supplier reputable, with a long history of glove sourcing direct from the manufacturer and proven quality control processes in place?
Can your glove supplier ensure your glove quality is consistently high through documented factory audits, HACCP compliance certifications and quality processes?
Have you undergone a commercial trial of products prior to committing to purchasing to ensure glove quality is consistently high?
After establishing Eagle Protect as an industry leader in New Zealand, where the company supplies approximately 80% of the primary food processing industry, Steve Ardagh relocated with his family to the U.S. in January 2016 and launched Eagle Protect PBC. Steve brought with him Eagle’s values of providing products that are certified food safe, ethically sourced and environmentally better. Steve is driven to keep consumers safe, one high-quality disposable glove at a time, and has been instrumental in developing Eagle’s proprietary third-party Fingerprint Glove Analysis glove testing program.
Eagle Protect, the world’s only glove and PPE supplier to be a Certified B Corporation®. Eagle Protect supplies disposable gloves and protective clothing to the food processing, food service, cannabis, medical and dentistry sectors in both the U.S. and New Zealand.
Eagle is implementing a proprietary third-party glove analysis to ensure a range of their gloves are of consistent high-quality, and free from harmful contaminants, toxins, and pathogens.
Video: NCIA Today – August 20, 2021
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 defined economically 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, including finding 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 must submit 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.
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.
Bloomberg reports: “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.”
You can read the full FDA letter here.
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 be further 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 Moment reports.
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.
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.
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.
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|
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).
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.
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.
Average Max (ppm)
Average Max (ppm)
Average Max (ppm)
|Limonene Average Max (ppm)||Myrcene Average Max (ppm)||Linalool Average Max (ppm)|
|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.|
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).
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)
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|
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.
Committee Blog: Cannabis And Cancer – As We Go Forward (Part 1)
by Ann Allworth, Ph.D. And Cynthia Shelby-lane, M.D.
Members of NCIA’s Scientific Advisory Committee
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 and up 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.
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.
Committee Blog: Future-Proofing Cannabis Manufacturing Facilities
by NCIA’s Cannabis Manufacturing Committee
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.
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.
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.
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).
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!
#cannabisindustry #legalcannabis #trackandtrace #wearethecannabisindustry #cannabiscompliance
Video: NCIA Today – August 6, 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 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.
You recently launched the Cannabis Regulators of Color Coalition (CRCC). Is that initiative part of CannRa?
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?
Hopefully, by now you’ve had a chance to read the discussion draft of the Senate bill released a few weeks ago, detailed in Michelle’s last blog post, Crazy for Cannabis Administration and Opportunity Act (CAOA). If not, at least read the summary so you understand what is happening with this potentially historic legislation.
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:
Eric Rahn, S2s Insurance Specialist
Shay Gilmore, Shay Gilmore Law
Adam Patt, iCann Insure, LLC
Mathew Grimes, Grimes Law Group LLC
Sandra Sheils, Safety Equation
Jason Horst, Horst Legal Counsel
Summer Jenkins, Cannasure Insurance
Doug Esposito, Owen Dunn
Christopher Payne, CLIC Risk Retention Group, Inc
Cimone Casson, Cimone Casson, LLC
Jim Gerencser, Nationwide Auto Services
Merril Gilbert, TraceTrust
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 Report pull 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.
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.