There’s been a lot of positive press lately about the success of the cannabis industry in Nevada, and with good reason. The cannabis industry contributed more than $110 million dollars in FY19 to state coffers and is poised to overtake the mining industry in annual tax contributions; all of this in just its second year of operations. But while the tax-generating retail industry continues to steam ahead, much of the business and opportunity in the balance of the industry remains on hold (since early October). The responsible moratorium has largely been erased from public awareness by the intervening holiday season and the ongoing success of tax collections over projections.
Unfortunately, while this suspension was necessary in light of the surrounding circumstances, its indefinite duration has created market instability at a time when cannabis-friendly markets are competing for business and tax dollars. Regrettably, this uncertainty has made Nevada look more like the nearly paralyzed California market. The time has come to complete the necessary work, end this moratorium and let the critical behind-the-scenes elements of our nationally leading industry get back to work.
For those that don’t recall, the present moratorium was announced by the Nevada Department of Taxation on October 17, 2019 following the recommendations of a task force initiated by the Governor. The launch of the task force was in response to two scandals: one involving the awarding of retail licenses earlier in the year and the second being the discovery that the foreign nationals identified in a national campaign finance scandal (involving former New York Mayor Rudy Giuliani), had sought to invest in and seek influence over the local cannabis industry.
Few can argue the need for a regulatory pause given the state of affairs last October, and I believe the Governor’s response was the single most effective way to stifle inappropriate corporate activity. By the simple administrative step of freezing all pending and future license transfers, the state was able to get the lawyers involved in these transactions to shut them down. The final step in almost any merger or acquisition transaction became temporarily unlawful. There’s no need for a police force when every lawyer in the industry can be deputized.
This Friday will mark ninety days since the moratorium was put into place, and would be a fine time to release this de facto suspension of all mergers, acquisitions, sales, financing, etc. After a decade and a half of practice in transactional law, I can tell you that the “invisible hand” of the market that most of us rely upon to guide capitalism isn’t invisible to the people in the transactional trenches. If the machinery behind the scenes is seized up for too long, inevitably, even the very of the supply chain (i.e. retail) will suffer.
Many capital rich companies, who only recently became comfortable with the cannabis space, are looking to deploy resources into the cannabis industry. The mechanisms to do so, and to create the jobs and economic development desired by the state and its taxpayers, are restricted to mergers, acquisitions and equity investment. Capital markets are not static. They are as dynamic as the cultures they serve and forcing them all to the sidelines for an extended period owing to the misdeeds of a small number of them, is painting with too broad a brush. It is perhaps due to the recent legality of the cannabis industry and its vestigial stigma that a transactional moratorium has been tolerated for as long as it has. It is difficult to imagine a comparable capital markets freeze in any other industry.
In the ten years I have called Las Vegas home, I have watched our city and, indeed, our state, transform from side show to main event – as we are no longer content to ride shotgun to California’s success. We Nevadans have proven capable of, and even better equipped for, leading in multiple industries, including cannabis.
To that end, we are, or certainly should be, capable of completing an “extended review” of the license transfer process as well as developing a “more thorough and appropriate vetting process” in ninety days. Ostensibly, freezing all pending transfers was undertaken to ensure that those aspiring licensees were subject to such “more thorough” process. It is difficult to imagine, however, how this process could presently be incomplete. If anything, as the state is writing the rules as it goes, it makes sense to at least unlock the “pending” transfers and provide some guidance as to the expected timeline for future transfer approvals.
We spent most of 2019 advising clients to avoid cannabis transactions in California, as the regulatory structure there is widely agreed to be in disarray. During most of that time, we were able to credibly suggest Nevada as an alternative market, free from such chaos, and capable of sustaining robust merger and acquisition activity without issue. However, as large and popular adult-use markets (e.g. Chicago, IL; Detroit, MI) open and expand, and agriculturally experienced markets expand into hemp and CBD production, we are left to advising clients that their dollars are better spent elsewhere.
However, there is still time to start the new year and new decade with a local cannabis market that is looking to lead and provide prototypical regulatory and compliance guidance, as it was prior to last October. If we don’t, we can’t expect other cannabis-legal states or businesses choosing between them to wait for us to figure it out. And when federal legalization undoubtedly arrives, the loss of time in developing the Nevada market will no longer be treated trivially.
Glenn H. Truitt, Esq. is the Managing Partner of Ideal Business Partners, a boutique multi-disciplinary professional firm focusing on serving businesses in the cannabis, hemp and CBD spaces. He is a graduate of the U.S. Naval Academy and Stanford Law School, is licensed to practice in California and Nevada and has been practicing for 15 years.
Committee Blog: What Should You Do If Your Customer Won’t Pay You?
When I first came into the market in 2016 almost every company told me that they don’t have collection issues, they either get paid COD or get paid “on time.” Well, as the recent reports about a dispensary stopping payments to vendors has hit the press, I thought it would be a perfect time to talk about an issue that has largely been ignored in the cannabis market: collections, and what you should do if you are not getting paid?
Almost every company I have spoken to, whether they are a grower, manufacturer, or service provider are extending some type of credit to some of their customers. With more companies in the cannabis space now extending credit to their customers, delinquent payments are on the rise and the management of your new “accounts receivable” can have a major impact on your cash flow.
Most of this credit extended today in the cannabis market is what we call “friendship credit,” credit that is extended to a customer who you have developed a personal relationship with and where no credit analysis was performed. Friendship credit may have worked in the past, but the rules are changing and as you may be experiencing first hand, many of these customers are not paying you on time and some are not paying you at all. If this is happening to you, what should you do?
The following is a common-sense approach to the problem of determining whether a customer has become a collection problem where you may need outside help. Customers that have a cash flow problem must choose which vendors they will continue to satisfy and which vendors they will not. If a company has insufficient cash on hand to pay all their vendors, some are not going to get paid on time. This can be a one-time problem, or it can be an endemic problem and if you don’t act promptly it may cost you.
The Customer is More Than 30 Days Past Due
Your customer always paid on a timely basis, you have transitioned them from paying you COD to credit terms and now they are 30 days past due. They answer your calls but promises for payments and clean up the past due balance are not met. Chances are you have a problem and depending on how old the debt gets, turning them over to a 3rd party collection agency may be the way to go and save you a customer. Yes, you read it correctly, save you a customer and get you paid, that is the goal of a collection agency.
The Customer is Not Returning Your Calls and Re-Ordering
Your customer is past due and ducking you. If they won’t talk to you after repeated attempts to reach them, their debt is 30-60 days past dues and getting older and they are not trying to re-order and pay down the old balance, a collection agency may be your only solution. Collection agencies have trained recovery professionals that focus on working with these types of accounts. A collection agency experiences this problem as a normal course of their daily activity and they are experts at getting your customer to the table because it’s what they do for a living.
The Customer Has Stopped Buying
If the customer has stopped buying and owes you money, even if it’s not past due you need to be on the alert. For whatever reason, if the account no longer needs you, they don’t have a reason to be prompt. If they go 60 days past due, you are probably going to need outside help to collect your money.
You Receive Negative Information on the Customer from Other Suppliers
Your customer is past due, and you receive some negative information on them from other suppliers who are also selling to them. When a company gets into trouble financially, they start allocating their available cash, the key important vendors may not see a problem, but the secondary vendors will. For example, if the account is a dispensary they need to have flower and concentrates on the shelf and therefore those suppliers will get paid first. But if you manufacture infused THC/CDB sports drinks that do not sell as well you might not get paid on time if the dispensary has cash flow issues. If you have relationships with other suppliers leverage them to find out what is going on.
Final Thoughts
If you are extending credit you will need to implement a collection policy that details how to manage and collect from a delinquent customer as well as what is your point of no return is where you need to pull the trigger and place the customer with a 3rd party collection agency. The warning signs listed above are usually evident during your internal collection efforts and the sooner you recognize them the better. Prompt action will save you money. If the account is behaving erratically, you should turn them over to a 3rd party collection agency as they trigger the 60-90 days past due signal because probably things are not going to get better, only worse.
Sam Fensterstock is the SVP of Business Development at AG Adjustments (AGA), a 48 yr. old provider of 3rd party commercial collection services where he oversees sales, marketing and revenue. Sam has spent his entire business career as an entrepreneur and senior executive in the commercial credit & collection space. Sam been a founder and played a key role in the dynamic growth of several leading niche commercial credit risk management companies including F&D Reports, CreditRiskMonitor and PredictiveMetrics (sold to SunGard/FIS in 2011) and AGA. Sam is widely considered a vendor expert in the order to cash and credit and collection process. AGA is the only national collection agency focusing in the cannabis market Sam has been an active member of the NCIA’s Banking & Finance Committee since 2017. Sam is the author of the NCIA published White Papers “The Future of the Accounts Receivable & Credit Function in the Emerging Cannabis Market” and “Implementing an Initial Trade Credit Policy for an Emerging Cannabis Related Business” as well has authored several articles on the topic of trade credit and collections in the cannabis market.
Member Blog: Condensate Recapture for Cannabis Cultivation Facilities – Making Informed Decisions to Save Resources and Improve Efficiency
Condensate capture for reuse is an intriguing new application within the controlled environment horticulture space. Addressing both environmental impacts and regulatory requirements, capturing and reusing condensate has many attractive benefits. However, several key questions have appeared surrounding the topic of condensate water capture and reuse applications that have slowed its adaptation in many facilities. In this article, we discuss common questions and concerns associated with condensate reuse and how each may be addressed with adequate, customized treatment processes.
Condensate water is generated by a number of processes within a controlled environment agriculture facility. Most commonly, dehumidification and HVAC systems are the primary sources of condensate water. The source of water and collection system plays a significant role in condensate water quality and associated concerns when considering reuse.
Why is collecting and reusing condensate water a good option?
Recycling available water streams reduces the amount of fresh water required and offsets associated costs.
Recycling minimizes discharges and waste. Coming regulations will require extensive discharge limits.
With adequate monitoring and treatment, risks may be greatly reduced, maximizing benefit.
Contamination – Don’t Let One Bad Apple Ruin the Bunch
In general, condensate water is low in Total Dissolved Solids (TDS)/Conductivity and is generally very clean. pH is typically low as carbon dioxide readily absorbs into solution (pH 5.5-6.5 range). Contaminates are easily introduced based on what the water contacts during collection and distribution. Volatile Organic Compounds (VOCs) and other organics can be absorbed and provide “food” for microbial proliferation – especially if the condensate is pooled and stored for extended periods. Metals leaching from dehumidification equipment and/or from dust/air pollutants also may accumulate. Identifying and managing emerging contaminates is crucial to successfully mitigate risk and maximize value when reusing condensate water.
Microbes and Organics
By themselves, most organics potentially found in condensate water pose little threat. However, organic (carbon-based) pesticides, foliar sprays, etc. have the potential to accumulate in exposed condensate water and could lead to downstream issues. Organics also provide a potential carbon source for various microbial populations to proliferate. This can create biosecurity challenges, plant disease and challenge existing water treatment processes. Microbes are ubiquitous in nature and although pathogens are presumed to make up less than 1% of the known microbial kingdom, contamination remains a threat. Airborne bacteria, viruses and fungal spores can be introduced to a condensate water system through its condenser plates. Microbial proliferation and the formation of biofilms on wetted surfaces downstream of dehumidification equipment can result in elevated levels of total and pathogenic microbes.
Heavy Metals
Heavy metals including lead, zinc, aluminum, and copper may be a concern if leaching from dehumidification equipment occurs. Soldered joints in copper tubing, for example, may introduce lead to condensate water. In that case, mechanical joints/brazed joints would be preferred. Aluminum, copper, and zinc may be stripped directly from metal surfaces as part of generalized corrosion. Even at relatively low levels, some metals, dissolved contaminates and other corrosion byproducts can bioaccumulate in plants resulting in compounded issues, including phytotoxic effects.
Water Treatment & Management
In many situations, the use of recaptured condensate water is a viable option to supplement make-up water demand and reduce waste discharge. Treatment prior to reuse is recommended to condition the condensate water to ensure water system stability over time and to prevent potential treatment and operational challenges that could otherwise arise.
Available treatment processes include Advanced Oxidation Process (AOP) gas and UV for disinfection, adsorptive media for dissolved organics and various other filtration processes for metals and other contaminate removal. The extent and type of treatment varies based on specific water challenges and end goals.
Baseline and routine subsequent water testing and monitoring is key to maintain a proactive approach to water management. Integrating smart water management programs limits waste, improves logistics, saves money, protects the environment and allows for current and emerging regulatory compliance. Equally important is choosing the right technical partner to help develop and implement your smart water management program.
Taylor Robinson is the Research & Development Manager and Chief Chemist for Silver Bullet Water Treatment with expertise in molecular and cell biology, general water chemistry, microbiology, and industrial (oil and gas) water treatment and reuse processes/chemistries. For the past 4 years, Taylor has led, conceptualized, organized, and completed numerous Silver Bullet research and development projects related to water treatment for the livestock, cooling water, horticulture, aquaculture and data center industries. Taylor joined Silver Bullet in 2016 and has been a key contributor to the advancements in the company’s technology and research base.
With over 15 years’ experience, Kyle Lisabeth has been focused on improving water management programs across multiple industries, with a central focus of treating water for reuse applications. Kyle attended the University of Texas – Austin, and upon graduation with a BS in Biology and Environmental Sciences, gained years of international water management experience in both North and South America. Since establishing Silver Bullet’s Horticulture Division, Kyle has exponentially grown the business unit’s install base and cultivated a nationally known water treatment brand for many controlled environment agriculture applications, including cannabis.
Member Blog: Cross-Pollination Poised to Prompt Litigation in Light of New USDA Hemp Rules
On October 29, 2019, the USDA released regulations establishing a domestic hemp production program, paving the way for hemp cultivation on an industrial scale in 2020. While the potential benefits of a robust hemp industry in California are exciting, large scale industrial hemp cultivation increases the risk of cross-pollination for hemp and cannabis growers, which may significantly impact the value of both crops.
Cannabis sativa, the plant used in both hemp and cannabis production, is a dioecious species, meaning that male and female flowers are borne on separate plants. Cannabinoids, including THC and CBD, are more concentrated in the female flower than in the male flower. Therefore, cannabis or hemp growers who desire a crop with a high yield and potency of either THC or CBD will typically use feminized seeds or clones and will weed out male plants if they appear. Growers of industrial hemp produced for seed or for fiber, however, are not concerned with producing potent cannabinoids and therefore will generally grow both male and female plants.
Cross-pollination between female and male plants can cause problems, such as seed production, lower crop yields, and altered THC or CBD content of the flowers that are produced. This can devastate the value of crops grown for their THC or CBD content. Moreover, if hemp exceeds the 0.3% THC concentration threshold allowed under the federal regulations, it must be destroyed.
Unfortunately, cannabis pollination can occur over large distances depending on the concentration of plants and weather conditions. Industry experts recommend a minimum distance of ten miles between outdoor growing operations, but research shows it is possible for cannabis pollen to travel much further. Therefore, cross-pollination is possible even if a neighboring farm is miles away. This dynamic poses a huge problem to the young industry.
At this point, there are few regulations in California designed to prevent cross-pollination. Several counties enacted temporary moratoriums on the production of hemp, primarily based on the USDA’s inaction. In those counties, cross-pollination has not been a problem since cultivation was not allowed in the first place. Now that the USDA has issued regulations governing the hemp industry generally, counties will likely lift these temporary moratoriums. But since the USDA regulations are silent as to the distance between hemp and cannabis operations, cross-pollination will almost certainly occur and will likely result in litigation in the near future. Indeed, cross-pollination has already caused litigation in other states. For example, lawsuits related to cross-pollination have already commenced in Oregon. In Jack Hempcine LLC v. Leo Mulkey Inc., et. al., a hemp grower alleges that cross-pollination by male plants on the property of several nearby growing operations raised the THC levels of the Plaintiff’s female plants, rendering his entire crop unmarketable. The grower who brought that action alleges damages exceeding $8,000,000 in lost crop value.
There are several legal theories available to growers seeking to recover damages caused by cross-pollination of their crop by a nearby hemp or cannabis operation, including negligence, trespass, nuisance, strict liability, and interference with prospective economic advantage. If your crop is or was negatively affected by cross-pollination or another grower alleged that you have damaged their crops via cross-pollination, you should contact counsel as soon as possible.
Ryan McGuire is an attorney at HK Cannabis Law, a practice group of Huguenin Kahn LLP, a full-service law firm representing clients throughout California and beyond. Ryan has years of experience litigating a broad range of legal actions, including personal injury, employment, contractual disputes, and construction defect claims. Ryan also has deep ties to California’s agricultural community, and has successfully represented growers, packers, and distributors. Ryan’s knowledge and experience are valuable assets for clients involved all aspects of cannabis production from seed to sale. Established to provide legal representation and counsel in the emerging field of cannabis law, HK Cannabis Law stands ready to serve clients at every stage of the cannabis business cycle, from business entity formation, real estate acquisition, land use, contracts, business transactions, regulatory compliance, licensing and permitting, enforcement defense and, should it ever be necessary, legal representation in both civil and criminal trials and appeals.
Committee Blog: Ending The Ban On Interstate Commerce (Part 1)
Oversupply and shortages, high prices and lack of choice for patients and consumers, illicit markets, tainted products, and the inability to access banking and capital all plague the burgeoning cannabis industry. While cannabis advocates and industry leaders are working on each of these problems, there is one solution that would ease the burden on all of them. Allowing for interstate trade between states with legal cannabis markets would improve each of these issues while supporting the individual solutions to each that the industry has been working on. This is the first post in a series that explores the benefits and barriers to setting up a legal framework for interstate trade, even before wholesale legalization at the federal level.
Since the beginning of legal, adult-use cannabis, when Colorado and Washington passed the first ballot measure allowing for adult-use, the industry was guided by the Cole Memo, which laid out the parameters for the federal government staying out of the states’ cannabis experiments. Among other things, the Cole memo stated that the DEA could crackdown on cannabis moving from states with well-regulated systems to states that do not allow cannabis. This statement has been interpreted conservatively to mean that no cannabis should cross state lines for any reason, ever, based on the fact that at the federal level, cannabis is still a Schedule I drug under the Controlled Substances Act.
Today, there are 10 states which have legalized adult-use, another 19 which allow for medical use, and six more which allow the use of CBD products only. Many of these states share borders, and producer states could serve several nearby markets without ever entering a state that does not allow cannabis in any form. Furthermore, the Cole Memo, which was rescinded by Jeff Sessions in 2018, has not been replaced by any guidance whatsoever. This means that each U.S. Attorney’s office is free to set their own enforcement priorities around state-legal cannabis activities, and there is no official overriding policy at the DOJ on interstate trade between states with medical or adult use. Corresponding guidance from FinCEN, however, remains in effect and similarly discourages the transfer of cannabis between states.
Cannabis markets vary widely from state to state with regard to the underlying market dynamics and challenges that they face. Some states produce too much while other states experience shortages. Meanwhile, new states pass legislation or have voter initiatives that allow medical or adult-use every year without any infrastructure in place to supply that state’s demand. In each new legal market, the vast majority of demand had long been met through illicit market supply, and generally from outside of the state’s boundaries.
The artificial boundaries around cannabis markets have far-reaching impacts for local economies, patient access, illicit market activity, and social equity. Later posts in this series will take a deep dive into each of these issues, and in this post, we will look at how this has impacted states, the industry, and consumers so far.
Lessons Learned:
Washington State chose to take the strictest possible reading of the Cole Memo, and insist that not only must cannabis not cross state lines but also sources of funding must come from within the state. Combined with their high capitalization requirement for licenses, the result was a disaster from an equity standpoint: only wealthy and well-connected individuals in the state (which are overwhelmingly white males) were able to even attempt a license. This decision was based substantially on the fact that interstate trade was not allowed.
In Oregon, which has an ideal growing climate and a long tradition of exporting cannabis (albeit in the illicit market), the artificial boundaries created by the ban on interstate trade lead to a massive oversupply for its small population, which crippled the industry and tanked many small businesses. Despite the fact that Oregonians consume more cannabis per capita than any state, their climate and culture have led to growing massive quantities of world-class cannabis that cannot reach patients and consumers, even in neighboring states that might have under-supply issues. The result is that hundreds of small, mom-and-pop shops and family farms have gone out of business, eradicating millions of dollars of local capital, and accelerating mass consolidation of the industry into the hands of a few foreign corporations. Meanwhile, in medical markets like Illinois and Michigan, patients have had sporadic access to quality cannabis-based medicines.
When Nevada originally launched, due to the influence of local liquor distributors, it was almost impossible to get products to market, and the state’s dispensaries sold out on the first day of sales. After ironing out some of the kinks, sales are going strong, but the practice of growing thirsty plants indoors in the desert is of dubious value when the same plant can be grown with a fraction of the inputs in northern California and southern Oregon.
California’s legal system is a perfect example of how over-regulation fuels illicit market activity. Because of the structure of their regulatory framework and high taxes, the state is served by only 800 licensed dispensaries, whose prices are double and triple those found on the illicit market for similar products. This has led to the emergence of thousands of “pop-up” or unlicensed dispensaries, selling untested products tax-free in a thriving illicit market. The booming illicit market in California has also led to massive wholesale markets of hardware, branded packaging, and flavoring and cutting agents (all technically legal) to supply the illegal operators with everything they need to look legitimate. This is a major contributing factor to the wide-spread vaping related illness cases popping up all over the country, as many illicit market operators purchase their supplies in downtown Los Angeles.
The ban on interstate trade promises to continue to create new and novel problems as well. If New York, the 4th most populous state in the union, legalized adult-use (which seems likely in the near future), and interstate trade were still banned, it would require a massive investment, on the order of billions of dollars, to create enough indoor and greenhouse grow facilities to supply the demand created by its 19 million inhabitants. The recent legalization of hemp under the last Farm Bill has created a number of legal dilemmas as well, as some individual states that do not recognize any difference between hemp and cannabis flower have seized products and arrested individuals taking hemp legally grown in one state to a market where it is legal to sell.
Some suggest that these issues will be sorted in local markets, and in each state individually this approach might seem to make sense. When you add these problems together, though, a much more elegant, efficient, and obvious solution emerges: let states that have always exported cannabis send it to states that have always imported it. A set of different and seemingly unconnected problems become each other’s solutions.
Historically, people across the country have consumed cannabis, and the vast majority of it was grown in a few locations that are particularly well-suited to the plant. It is highly likely that a fully-matured nationwide legal market (one which must account for not only interstate, but also international competition) will ultimately be best served by the same general market dynamics. The only question is: how long will we allow the artificial market boundaries around each state to decimate local capital, curb access for patients and consumers, encourage investments that are attractive short-term but disastrous long-term, and prop up the illegal markets that pose a public health risk?
Interstate trade between states that allow some form of legal cannabis would provide much-needed relief on a number of fronts for cannabis businesses, and could be structured in such a way to support social equity efforts. With a little guidance on enforcement and thoughtful programs and agreements between states, there is a path to legal interstate commerce even before cannabis is removed from the Controlled Substances Act. The state of Oregon has already passed legislation allowing for the export and import of cannabis products provided that the Federal Government allows it. This could be either through legislation such as the proposed Blumenauer/Widen State Cannabis Commerce Act, or though DOJ enforcement guidance (whether from the Attorney General or the relevant local U.S. Attorney’s). There are multiple paths that can lead to the end of banned interstate trade, and it seems increasingly inevitable that we will see legal cannabis trade across state borders in the near future. For most operators in the cannabis industry, and for all patients and consumers, this will be a good thing, and can’t come soon enough.
Gabriel Cross is a Founder and CEO at Odyssey Distribution, LLC, a distributor for locally-owned craft cannabis producers and processors in Oregon. Gabe worked in the sustainable building industry for a decade before starting Odyssey and brings his experience with sustainability and systems thinking to his work in the cannabis industry. Odyssey manages logistics, sales and marketing for boutique producers so they can focus on creating great craft cannabis products for the Oregon market.
Committee Blog: How NCIA’s Banking & Financial Services Committee Can Help You In 2020
As we begin the new year, the NCIA Banking and Financial Service Committee is joining the trend of starting something new for 2020. We are launching a blog series, the very words that you’re reading now, to help the cannabis industry when it comes to banking and payments. Here, you’ll find new content every month. Our goal is to give you actionable information based on current markets so that your business can grow and thrive throughout the year.
In Missouri, the state has issued 192 retail licenses, and 80 licenses for cultivation. To serve the industry, there are numerous banks and credit unions who are actively working with cannabis businesses to offer transparent banking options.
Utah will be issuing 14 retail licenses and 8 cultivation licenses, with businesses expected to start operating in March of this year. There is a financial institution in the state that is ready to bank the cannabis industry, helping your business with compliant financial services.
Finally, the committee has built relationships with additional financial institutions in California, giving even more options for cannabis businesses that need banking solutions. Whether your business is based in Missouri, Utah, California, or any other state with a legal cannabis market, NCIA’s Banking & Financial Services Committee can help provide information that may help you obtain banking services. Please get in touch with usif you need help, and we can make connections that could help.
Considering the changes to legislation in states across the country, as well as the impressive growth of the cannabis industry in recent years, we’d like to take this opportunity to welcome both newcomers and old-timers in this industry. Our community is vibrant and collaborative, with a focus on helping each other grow.
Unfortunately, there are always operators who try to work around the rules instead of following them. As a result, it’s important that we remind all our members about the dangers of breaking the laws or rules regarding cannabis banking and payments. We want to make sure that everyone knows the dangers that can be associated with the few transaction methods that are available to the industry.
Debit and credit card payments for cannabis are not allowed by the branded card networks. What does this mean? VISA and MasterCard do not want anyone paying, or receiving payment, for cannabis on their rails. While not technically illegal, circumventing their rules can lead to some dire consequences, including getting blacklisted and unable to get a merchant account in the future, even when cannabis becomes federally legal.
Instead of trying to work outside the system, focus on compliance and sustainability. How can you ensure that your business thrives for years to come? Build a solution that is legal now and will continue to operate legally as the federal laws expand. Work with banking and payment partners who understand your business and help it grow. Ensure that you only build partnerships with reliable, trustworthy institutions that improve your brand’s viability and performance.
As always, remember that NCIA’s Banking & Finance Committee is here to help you. Our goals are to educate and support operators in this industry across the country. If you’re worried that your banking or financial services solutions might not be fully trustworthy or compliant, don’t stay silent. Make full use of this committee by utilizing all our resources and connections to help your business thrive. Because when your business does well, the association continues to grow and improve, too.
In his role as Hypur’s Chief Revenue Officer, Tyler leverages his extensive experience in building brands, managing key relationships and strategic partnerships. Tyler has been at the forefront of Hypur’s expansion efforts for over five years and touches Financial Institutions, Government Officials, Regulatory Bodies and the State Legal Cannabis industry.
As a result, he possesses an intricate knowledge of the Banking and Regulatory climate, key industry influencers, industry dynamics, and market history. He has also become a key contact for media outlets, analytics companies, industry consultants and investment firms searching for reliable, accurate sources of industry information.
Tyler’s contacts and relationships in the US State Legal cannabis industry are unparalleled.
As a result of his influential value, he was selected to be Chairman of the National Cannabis Industry Association Banking and Financial Services Committee. He is also a member of the Forbes Business Development Council, frequently publishing articles about the banking and payment environment in the cannabis industry. Tyler founded and managed a large beverage company prior to joining the Hypur team and was a professional athlete in the New York Mets Organization.
2019 was an incredible year of growth for the cannabis industry; mergers and acquisitions, multi-state expansion, new state licensing, and an explosion of new jobs created. Operationally, more businesses began adopting best practices from the retail and hospitality industries and implemented technology systems to connect all facets of business for stronger insights. There have been focused efforts on hiring, engagement, and training to improve employee retention. Plus, the momentum for widespread acceptance of cannabis legalization is truly unstoppable.
These favorable advancements haven’t come without a variety of challenges, including continued banking access stalls, compliance hurdles, and environmental tragedies. While most legal markets in the nation are struggling to keep up with the demand for qualified talent, select California enterprises laid off an average of 30% of their workforce due to numerous obstacles. Most notably, the vaping crisis shed light on the need forconsistent regulation and testing. Additionally, lack of access to capital has significantly slowed down business growth nationwide.
According to a survey Wurk sent to leading enterprise U.S. cannabis businesses, the largest human resource challenge in 2019 was managing rapid growth and scaling the workforce to meet demand. Managers felt pressure to ensure hiring plans were strategic, yet could meet the constant change of the industry, and many learned that employee turnover was directly related to a lack of training and effective performance management practices.
2019 tested the resiliency, patience, and commitment of many in the industry. As 2020 begins, consider this: this is a passionate community that has the experience, determination and gumption to persevere no matter the roadblocks. As pioneers in cannabis HR, leaders are responsible for providing the right support and resources to the people of the industry, so momentum continues.
In 2020, recognize these 9 trends in cannabis Human Capital Management:
Employee Training & Performance Management
While more than half of the US has some form of cannabis legislation in place, the industry still lacks a standardized education and training program for employees in each vertical. Compliance and risk management programs have been developed by vendors like Cannabis Trainers, and states such as Massachusetts are mandating that operators take part in these sessions. A portion of marijuana businesses have created internal training programs and will invite producers in-house to offer product education to budtenders.
Although there’s been progress in this category, the industry is still a long way away from providing consistent, reliable education to employees. In the coming year, HR leaders will have self-developed or outsourced courses on compliance, at a minimum. More and more operations will expand their employee development to include product and plant specifics, responsible selling best practices, and even positive psychology coaching.
Reducing employee turnover will remain a focus for cannabis HR leaders in 2020. Operators will take a fresh look at how performance management is handled and whether it aligns with company culture. One approach to replace the annual review will be “continuous performance management,” where frequent one-on-ones are scheduled to improve communication, address issues fast, and ensure employees are engaged in the organization. HRIS platforms can support these conversations with people data so managers can combine the human interaction with trending evidence in order to spot at-risk employees before they jump ship.
Employee Experience
People are a business’s largest asset, which means not only can they be the most substantial expense, they are also the biggest revenue generator. The Employee Experience (what people encounter, observe or feel over the course of their employee journey) will begin to be a part of cannabis HR strategy into the new year. By gathering insights about this unique workforce through surveys, interviews, and conversational documentation, cannabis businesses will start to define an Employee Experience that parallels the company’s mission, vision, and values.
Forbes recently included “tending” people as an HR trend to be aware of in 2020. The idea is to cultivate employees and support their growth, rather than manage them. This intentional relationship-building practice evokes a sense of community and wellbeing. Harvard Business Review notes that tending goes a long way in mitigating the “workers as machines” phenomenon. If crucial talent feels they are just a cog in the Multi-State Operator machine or an unseen hourly inventory manager, the likelihood of them voluntarily departing the business will rise.
Standardization vs Customization
Recognition must be given to leadership in 2019 for leaning on other industries for processes to effectively manage a mostly hourly workforce. While cannabis businesses are still in start-up mode, there are labor tasks and procedures that mirror those in the fast food, hospitality, and agricultural segments that can help shape standards. There’s no need to reinvent the wheel, but it’s obvious that the intricacies involved with the seed-to-sale process require customization.
In 2020, HR will balance enforcing best practices and the need for agile, tailored decision-making. When it comes to talent acquisition, for example, a hiring manager may draft a job description that includes vital soft skills, like reliability, communication skills, organization, adaptability, and leadership. In new cannabis markets, following a cookie-cutter model won’t generate the talent pool needed to build a business.
Being innovative with tried and true methods will allow leadership to solve bottlenecks today, not in the future.
Data-Driven Decision Making
According to Deloitte’s 2018 Human Capital Trends report, 85% of companies see people analytics as a high priority, but only 42% believe they are either ‘very ready’ or ‘ready’ to meet expectations. Over the years, cannabis executives have taken action to implement a technology foundation that supports compliance, streamlines processes, and reduces cost. Yet, there is still a lot of runway left to cover.
The focus will shift from technology as a ‘nice to have’ to technology as a major transformational driver in the years to come. Organizations will recognize the benefit of all-in-one solutions that enable better business decisions based on data. Human Resources will remain on budget by comparing actual spend per department, location, and cost center to predicted payroll spend. Managers will rely on people analytics to identify what elements impact turnover and employee engagement. Even in the most fast-paced, ever-changing industry, HR professionals will have the ability to predict future trends for talent, finance, and workforce planning.
Managing Rapid Growth
Massive expansion has created immense pressure for all positions in the cannabis vertical, notably for HR professionals. With most companies growing through M&A activity, not organically, the structure of business is evolving faster than most can realistically manage. This surge will only continue in 2020, demanding the expertise of the HR department to effectively discern new opportunities and build the workforce of the future.
According to the PwC CEO survey, 77% of CEOs believe the biggest threat to their business is the lack of availability of key skills. With CEOs so concerned about talent, cannabis HR managers will shift focus to increasing productivity of their existing workforce as opposed to hiring additional staff. Data will help inform HR professionals on who the top performers are and what conditions are supporting their success.
Outsourced HR Solutions
Employee relationship management should be made a priority for every business, but in-house cannabis human resources may not be an option for all. Small businesses may wait until they reach 40 or even 75 employees before bringing on a full-time HR manager. Constantly evolving labor laws and the risks involved with cannabis payroll will drive some business owners to outsource HR services to cannabis-specific partners.
From employment taxes to employee benefits to the Fair Labor Standards Act (FLSA), there are many aspects of workforce management that owners may not have the resources or experience to maintain. In an industry already strapped for financial support, one mistake in adhering to the work and pay rules for a specific municipality can amount to a hefty fine. The risk involved with managing cannabis people is high and this liability will drive licensees to depend on cannabis-friendly HR and Payroll partners.
Diversity and Inclusion
Key states had strict requirements surrounding diversity initiatives in the cannabis application process in 2019 and this focus will only grow in the decade to come. HR departments will develop stronger D&I plans with innovative ways to recruit, to communicate the importance of unique perspectives and to support peers across the organization.
Sadly, the industry saw a decline in the number of women execs at the end of the decade. Vangst found that of the 38.5% of employees that self-identified as females in the industry, only 17.6% of these women held a “Director” or “Executive” role. This compares to 82.4% for self-identified males.
As momentum gains, the industry will continue to attract like-minded, experienced professionals from mainstream, big box corporations. This past year, KushCo Holdings appointed former Nestle and Cetera Financial Group HR Executive, Rhiana Barr, as their Chief People Officer and Harborside brought on a female HR leader from big pharma. This trend will progress as the industry continues to prove legitimacy through international acceptance and financial opportunity.
Corporate Social Responsibility
Giving back to the community has been a challenging push for cannabis businesses as many non-profit organizations and volunteer programs are still hesitant to partner with plant-touching operations. Thankfully, this trend is taking a turn in a positive direction. Take for example, Cresco Labs, who launched the SEED initiative in 2019 to “ensure that all members of our society have the skills, knowledge and opportunity to work in and own businesses in this industry.” Companies all over the nation are contributing to those most affected by the War on Drugs by donating to non-profits like Last Prisoner Project or collaborating on expungement events.
Human Resources will attract a wider talent pool and increase employee satisfaction in 2020 by providing thoughtful opportunities for employees to be involved in CSR efforts.
Wellness and Benefits Offerings
For years, marijuana businesses have had to worry about basic employee resources, like ensuring they have access to banking and can receive a direct deposit. Although this will remain a hurdle for many, more doors have begun to open for managers to offer benefits, and even 401(k). Insurance and 401(k) brokers that are transparently serving the industry are becoming more and more prevalent into the new year. While Section 280E hinders employers from offering a 401(k) match, some production-focused entities may be able to deduct contributions to their employee benefits plans, where dispensary entities may not be able to—even when they’re owned by the same parent company.
Partnering with cannabis-friendly brokers and financial advisors will only benefit HR professionals as these offerings are still difficult to obtain and execute.
They say a year in cannabis is like 7 dog years… The industry has made it this far, not without flaw and frustration, but certainly with grit and determination. Organizations have the strength to power through 2020 with a solid foundation, the right toolset, and the best people around.
Heather is an experienced marketing professional with a demonstrated history of work in cannabis technology and digital strategy. Skilled in customer relationship management, online marketing, immersive experience design and communications, Heather brings a unique combination of creative ideation and project management. As Director of Marketing for Wurk, the first workforce management company designed specifically for the cannabis industry, Heather develops key messaging to inform the market about effective human resource management and to support the advancement of the industry. With previous experience at MJ Freeway, the leading provider of seed-to-sale software solutions for marijuana businesses, Heather brings a unique understanding of cannabis chain of custody and the various challenges operators face in this highly regulated space. Heather earned a bachelor’s degree in communication design and marketing from Metropolitan State University.
Designed specifically for the cannabis industry, Wurk allows employers to protect and streamline their operations, while providing an environment where people are a priority every step of the way. The intuitive, all-in-one solution automates the most complicated and risk-prone processes associated with hiring, scheduling, and paying employees. Learn more at enjoywurk.com.
Committee Blog: Working With Your Local Government as a Cannabis Cultivator
The regulated cannabis industry is inextricably linked to politics, and all politics is local — so when trying to open and operate a cannabis business, you’re almost sure to need to work with local government in some way.
To help our members understand how to start these relationships right, the NCIA State Regulations Committee hosted a webinar on how to approach local government earlier this year. That focused on identifying your relevant local authorities, how to introduce yourself, and how to properly navigate those relationships.
Once you’ve figured out who to talk to and have gotten in touch with them, they’ll often have questions about the cannabis industry, and there is plenty of good information you can proactively share as well. To help NCIA members inform their local governments about the wide range of issues surrounding our industry, we’ll be diving even deeper with a series of blog posts.
We’ll be starting this series where the whole cannabis supply chain begins: cultivation. Future posts will touch on processing, retail, and more. Even though states categorize their licenses differently, with some issuing stand-alone cultivation licenses and others combining cultivation with processing (or sometimes issuing vertically integrated licenses, with retail too), we’ll be focusing in on the various operations individually.
ECONOMIC IMPACT
When elected officials hear about a new business wanting to open in their town or city, their first question is usually, “how many jobs will it bring?” Mayors, city and town councils, departments of economic development, and other government entities are often laser-focused on building up the local economy, so explaining how your business will help them towards that goal is integral to moving your project forward.
Lucky for them, cannabis cultivation is a very labor-intensive endeavor, and you’ll likely be hiring dozens of people to staff your facility. If you’re an experienced operator who knows exactly how many people you need to hire and in what roles, let your local government know! They’ll be interested to see the range of responsibilities and necessary experience, from entry-level trimmers to mid-career managers to botanists with a Ph.D. If you’re still figuring out your exact staffing plan, providing a range of possibilities will help them understand the scale of your project. Be sure to avoid pie-in-the-sky estimates that you’ll never be able to reach — in the long run, it’s always better to under-promise and over-deliver than to make it seem like you were pulling a bait-and-switch. Also do not forget to include all the contract jobs created by constructing or retrofitting your facility.
Beyond the sheer number of hires you’ll be making, it’s important to talk about the compensation and benefits that you’ll be providing to your employees. If you’re starting everyone above the state’s minimum wage — or better yet, starting everyone at a living wage (generally thought to be at least $15/hour) — highlight that! If you’re providing health insurance or other benefits to your hourly employees, let them know! Elected officials like to see companies doing better than the bare minimum, and love to see companies that do even more.
Your physical facility will also have an economic impact on the community that’s worth talking about. If you’re buying your building, you’ll be paying property taxes, and you can let your elected officials know just how much you’ll be contributing to the tax base. Mayors and councilors always love to see unused space being occupied, so if you’re making use of a vacant or neglected building, be sure to let them know. This goes double if you’ll be making improvements to the building that increase its value (and triple if you’re using a local construction company to make those improvements).
Finally, consider whether you will be providing any additional revenue to the local government. While some state cannabis laws do allow for local taxes, these typically apply to retail rather than cultivation. Massachusetts and some other states also make heavy use of “community host agreements,” or CHAs, where a business commits a percentage of its revenues to the local government for a limited period of time. If either of these applies to you, be sure to provide elected officials with the relevant parts of state law, and the specifics you’re willing to offer. If you plan to financially support any charities, provide details — and if you’d like some guidance on what local charities are doing the most good, just ask, since most officials would be happy to tell you some of their favorites.
PUBLIC SAFETY
Elected officials also care about public safety, but usually follow the lead of their police chief and fire chief, for whom safety is their one and only priority. It’s good to proactively highlight the ways your facility will improve public safety — if you’re installing outdoor security cameras or floodlights, those can protect your neighbors as well as yourself, and there have been multiple cases where cameras on a cannabis business have helped solve an unrelated crime.
It’s important to remember that police and fire chiefs are spread thin and need to know a little about a wide variety of topics. Unless there are already cannabis businesses in their town, they probably haven’t read the state security requirements to open a facility, so providing an overview of the state law can help demonstrate how tightly regulated you will be. Knowing that the state already has rules for waste disposal, product storage, and controlled access areas can alleviate many of their initial concerns.
Once you’ve explained the security features of your building and run through the state requirements for cannabis businesses, you should address any lingering fears or questions that they may have. Two of the most common concerns are the safety of employees while transporting product or cash, and the risk of your building being targeted by burglars looking to steal product.
Regarding employee safety, explain how you will be shipping product to processors or dispensaries. Are you delivering it, are they picking it up, or are you using a third-party transporter? If you are transporting product yourself, explain both the state requirements and your own operating procedures, from GPS tracking to using two employees for each delivery.
You should also go into detail about your banking relationships. Many people outside the industry assume that it’s 100% cash, but if you’re part of the large majority of cannabis businesses with bank accounts, let your local officials know, especially the police chief. They will be much more comfortable if they know your customers will be wiring payments directly to your bank, rather than dropping off duffle bags full of cash at your facility.
Regarding burglary, be sure to re-emphasize your security measures, from cameras and fencing to access control and alarms. Explaining the cannabis life cycle may also be helpful — since plants are not useable products for most of their life, they’re poor targets for theft. This means that cultivation facilities are not prime targets for burglars, but in the rare cases that they are targeted, you can point to examples where cameras have led to burglars’ arrests.
COMMUNITY IMPACT
While economics and public safety are almost always the top two concerns of local governments, they may also be worried about other impacts on the community and how your business will affect residents’ quality of life. Common questions include whether your facility will emit any odor, and if it will increase traffic in the area.
Cannabis is famous for its strong odor, so it’s understandable that people would ask about it. Whether your state requires it or not, it’s advisable to use charcoal scrubbers or other odor mitigation technology to prevent your plants’ odor from escaping the building. Knowing that you’re taking steps to address this concern will help elected officials feel comfortable welcoming you into their community, especially if it’s in a densely populated area.
Traffic concerns may arise, especially if there are recent news stories about mile-long lines at dispensary grand openings. You can address this easily by explaining how cannabis cultivation facilities are not accessible to the public, and the main people coming to your building will be employees and inspectors, not customers.
When built and operated properly, cannabis cultivation facilities should be virtually indistinguishable from any other commercial warehouse. Unless you have very explicit signage (which we do not recommend), most people driving or walking by will not even know that you’re a cannabis business.
GOING FURTHER
Even after you have addressed all of your local government’s concerns, there will probably be even more questions — and that’s okay! This is a great opportunity to keep the dialogue open. Be sure to stay up to date on state laws and regulations so that you can serve as a resource for local officials. Because they’re spread so thin, they will appreciate having someone like you as a go-to when they have questions about cannabis politics or the industry.
If you’re able to offer tours of your facility, that’s a great way to build relationships with your local officials while educating them about your business and the cannabis industry as a whole. They may also appreciate invitations to events hosted by state cannabis regulators, or local industry conferences where they can get broader exposure to the cannabis world.
And of course, it’s important to be a good member of your community. Whether it’s participating in local projects, supporting local organizations, or organizing your own trash clean-ups or other events, staying active and visible will help the community know that they can count on you being a good neighbor.
Be sure to stay tuned for future installments in this series, where we will be addressing other cannabis license types. Our next blog will focus on processors.
The 2019 Cannabis Compensation Survey
NCIA is pleased to join forces with FutureSense to announce the first formally executed survey created for the cannabis and hemp industries. A growing number of companies have been looking for data and best practices for their executives and employees. This survey provides benchmark data to better understand compensation trends and remain competitive for talent in the marketplace.
2020 may be filled with unpredictable and new challenges. Compensation data and best practices are the foundation of any human resources and growth initiative. Pay is an effective supporting tool for any employee-oriented effort. As participation in the survey increases, so will our understanding of what is working and why it is effective.
We encourage you to read through the preliminary results laid out in the report and then consider taking the survey yourself by clicking on the links at the bottom of each page.
A new data release is planned for the first quarter of 2020. It will be followed by quarterly updates for the remainder of the year. We are accepting rolling submissions of the survey and will update and rerelease results on a quarterly basis. Participation is easy and we can help! If you’d like to participate simply go to www.CannaCompensation.com, select the “I Want To Participate” button, and fill in your information. FutureSense will contact you with instructions.
As a new industry, cannabis has the opportunity to do business the right way. From day one. Many industries have come before ours, making missteps as well as setting best practices. In fact, we have the Harvard Business Review articles to prove it.
That’s why it frustrates me to no end to see industry players short-cut the right path forward. One of those areas is testing. In every consumer product area, testing is vital to ensuring consumer health and safety, but it is even more dire for products that are consumed or inhaled.
The Dire Need to Detect Microbes
Microbial contaminant testing is a critical step in the supply chain for all food and agricultural products, but it becomes ever more important to ensure cannabis products are verified as free of hazardous contaminants as cannabis-derived products become accepted treatments for various medical conditions.
Currently, the regulatory framework for evaluating the safety of cannabis products differs from state to state, with an abundance of clinical cases to back up the reason for testing, and the availability of technology to meet the safety standards to protect immuno-compromised patients and consumers. Conventional methods such as Petri-dish culturing and qPCR methods are not nearly as accurate or sensitive as commercially available, next-generation technology such as DNA microarray testing. Yet, the continued use of these outdated methods opens up the possibility that dangerous and deadly contaminants can enter the supply chain, and get consumed by millions of consumers.
In a recent study released to regulators and labs across the country, it was presented that plate culturing and qPCR testing was unable to detect the presence of a deadly fungal species, Aspergillus, that is presently common in both recreational and medical marijuana. A different technology, the DNA-Microarray tests not only detected Aspergillus, it also identified the exact species of the fungus, a nuance that requires longer testing times and additional testing steps when using petri dishes or qPCR methods.
Technologies such as sequencing and DNA microarrays can test for dozens of different deadly pathogens multiple times simultaneously from the same sample, whereas plate and qPCR methods test for a single or limited number of microbes. What this means is definitive confirmation when using the Microarray technology. This is where the technology is different and better, and also saves on costs, streamlines the entire testing process and reduces any opportunity for operator error.
In addition to being more accurate, DNA microarray testing is also faster. Plate methods require microbials to be cultured before being tested, which takes a minimum of 24 hours and often closer to a week for slower-growing organisms, such as many fungi including Aspergillus. In contrast, DNA Microarray testing yields results in six hours, and reduces harm to lab technicians by not subjecting them to large amounts of live cultures.
The point here is when technology is available that protects consumers and patients to an even greater level, is faster and more economical to process, and better in terms of performance, then why should the cannabis industry walk down the same path other industries have traversed, and one which they have tripped over multiple times? Why not learn from the lessons of these other industries and set a path that ensures greater safety and quality to the product?
History Not Worth Repeating
We’ve seen what happens when industries and governments turn a blind eye to deadly matters. In the pharmaceutical industry, the FDA came under scrutiny after a study found that excess dosages of the Merck drug Vioxx tripled a patient’s risk of cardiac arrest. In front of a Senate Finance Committee, the FDA was asked why danger signals of Vioxx went ignored. Questioning specifically focused on its relationship with the drugmaker, its expedited review process and the timeliness in conducting and stopping clinical trials when potentially adverse information was found that put the public at risk.
And yet, a similarly concerning matter remains ongoing with asbestos makers. The U.S. began regulating asbestos in the 1970s but has yet to ban the mineral, despite it being the number one cause of work-related deaths in the world. In fact, evidence suggests there is no safe level of asbestos exposure.
Similarly, science shows that there are no safe levels of Aspergillus. All it takes is one spore to kill. Sub-par and outdated testing methods not only risk the health of immunocompromised patients, it also puts consumers exposed over a period of time into the line of fire – as well as the credibility of the industry as a whole. Regulators need to demand cannabis is 100 percent contaminant-free by using testing methods that deliver absolutely proven and reliable results.
A number of stakeholders in the industry and beyond have reason to take up the call. In the recent e-vape crisis over 2,000 people have been hospitalized and 50 people have died due to lung infections. The pathogenic strains of the Aspergillus family would exacerbate this crisis further, and so gives the industry reason to ‘tighten’ the regulatory framework even more so not only with trusted testing methods, but ones that definitively protect public health. Even today in certain states that have not mandated testing of Aspergillus, but only mandating testing of Yeast & Mold, those states are allowing their consumers and patients to inhale Aspergillus ultimately fueling a national pandemic in lung infections. Just reference a peer-reviewed scientific paper by Kagan MD et al in the Journal of Allergy Clinical Immunology published in 1983, where the authors concluded that “[t]he use of MJ thus assumes the risks of both fungal exposure and infection, as well as the possible induction of a variety of immune and infectious lung disorders. Given the extraordinary number of individuals estimated to be MJ smokers, the occurrence of these illnesses may well become more commonplace”.
Sometimes the way things have always been done just isn’t good enough anymore. Technology has changed the way we take pictures, listen to music and even hail a ride. Can you do those things the old way? Sure, but they won’t have as much definition or clarity. It won’t be as convenient or cheap. When there is truly a better way, why wouldn’t you change?
And that’s what we ask when it comes to protecting the supply chain, a place where quality and accuracy cannot be compromised. When it comes to which testing method is the best, there is a clear choice – a choice that literally comes down to life and death. In order to safeguard both consumers and the legitimacy of the industry, cannabis stakeholders should demand labs use rigorous testing methods that pinpoint pathogens and protect public health.
Photos by Michael Chansley Photography, www.michaelchansley.com
Mr. Patel leads the strategic vision, financial health and global growth of PathogenDx, a Scottsdale, AZ based company which provides disruptive DNA-based pathogen testing technology and solutions for the cannabis, botanical, food and agricultural industries.
Previously, Mr. Patel spent over 25 years working with large public, small private and entrepreneurial companies in numerous fields from the life sciences, to biotechnology, to government services and the automotive industry. Milan served as COO/CFO of GMSbiotech. He also was CFO of 2020 Company, LLC, a leading premier professional services firm that delivered business and technology solutions to the government, in the areas of health, education and science.
Mr. Patel also worked at Intel Corporation in Sales & Marketing, Finance and Manufacturing. He has extensive experience in corporate finance, mergers and acquisitions, business strategy and planning, infrastructure and organizational development, and controls, compliance and audit and has led several company exits.
Milan earned his BS in Electrical and Electronics Engineering from the University of Detroit Mercy; a MS in Biomedical/Medical Engineering, University of Michigan; and a MBA in Finance and Marketing, University of Detroit Mercy.
Member Blog: The Ultimate List of Must-Have Cannabis POS Hardware
by Heidi Orpilla, Digital Content Specialist at Star Micronics
The cannabis industry is booming – and it’s expected to continue doing so. According to Grand View Research, the global legal marijuana market is expected to reach $66.3 billion by the end of 2025, and each year brings new legalization across the world.
Whether you’re in the business of opening a cannabis business yourself or are looking to provide cannabis point of sale (POS) solutions to your customers, it’s important to understand the critical role cannabis POS hardware has and how to determine which products are right for your business.
Must-Have Cannabis POS Hardware
Receipt Printers
Receipt printers are extremely important in the cannabis market. When it comes to cannabis, proof of legal purchase is key – and there’s no better way to provide it than with a receipt printer. In some places, like Canada, it is illegal to possess cannabis deemed illicit, and without proof of purchase, all cannabis is assumed to be illicit. Carrying that illicit cannabis could result in a $5,000 fine or a five-year prison sentence! In the US, laws vary greatly by state and must also be carefully obeyed.
Along with providing proof of purchase, it’s important to note that depending on your region, receipts must also contain other information, like store name and address, product category/name, and the appropriate tax code/identifier.
Label Printers
Next on the list is another kind of printer: the label printer. An important part of seed-to-sale tracking, printed labels have an important role in the entire cannabis production and retail process. Seed-to-sale tracking is a key requirement in cannabis regulatory models, and refers to the process of tracking plants and their byproducts from planting all the way through to the plant’s sale.
Custom Cannabis Labels
As mentioned above, labels are incredibly important for the cannabis industry. It’s critical to ensure your cannabis labels come pre-printed with official, state-required universal symbols. These pre-printed cannabis labels are available in various sizes for all recreational markets.
Scales
Yet another critical piece of cannabis POS hardware is the scale – but not just any scale will do. First, you must ensure the scale you are considering is legal to use in your state and NTEP-certified. Being certified means that the scales are ensured to charge the correct amount for the product being weighed. Another great feature to look for is a scale that is integrated directly into the POS. Why? Reduced risk of human error that is associated with standalone scales that cannot integrate with the POS.
To make the process of adding a scale to an existing system a simple process, look for scales which are compatible with Windows, iOS, and Android. It’s almost important to seek scales that include a waterproof and dust-proof cover, as well as Bluetooth, USB, and serial interfaces.
Cash Drawers
Chances are you’re aware that the cannabis industry is currently predominately powered by cash. While marijuana is legal in many parts of the country, it remains illegal under federal law, which means dispensaries’ access to credit card processing options is slim. Thus, a reliable, high volume cash drawer is key! Be sure to look for a cash drawer made of durable steel that’s available in colors to match the rest of your POS.
Scanners
Scanners are an important part of the entire seed-to-sale process, from back-end warehouse operations to scanning products at the point of purchase. Important features to look for are connectivity options and a design/color that matches the existing POS, if applicable.
Tablet POS Stand
As we discussed above, dispensary aesthetics are extremely important, not only from a branding and customer experience perspective but also to legitimize the business to outsiders and newcomers. A great place to tie in style is at the POS, and an easy way to do that is by incorporating a sleek, space-saving POS stand into your arrangement. Choosing a stand that features clean cable management is an added bonus.
Self-Service Kiosks
Dispensaries are sometimes limited to how many people they can allow inside at one time because budtenders need to be able to pay special attention to customers, and make sure they are recommending the right products. Some dispensaries are using kiosks to allow waiting customers to pick out what they want on screen, take the slip to the budtender, and simply just collect and pay for their items.
Value-Added Marketing Services
Just like other businesses, cannabis dispensaries need to advertise, but what sets them apart is that they must adhere to strict advertising laws. For example, in multiple states including California and Colorado, over 70% of cannabis advertisement audiences must be over the age of 21.
An easy way to ensure marketing efforts are being communicated only to the intended audience is by printing those promotions on your receipts. By leveraging receipt marketing tools – some of which can be provided by certain receipt printer manufacturers as a value-added service – dispensaries can create custom promotions from templates which increase customer engagement and retention and can be used to promote sales, new products, loyalty programs, and more.
The POS as a Dispensary’s Backbone
In the cannabis industry, accuracy, a professional aesthetic, and responsible marketing are of utmost importance. When properly implemented, the POS can become a dispensary’s backbone to success. By choosing the correct printers, scales, labels, cash drawers, and value-added marketing services, cannabis industry professionals can focus more on growing and selling and spend less time worrying.
Heidi writes for and manages the blog and social media at Star Micronics, a point of sale manufacturer that specializes in POS printing – and more – for the cannabis industry and beyond. Star Micronics offers a full portfolio of cannabis point of sale hardware including receipt printers, cash drawers, NTEP-certified Class II scales, label printers, mobile printers, tablet POS stands, and more. A true one-stop shop, Star provides all the hardware solutions a dispensary could need, from front of house dispensary sales to labeling and weighing product during curation. Additionally, Star has integrations with approximately 85% of all cannabis POS software on the market today.
Cannabis Compensation – Not All Survey Data Are The Same
Closing out 2019, jobs in the cannabis industry have been at the forefront of a national conversation. With more states coming on board with medical and adult-use legislation, the industry is continuing to grow. Industry leaders are looking to attract and retain talent from within and outside of the industry by using competitive compensation strategies.
Several companies launched salary surveys in 2019, including us – FutureSense, LLC. We started on this journey to offer our compensation consulting clients accurate survey data. Surveys happen to be one of our areas of expertise. We partnered with the National Cannabis Industry Association (NCIA) to launch the first-ever comprehensive, compliant, and actionable compensation survey to be released in January 2020.
As we dove deeper into the industry, we found that there were several other surveys in action. We also learned that our survey holds a few essential components that other surveys were missing.
These components include:
Compliance – Creating a compliant survey is not easy. Other surveys provide no acknowledgment of DOJ and DOL regulations around reporting pay data. Most other data sets do not indicate as to how many incumbents represent each data point, nor how heavily weighted any one company was in the data. Our survey follows all DOJ and DOL regulations.
Broad & deep data – At first, other surveys represented these values as minimums, averages, or maximums. Further research showed extreme data points that were not in line with normalized data. Based on our 30+ years of survey experience, these are clear signs of thin data. Our data has always been presented in percentiles, showing breadth and depth.
Usable & actionable data – Companies need much more than a handful of “hot jobs” to build out their compensation programs. HRT and compensation professionals need detail and ranges. Our survey provides extensive ranges and detail for professionals and companies to understand the market and put these findings into action.
When reviewing final survey data, we generally expect there to be data for a minimum of 25th, 50th, and 75th percentiles, each calculated using standard statistic formulas. We also expect there to be a normalized difference between each level of no more than one or two standard deviations from the norm. In much of the other industry data, there are only minimums, maximums, and averages reported. Even more concerning is the wide range of pay for some jobs. In certain cases, we have seen data with no ranges (clearly data for only one or two individuals). In other cases, we have calculated rough deviations of six or even ten standard deviations from the norm.
As an example: one of the industry’s premier recruiting firms did a great job outlining the current trends in the industry and providing info on hot jobs and benefits. The narrative is great, but the pay data used to support their findings is limited to less than 30 positions and does not indicate whether it is compliant with all rules. It’s simply not data that businesses should use to set their pay levels. As an independent third-party survey provider, we’re aiming to provide compensation and benchmarking information that can be used to determine pay, without any bias.
Our report currently covers compliant data for more than 85 positions in 11 job families. As participation in our survey continues to grow, we will continue to expand the number of reportable job titles and family benchmarks. Our goal for 2020 is 200+ jobs with compliant and reportable data. We will also begin to present data by demographic breakouts, like location/region, company size, and revenue. The elements will make the data increasingly useful to any compensation/HR professional or executive looking for pricing for key positions and the foundations for the structure of a viable pay program for their company.
We are big believers in collaboration, not competition, and welcome the opportunity to explore designing a single set of data with other industry providers currently creating their own survey. The goal must be to represent the industry at-large. Good data is critical. Our growing industry cannot afford to promote the use of bad data any longer.
The report summary will be released to NCIA members in January of 2020. For more information or to sign up to participate please visit: www.CannaCompensation.com
Dan Walter, FGE, CECP, CEP, is a Managing Consultant at FutureSense, a holistic human capital consulting firm. He has worked in the field of compensation since 1994 and was previously the Founder and CEO of Performensation. His expertise includes equity compensation, incentive pay, executive compensation, and talent management issues. Dan is an industry thought leader for all forms of equity, including stock options, restricted shares and units, stock purchase plans, and performance-based programs. In addition to his focus on plan design, he has been the architect of software solutions and administrative and technological best practices used by many companies. Dan has coauthored several books on compensation and is a popular blogger on the topic. He is also a popular speaker and does dozens of presentations every year. Dan is also on the NCIA’s Human Resource Committee.
Matt Finkelstein, is a Consultant at FutureSense. Matt has worked in the compensation field with FutureSense for six years and has also spent thirteen years as an organic farmer & gardener. Prior to joining FutureSense, he was managing small family farms & developing educational gardens around California, with an emphasis on regenerative practices and design. As a farmer, Cannabis has always been integrated into his own operations and he has also spent a lot of time on cannabis-specific farms. Matt brings his breadth of knowledge from both fields and serves as the primary project coordinator for FutureSense’s cannabis compensation endeavors. Matt is also on the NCIA’s Cultivation Committee.
About FutureSense, LLC FutureSense provides integrated solutions to build and sustain human capacity and optimize organizational performance. FutureSense specializes in people, pay, organization, and strategy, offering unique and comprehensive services to create solutions that make a difference. For more information, visit http://www.futuresense.com.
Committee Blog: What The Recent Layoffs in the Cannabis Industry Mean
Many in our industry have heard about the recent layoffs announced by cannabis companies, including some of NCIA’s members, in the U.S. NCIA’s Human Resources Committee views the layoffs as an unfortunate but sometimes necessary part of business, and overall remain optimistic about the industry as a whole.
On the face of it, the recent headlines regarding cannabis industry layoffs appear grim. One of California’s best-known cannabis brands announced a reduction of 20% of its labor force. Another grower is reported to have had a similarly sized cut. Listening to the news coverage, one might have the impression that the industry as a whole is going through a massive negative upheaval. This could not be further from the truth.
At the same time, we have seen hiring trends in 2019 that are overwhelmingly positive. According to an article in Forbes earlier this year, the cannabis industry added almost 65,000 jobs in 2018, with a substantially greater amount expected for this year. Clearly, cannabis is a significant growth engine for employment across the U.S. Add in Illinois, Massachusetts, and other states legalizing cannabis for medical or adult-use, and the numbers continue to grow. The state of the cannabis industry is strong!
Since its founding nearly a decade ago, NCIA has dedicated itself to promoting the growth of a responsible and legitimate cannabis industry. During this time, the industry workforce has swelled to over 200,000 people, and new people are joining us daily from coast to coast. NCIA’s HR Committee, which is comprised of human resource practitioners devoted to bringing best practices to the cannabis industry, carefully monitors hiring trends and other people-related developments.
NCIA’s Human Resources Committee regrets any job losses for their impact on the lives of employees and their families. History has shown that layoffs often happen in high growth industries. These reductions in force occur when companies who have over-invested ahead of anticipated growth must adjust their labor counts to rapidly shifting business dynamics. While painful in the short term for employer and employee alike, this represents a chance for other companies to acquire top talent, and for that top talent to secure new and exciting opportunities.
NCIA’s HR Committee is unwavering in its faith that the cannabis industry will continue to grow as an economic force in this country for many decades to come, and that these short-term changes will make the industry better, stronger and more resilient in the long run.
There are many ways you can get involved and help. Attend NCIA’s national trade shows and regional networking events to get your foot in the door of our dynamic industry. Start a business. Educate yourself on the latest issues, and contact your congressperson. Whatever road you choose to take, we look forward to welcoming you as our partner on this amazing journey!
Member Blog: The Economics Of Trespass Grows And The Legal Industry
by Jackee Riccio, Regional Field Director at the CROP Project
California’s cannabis economy has not generated the cash flow that regulators were anticipating. Current legal sales have topped $3 billion, but unregulated cannabis continues to dominate the market. This may not be surprising, as critics argue that the current licensing process — being lengthy, expensive, and with unpredictable outcomes — does not encourage cultivators to join the legal industry. What may be surprising is how much of that unregulated market is dominated by trespass grow operations on California’s public land. Forest Service Law enforcement & Investigations, and other government agencies, estimate that cannabis cultivated on public lands account for nearly 60% of the illicit market in California. And 98% of trespass grows in California are operated by international drug-trafficking organizations that leave a heavy environmental footprint, and a costly clean-up process for taxpayers. DTOs have wide distribution networks on the East Coast and throughout mid-west states. Many of those states do not yet have adult-use cannabis, creating no legal, safe avenue for cannabis users to purchase from.
So, would legalization federally help the trespass grow issue? Yes, and no. It would in the long term, but in the near term, consumers would likely still purchase what was readily available and inexpensive. Furthermore, without increased Forest Service presence on National Forests where the vast majority of trespass grows occur, they’d still have remote, unvisited landscapes to operate in. Trespass grows operating up-stream of a legal grow may still jeopardize the ability of that product to get to the legal market. In the words of Lindsay Robinson, Executive Director of the California Cannabis Industry Association, “Black market marijuana is potentially dangerous because traces of the toxic chemicals used at grow sites are often found in the plants,” she said. “If you have an illicit grow upstream from you, and you’re legal, that could end up tainting your product and prevent it from entering the market,” Robinson said.
There are thousands of trespass grows throughout nearly all of California’s National Forests. While recreation in National Forests has increased over the past decade, budget cuts have reduced Forest Service presence on the forests and the ability to properly patrol them. For example, the Shasta-Trinity National Forest is 2.2 million acres, and yet only 6 Forest Service Law Enforcement officers patrol its entirety. Reclamation of the sites is only one aspect of removing them from our public lands. To avoid playing trespass grow whack-a-mole, it’s critical that there is regular Forest Service presence to deter the activation of new sites, while reclamation teams clean-up the backlog of existing sites. This is one of the primary goals of the Cannabis Removal on Public Lands (CROP) Project, a nonprofit project of the Community Governance Partnership and the California Wilderness Coalition.
Before CROP, there was no bi-partisan effort or political will to remove trespass grows from the landscape. Two years of meetings, listening to communities and scientists, has led to CROP spearheading a state and national effort to secure state and federal resources to reclaim trespass grows on National Forests, increase Forest Service law enforcement and overall presence in National Forests, educate the public on the dangers of ingesting unregulated cannabis, and increasing criminal penalties for bringing neurotoxic pesticides onto public lands.
Jackee Riccio currently serves as the Regional Field Director for the CROP Project. Her fervor for the natural world has fueled her career as a wildlife biologist and archaeologist, backcountry horse packer, and finally as the co-founder and Executive Director of Cannabis for Conservation, a new 501(c)(3) nonprofit. She graduated from Humboldt State University with a B.S. in Wildlife Management and Conservation, and a B.A. in Archaeology. She has worked for the U.S. Fish & Wildlife Service and private organizations conducting wildlife research on endangered species including gray whales, desert tortoises, and Pacific fishers.
CROP is directed by an Advisory Board of interests that includes environmental organizations, state and federal agencies, local officials, tribes, scientists, and the legal cannabis industry. CROP is fighting on behalf of California’s wildlife, users of public lands, and downstream communities long plagued by trespass grows. To learn more about CROP, or how to contribute, please visit www.cropproject.org.
Member Blog: Cannabis Dispensary Inventory Management Done Right – Best Practices
Discover how state-of-the-art technology can help your dispensary thrive.
Many first-time dispensary owners do not come from a retail background. The cannabis industry is full of entrepreneurs running into long-established retail processes for the first time.
Although the cannabis industry is new, many of the processes upon which it relies are not. Sales, marketing, and administration operate on the same foundations no matter what you are selling, from apples to zucchinis.
Inventory management is one of those ever-present aspects of retail. Every business that sells physical goods has to keep track of its stock, perform inventory audits, and synchronize inventory movement across multiple systems in order to operate.
Cannabis dispensary owners have additional demands to meet. They must implement solid strategies for meeting compliance needs, including comprehensive seed-to-sale tracking. Managing all of these demands while running a successful business can be overwhelming.
Automated Processes Improve Inventory Management
Optimization is the key to responding to the many demands of operating a retail store in a highly regulated industry. In the retail environment, there are never enough assets and resources to get every job done – certain processes need to be automated in order to free up time for higher impact work.
Inventory management is one of those critical-but-time-consuming activities that is ideally suited to process development and automation. Since cannabis dispensaries already have to report on every purchase and transaction that takes place in the dispensary environment, the data is already there.
Yet without a tailor-made technological solution, cannabis dispensaries find themselves spending valuable employee-hours manually entering inventory data into their systems. This necessarily takes time away from other, equally important processes.
Enhance Inventory Management in the Dispensary
Dispensary owners who invest in process development and automation quickly find that the retail service industry already offers many solutions to the kinds of problems they face. Streamlined cannabis dispensaries use these technologies to solve a broad range of problems:
Inventory Categorization. A well-organized inventory is key to success in any retail environment. Dispensary owners that know which products sell best can place those products in the spotlight, further enhancing profits by focusing on their most successful lines.
Automated Data Entry. Manual data entry takes time and produces little value. If there is one readymade way to improve retail efficiency across the board, eliminating manual data entry and freeing up employees to focus on more valuable work is the first step to take.
Inventory KPIs. Key performance indicators (KPIs) help business owners identify opportunities to make better purchasing decisions, improve cash flow, and ultimately boost profitability. Dispensary owners that track data like inventory turnover are better-suited to make sound business decisions. More on these below.
Automated Tracking.Tracking inventory movement through the retail environment is another time-consuming process that, although necessary, produces little value. Implementing automated solutions helps to streamline the process and lets dispensary owners put more energy into value-driving initiatives.
Accurate Reordering.Dispensary owners that know when products are running low can reorder in time to prevent costly and embarrassing stockouts. This is key to maintaining a professional image in a regulated industry like cannabis.
Streamlined Stocktake.Stocktaking plays a critical role in financial management. In order to know how much money the dispensary is really making, owners need to calculate how much liquidity is frozen in stock.
Active Inventory Synchronization.Dispensaries that wish to synchronize their stock with a website database or an app like Leafly or Weedmaps needs to have a solid inventory system in place. Developing active inventory synchronization is key to selling products through multiple channels.
Which Key Performance Indicators Should You Track?
There are many different types of key performance indicators that relate to inventory management. Some of them are more important than others, but navigating the world of cannabis retail requires gathering enough data to calculate any of them when needed:
Weeks-on-Hand. This KPI correlates to the efficiency with which the dispensary moves stock. If the figure is too high, it means that inventory is not selling at the same rate that new goods are coming in. This results in lower profitability due to storage fees and liquidity problems.
Inventory Turnover Rate.This is a ratio that shows how many times the dispensary sold and replaced specific goods during a particular time period. This also tells dispensary owners how fast inventory is selling.
Time-to-Receive.This metric shows how efficient dispensaries stock retrieval processes are. It measures the average time it takes for employees to validate incoming stock, add it to the inventory record, and shelve it in the appropriate place.
Shrinkage.In a highly regulated industry like cannabis, shrinkage is dangerous. Dispensary owners need to be vigilant in recording any discrepancies between recorded inventory and actual physical inventory. Employers who catch discrepancies early can account for shrinkage before regulators come into the picture.
Cost of Carrying Inventory. Holding products in stock costs money. This KPI helps dispensary owners calculate how much capital they spend holding and storing inventory on an annual basis. It allows owners to identify dead and slow-moving stock.
Days to Sell Inventory.This KPI measures how long it takes to sell products in stock. When the number is high, it indicates inefficient inventory movement. When it is too low, stockouts become a risk. Every industry has its own average days-to-sell figure, cannabis included.
Maximizing dispensary efficiency requires gathering this data and acting on the insights it offers. This is only possible with specialized dispensary point-of-sale (POS) systems that adhere to the industry’s rigorous compliance standards on a state-by-state basis.
Invest in a Purpose-Built Point-of-Sale Solution
It takes more than drive and ambition to implement efficient inventory management in the dispensary environment. Dispensary owners need to deploy technological solutions that address the unique nature of the regulated cannabis industry.
This means investing in a POS system that auto-populates inventory database fields, consolidating sales data into a compliance-ready format. Dispensaries that collect high-quality sales data are able to manage growth while empowering their employees to continuously improve.
BenCurren is the Founder of Green Bits, the nation’s leading retail management and compliance platform for the legal cannabis industry. Founded in 2014, Green Bits helps legal cannabis retailers run compliant, operationally efficient and growing stores. The platform serves more than 1,000 cannabis retailers across 13 states and processes more than $3 billion in sales annually through its point-of-sale platform. In 2008, Ben co-founded Outright, an accounting program used by businesses for freelancers and consultants, that web-hosting company GoDaddy acquired in 2012. Ben is a frequent commentator in national outlets about tech, trends, business issues, and state and federal policy and regulation in the legal cannabis industry.
Green Bits provides smart management solutions that help cannabis retailers maximize performance and make better business decisions. Our robust retail platform – with automated state-by-state compliance, inventory control, and personalized insights – enables owners, managers, and budtenders to run, protect, and grow their businesses with ease. The company serves more than 1,100 cannabis retailers across 13 states and processes more than $3.5B in cannabis sales annually. Visit Green Bits for industry resources.
NCIA Committees: Quarterly Update And A Look Ahead
NCIA committees are an opportunity for members to get directly involved in specific industry issues and sectors. These volunteer-driven efforts engage members’ expertise and passion to drill down in areas of expertise and passion to effect change, provide professional development opportunities, and develop best practices and guidelines that will shape the future of our industry.
We recently checked in with these various committees to learn more about what they’re up to and what projects they’re working on this term. Get updated on their activities below.
Scientific Advisory Committee (SAC)
SAC is comprised of practicing scientists, physicians, and other scientific field professionals. SAC’s vision is to disseminate educational materials to NCIA members on scientific topics in the cannabis industry and to advise other NCIA committees as they work to develop standards and guidelines, ensuring that any formal recommendations produced are scientifically sound, sustainable, and legitimate.
SAC is currently working on five projects, all of which are in the outline or first draft phase:
1) Blog on the science behind why ‘sativa’ and ‘indica’ are no longer the best way to classify cultivars.
2) White paper on how cannabis may help the opioid crisis with a review of scientific studies that show how cannabis can be an alternative for pain management.
3) Blog calling doctors to action in the cannabis industry and why it is important for doctors to get involved.
4) Blog on the vaping crisis from a physician’s point of view. 5) General audience and technical white papers on the Endocannabinoid System.
Marketing & Advertising Committee (MAC)
The MAC coalesces the talents of 20 of the industry’s top-tier marketing and communications professionals around three focus areas: Education, Advertising Access and 2020 political goals. We use our personal, professional and business skills and networks to help build a responsible, legal cannabis industry. The committee is producing best practices, webinars, workshops and social media campaigns to aggregate and generate support from NCIA members, the public, media, government and business leaders.
In our first quarter, our Education Sub-Committee began creating a Speakers Bureau to provide qualified experts for conference organizers and media who will address topics of interest and concern in the industry.
Our Advertising Access Sub-Committee is completing best practices for advertising, making presentations to media groups and expanding Advertising/Labeling Do’s and Don’ts from five states to all legalized states.
Our 2020 Sub-Committee is driving awareness around policy change through panel presentations, preparing a campaign supporting pro-cannabis candidates and is encouraging professionals from the cannabis industry to run for office.
Cannabis Cultivation Committee (CCC)
We are working on producing our first podcast episode, which will feature top-notch farmers who are doing great work employing sustainable practices in indoor facilities.
There will be more podcast episodes to come on other hot cultivation topics.
State Regulations Committee (SRC)
The State Regulations Committee has been hard at work on a number of exciting pieces of work-product that should be available soon. For example, we hosted a webinar on December 3, 2019, in which the expert members of the Committee break down what operators need to know about Michigan’s adult-use market’s rules before it launches in 2020.
The State Regulations Committee has work-product in the pipeline on a number of topics of great importance to members. That includes a recurring guidance series on social consumption in markets across the nation, posts analyzing challenges in local/municipal regulation, a focus on the crucial questions of promoting social equity, and much more.
Cannabis Manufacturing Committee (CMC)
The Cannabis Manufacturing Committee is focusing on reviewing existing business practices and state regulations of concentrates, topicals, vaporizers and, edibles ensuring the manufacturing sector is helping shape its destiny. In this approach, we have published our first blog using lessons learned from the e-cig sector. We are also engaging with NCIA’s Safe Vaping Task Force.
CMC has created three sub-committees; GMP (Good Manufacturing Practices), Testing (from the operator’s view), and Nomenclature (providing clarity to industry language). GMP has its first draft complete and will be ready for publication in November. Nomenclature has a concrete draft to review for publishing its first part of a multi-piece series.
Packaging & Labeling Committee (PLC)
The PLC has 4 subcommittees: Honesty & Labeling, Sustainability, Security, Next Generation Packaging. Each subcommittee has set a goal of producing 3 or more blogs and 1 webinar. We have a very motivated and strong group this year. Our biggest vision for the year is to use our data, blogs, white papers, webinars, and PLC members’ knowledge to create a document reflecting the industry views on what federal policy should be around packaging and labeling.
The Retail Committee is working on a compilation of SOPs for retail compliance to turn into a white paper and webinar series, combining efforts from various retailers in several states/markets in order to be most useful to the national audience.
Facilities Design Committee (FDC)
As a new committee, we have established a mission statement: To provide access to resources for the NCIA community and regulators that will inform the design and use of GMP-driven, sustainable and operationally efficient facilities to position our industry to compete in the global marketplace.
We have established two sub-committees: Standards and Sustainability. The Standards Sub-Committee is linked through membership to ASTM’s D37 committee on cannabis.
Banking & Financial Services Committee (BFSC)
Our vision is to provide reliable, actionable and current information to NCIA’s members via committee member videos and a monthly newsletter. The committee will also be coordinating “NCIA Panels” at Bank and Credit Union conferences throughout the country to spread awareness to the issue and bring these institutions closer to the industry.
Lastly, the committee will be contributing language to the Policy Council for revision of the current version of the SAFE Act.
We will keep the NCIA updated as the Bank and Credit Union panels are confirmed. The committee will continue to pair any operator with the best banking option based on a myriad of factors, free of charge.
Member Blog: Best Practices In Cannabis Cultivation For 2020
As with any industry experiencing unparalleled growth, the cannabis industry is going through a few growing pains in these early years of legalization. Cultivators especially are feeling the pinch as long-standing business practices no longer achieve the competitive edge in a crowded playing field.
Commercial operations look much different today than they did even a decade ago. It’s no longer about experienced growers nor about high tech solutions—the best practices for cannabis cultivation in 2020 come down to the math.
As we head into 2020, how do you increase yields, shave down production costs, and use metrics to manage future harvests? Start with the numbers and drill down.
Labor Considerations
Despite the advances in automation, cannabis still requires a human touch. From California to Ohio to Florida, labor is consistently a producer’s most significant business expenditure. As the largest monthly expense, labor is always a top priority when working on the bottom line. No matter how skilled or educated, human labor is still prone to inefficiencies, wasted time and costly mistakes. Keeping employees on task, consistently trained and accountable can go a long way towards reducing sky-high labor costs.
The best practices on labor in cannabis cultivation aren’t just about hiring the most talented person or operating with the leanest workforce, it’s about running a tight ship. Reduce costs through automated team management or digitally track to-do lists to assign the perfect employee to the most appropriate task. By focusing on improving the efficiency and value of each team member, you’ll create a measurable reduction of labor costs.
Analyze Past Performance for Better Forecasting
Unsurprisingly, cultivators can no longer rely on intuition and handsome experience as a means to producea premium product. Detailed analysis of past crop performance is the only way to outperform the competition and predict future profits.
Accurate and detailed crop analysis creates consistency between harvests (which translates into consistent sales). It can also help improve the crop with minute adjustments during the growth cycle. These tiny tweaks are not feasible if your crop management is based on whiteboards and notepads.
We are working with a grow that will harvest 30,000 plants this year. If they were able to increase their average grams per plant by just one (1) gram, they would see additional sales of $385,000, at nearly zero additional dollars to grow that single gram. Crunching the data from past crops will help grow more profitable future harvests.
The Growing Demands of Metrc
The wrath of the regulator is increasingly prevalent within established markets. With 11 states and counting adopting Metrc (Marijuana Enforcement Tracking Reporting Compliance), it’s become a non-negotiator. Metrc is a mandatory requirement placed on all players in the industry to track, trace and stay compliant.
In many regions, Metrc is required by the state. As a cultivator, making Metrc a priority reduces risk and establishes your product in the market. If you can consistently master the rigorous requirements of Metrc, it’s setting the business up for long-term success.
Data is King, So Lean into the Numbers
Again, cultivation experience is only one piece of the equation these days. Data analysis is an increasingly necessary path towards larger harvests and to keep the costs-per-pound in check. Cannabis cultivation management systems (CCMS) facilitate the move off of whiteboards and spreadsheets into an automated, algorithmic analysis.
Without crunching hard numbers, it’s impossible to determine which strains are the most profitable. It’s equally as painful to decide which employees are the most efficient at which tasks. While spreadsheets can capture massive amounts of data, few companies have an experienced data analyst capable of performing the analysis. It’s why a CCMP is no longer a luxury, it’s become a best practice within commercial operations.
Controlling the Costs of Cultivation
The margin matters in the cannabis industry in ways it never has before. Beyond labor, how does the cost-per-pound break out? Spend the time (and the money) for a deep dive into your largest expenditures directly related to the grow. Examine the costs associated with standard utilities, nutrient procurement, pest management and waste management services to identify areas suitable for cost-cutting measures.
Which services are best farmed out to third-party contractors? What automation can be implemented to cut the cost of the process? Would an upfront investment into more efficient lighting or an on-site biomass cleaning facility make long-term sense? All are important questions to consider during this analysis.
The best practices in cannabis cultivation in 2020 are all about drilling down on the numbers. This is where a CCMP comes into play. It’s about saving on labor without cutting capacity. It’s about assessing the statistics of past harvests to develop a better product.
Cultivators need to have a solid grasp on the minute details contained within their cost-per-pound to shave pennies from utilities, pest control or waste management. At the scale of most commercial grows, pennies per pound transform into significant annual increases in profitability.
Brett Strauss is President of FolioGrow, a cannabis cultivation management system developed with the express purpose of using math and algorithms to help improve yields and profits for cannabis and hemp growers. Get a free 30-day trial or follow the company on LinkedIn, Instagram or Facebook.
Member Blog: Youth Safety is Imperative to the Future Success of the Cannabis Industry
by Joan Irivine, Co-founder and CEO of ResponsiTech
The House Judiciary Committee recently passed the historic Marijuana Opportunity, Reinvestment and Expungement (MORE) Act in a 24-10 vote. After weeks of declining cannabis stock prices and layoffs due in part to counterfeit vaping issues, this vote provided a much needed, bipartisan boost to the industry. However, we need to remember that this is only the beginning of this process and there is still much to be done for our industry to be successful.
For example, this week, the legislators expressed both support and concerns about de-scheduling cannabis, but there was one consistent theme expressed by several of the committee members – youth safety. Representatives Doug Collins (R-GA), Tom McClintock (R-CA), Lou Correa (D-CA), Karen McBeth (R-RI), Debbie Mucarsel-Powell (D-FL), Sheila Jackson Lee (TX-D) and many more expressed valid concerns about youth safety.
As we all know, there have been many challenges for the industry and it seems that we are always reacting to change rather than being proactive about it. However, we now have the opportunity to lead our community when it comes to improving youth safety–especially online youth safety.
Online tools such as parental control filters are already offered by web browsers, Internet Service Providers (ISPs), firewall proxy servers, search engines, and even computer operating systems. Meanwhile, special plug-ins, toolbars and filtering software are widely available. These options are also commonly used to moderate kids’ Internet use in schools, libraries and other public places. However, even conscientious parents equipped with these tools can’t do it alone. Cannabis companies have a responsibility to label their sites that are unambiguously recognizable by parental control systems to reduce access by minors.
One of the issues in making website labeling mandatory is the fact that each state has different regulations. In addition, domestic laws do not apply internationally. As a result, websites operated by foreign companies cannot be required to comply with another country’s, state, or provincial labeling requirements. However, if international cannabis businesses and bloggers adopt a voluntary standard parental filtering label, proactive industry self-regulation can accomplish what governments can’t.
With parents implementing parental filters, and the industry installing standard parental controls, we can work together to reduce children’s access.
Moving forward, what does ResponsiTech recommend for companies in the cannabis industry? To start:
Continue to use self-affirming age gates for initial entry as a secondary safeguard.
And of course, use an age verification service for any purchase; including both online and delivery services.
Let a qualified marketing compliance expert conduct an audit of all of your brand’s Internet and social media profiles.
Like it or not, media, parents, and legislators consider vaping THC and nicotine as the same issue, even though minors obtain THC products from the illegal and counterfeit markets. Licensed e-cigarette retailers use various forms of age gates and verification to prevent youth access. We suggest that the cannabis industry incorporate policies that we established for another industry and Juul has included in its new marketing policies:
Do not feature images or situations intended for a youth audience.
Campaigns depict appropriately aged individuals.
Do not use cartoons, caricatures, or other designs aimed at attracting minors.
Ensure responsible placement of our product designed to limit exposure to an underage demographic.
Support and comply with all federal and state regulations to prevent sales to minors – this includes stringent third-party age verification for online sales.
Use social media responsibly to ensure content is targeted to adults while limiting engagement by youth.
Our industry needs to establish its own standard online youth policies before our legislators do. Let’s take the lead and make it happen.
I have written several recent articles about Online Youth Safety which provide more details:
Joan Irvine, ResponsiTech Co-Founder & CEO, brings over two decades of policy development, government relations, and advocacy for online child protection in ‘high-risk’ industries to the cannabis industry. She successfully spearheaded an international award-winning parental filtering label and worked with First Amendment, Internet Security, and Privacy attorneys and international law enforcement to establish online child protection. Learn more about us on our site, LinkedIn and Facebook.
Member Blog: Cannabis Business Security – Going Above and Beyond
In 2018, Sacramento CBS reported crooks stole $80,000 worth of cash and cannabis products from TotalLeaf Inc. after circumventing the facility’s alarm system and video surveillance technology.
Christopher Cohen, owner of the Sacramento-based cannabis manufacturing and distribution company, told the news outlet his security plan passed muster with state and local authorities, but noted the company upgraded its security after being robbed. The edibles-to-oils manufacturer has added steel doors, additional security cameras, alarm systems, fences and bolted-down safes. The firm also hired a private security company to watch over the property 24 hours a day, seven days a week.
Commercial cannabis businesses, like TotalLeaf, are prime targets for burglary, robbery and internal theft. This is not surprising in a cash-based industry with a flourishing black market. Commercial cannabis business operators must maintain stringent and customized security strategies that go beyond state and local minimums to fully protect their businesses from crime.
In states where cannabis is legal, the first step toward acquiring a commercial cannabis license is meeting state standards. However, a growing number of local communities are expanding on these bare minimums and applying a wide-ranging set of additional security requirements for commercial cannabis businesses. Emerging local regulations incorporate specific design elements, lighting standards, manpower requirements, and heightened camera and alarm standards.
Regulations vary by municipality. Regarding design elements, local entities typically require the use of door-redundant screening areas, internal/secure loading areas, and reinforced product storage rooms. A minimum exterior lighting standard of 1.5-foot candles of LED, white luminance, and prohibitions against up-lighting and light trespass are also common. Some localities even demand one or more armed, or unarmed, security guards on the premises, during business hours and sometimes around the clock.
Gaps remain though local regulations are more stringent, says Matt Carroll, President of Carroll Consulting and Director of Compliance for Seed to Sale Security. Carroll, who develops security plans for cannabis operations, finds, “There is little value in meeting state (and local) standards just to check a box for compliance. Operators seeking to enjoy peace of mind and asset protection will approach security planning from two different perspectives: technical compliance and actual security. Existing regulations do nothing substantive to deter burglary, robbery, or to protect the safety of those working within or visiting a commercial cannabis business.”
But what does going beyond security requirements actually look like? This article investigates how cannabis operations can better harden their security by voluntarily meeting additional requirements for security cameras, access control and alarms.
More Security Camera Coverage
State-level cannabis regulatory bodies typically demand a basic level of surveillance coverage for access points and limited access areas, which are spaces where operations process, store or transfer cannabis goods. Most local authorities expand this requirement to include security camera coverage on all sides of the building, adjacent thoroughfares, and more thoroughly throughout the interior.
States also set a minimum resolution for security cameras. For instance, California requires a minimum resolution of 1280×720 pixels (e.g. 1 megapixel). Herein lies the problem: Any minimum megapixel standard predisposes operators to meet the minimum standard and little else. But, doing so may not achieve the goal of “certain identification” as expressed in the regulations.
Security camera megapixel ratings mean virtually nothing. For certain identification to take place, companies must also factor in the distance of the targeted viewing area from the camera placement, and the camera angle, lens quality and compression rates.
For positive identification in idyllic lighting conditions, security cameras must meet a minimum standard of 60 pixels. For night mode, positive identification demands up to 90 pixels per foot. This is what matters: pixels per foot (PPF) at the target, not the camera resolution. IPVM, an independent research group, has developed a great video to drive these points home.
Regulatory agencies hoping to get footage of value from crimes in cannabis settings would be wise to adopt a PPF standard over an overly simplistic megapixel standard.
Better Access Control
With access control, state regulations typically require walls, doors and commercial-grade locks. They also expect operators to maintain a log of visitors and those accessing video surveillance systems. More stringent access control regulations are few and far between.
Though reasonably priced biometric and electronic key systems are readily available, hand-written logs meet most state and local regulations. However, manual logging is unreliable. Using a manual system, coupled with PPF-ignorant video standards, puts access control on the honor system.
Responsible operators fill the gaps regulations ignore. These business owners reinforce storefronts and roll-ups with K4 or better rated bollards to deter vehicular intrusion. They install solid-core doors at all exterior access points and at internal doors leading to limited access areas. They equip doors with pry-resistant latch covers and automatic closing devices. They reinforce shared walls to prevent tunneling and they fortify product/currency storage rooms.
They also use electronic access controllers that limit staff to areas of relevant roles and to the days and hours when employees work. They reduce opportunities for human complacency to override their access control strategies from initial design, to technology, to supporting and enforcing policies.
Improved Alarm Systems
Short of mandating that operators install an alarm system that is operational after hours, most states establish no standards for monitored intrusion alarms at commercial cannabis businesses. This is another area where applicants can fill in the gaps.
Some jurisdictions mandate a specific Underwriter’s Laboratory (UL) standard for intrusion detection and robbery alarms.
Beyond meeting UL standards, it’s also important to extend the focus of an intrusion alarm system beyond exterior access points. Offenders can come in the form of stowaways concealing themselves inside until closing. They may be employees accessing areas they shouldn’t or third parties who find less expected ways to access the premises, such as tunneling through walls or ceilings and misappropriating ventilation shafts.
A properly designed alarm strategy protects against these situations by establishing various partitions, allowing for “home” and “away” modes, and setting aside areas for management-only access. Even while occupied by workers, certain areas of the premises, such as product or currency storage areas, should remain under alarm monitoring.
Finally, a thorough alarm system abides by UL Standard 681, incorporating contact points at every door; sufficient motion detectors to detect movement in any direction, in any area of any room; glass break sensors; ventilation protection; and panic alarms at vulnerable positions, such as the entrance, loading areas, product/currency storage areas and the management office.
What more can you do?
Responsible cannabis operations also seek to elevate the safety and security of the entire industry.
This includes lobbying at the state level for severe criminal penalties against those engaged in the black-market trade. Public acceptance of cannabis often leads prosecutions to fall flat as jurors shrug about black-market activities. Black-market operators also view the limited penalties as a cost of doing business. But, as long as the government handles black-market cannabis retailing with kid gloves, criminals will target legitimate operators for their stockpiles of Grade-A product.
It also includes lobbying at the local level for more stringent security standards. Offenders who reap the rewards time after time an area will continue to target that area. But if cannabis business owners’ partner with local authorities to tighten up safety and security standards, their businesses become an environment where the juice is not worth the squeeze for offenders, ultimately driving their crimes to regions with less formidable targets.
Finally, it includes teaming with proven security experts who work in the cannabis space; following their best practices, developed based on real-world experiences; and teaching others in the industry to do the same.
Patrick Chown, is the Founder and President of Seed To Sale Security, a national cannabis security company offering security consulting, security plans, and security system installation to customer’s in 30 states. With cannabis-specific technology and a proficiency with regulatory compliance state by state, Seed To Sale Security makes sure your cannabis business stays safe, secure, and compliant.
Member Blog: Hemp and Marijuana Genetics – A Closer Look At The Differences
There are many ways to classify cannabis variants, but the most popular distinction is between hemp and marijuana. Although most of us take these classifications for granted, perhaps you’ve wondered if they are really legit? Put another way: are there real genetic and anatomical differences between marijuana and hemp? And, if so, what are they?
The hemp/marijuana classification is still a major debate within the cannabis community. Although up-to-date research suggests there are genetic differences, critics contend these distinctions have much more to do with legality than botany.
To better understand the complexity of the hemp v. marijuana classification, let’s quickly go through a primer on the cannabis genus. Afterward, we’ll take a closer look at the differences often associated with hemp v. marijuana and why these terms have gained such prominence.
The Basics Of Cannabis Distinctions
The first thing we should clear up is that the word “cannabis” is reserved for the plant genus. This means that both hemp and marijuana technically fall under the cannabis label. For many years, botanists have categorized the cannabis genus into the following three groups:
Cannabis sativa
Cannabis indica
Cannabis ruderalis
Of these three, sativa and indica are probably the most familiar to you. Usually, cannabis connoisseurs draw the sativa v. indica distinction to help differentiate the physiological effects of each strain. Sativa-heavy strains are said to be more energizing while indicas are supposedly more sedating.
It’s important to remember, however, that sativas and indicas were first split up due to their flowering patterns and features. Here are just a few of the key distinctions often ascribed to these two cannabis variants:
Indicas
Short
Fat leaves
Fast-growing
Enjoys mild climate
Sativas
Tall
Thin leaves
Slow-growing
Enjoys a humid climate
Ruderalis is a shrub-like variety of cannabis that evolved in harsh northern environments. Due to its history in regions with little light or warmth, ruderalis strains evolved unique genetics that allows them to flower automatically rather than relying on specific amounts of light.
Cultivators nowadays cross-breed ruderalis strains with indicas, sativas, or hybrids to create what are known as “autoflowering seeds.” These auto varieties are convenient due to their predictable flowering period, but they tend to have fewer cannabinoids than standard sativas or indicas. Most often new cannabis cultivators use auto seeds to gain valuable growing experience.
Hemp v. Marijuana: The Legal Distinction
So, why do we need a hemp v. marijuana distinction on top of all these cannabis varieties? A short answer is that drawing the line between hemp and marijuana helps a lot in the legal department.
You see, hemp is legally defined as a substance containing less than 0.3 percent of the high-inducing compound tetrahydrocannabinol (THC). Marijuana, on the other hand, could have 0.3 percent THC content or above.
Obviously, this makes it a lot easier for legal authorities to categorize what is and what is not legal. As of today, the U.S. legalized hemp at a federal level, but marijuana laws vary by state.
Beyond THC: The Different Uses Of Hemp V. Marijuana
This all doesn’t mean that the hemp v. marijuana distinction was arbitrarily drawn up to help legislators. OK, the 0.3 percent benchmark was pretty arbitrary, however, it’s true that hemp naturally produces less THC than marijuana strains. But there’s more to this story than just THC.
Now that the CBD market has skyrocketed, it’s often hard for us to imagine non-edible uses of hemp. However, for most of human history, hemp has been cultivated strictly for industrial purposes. Indeed, people have used the hemp plant’s fibrous stalks to make clothing and rope for thousands of years. Amazingly, hemp is now showing great potential in a variety of fields including papers, plastics, cosmetics, and even fuel.
Marijuana, on the other hand, has always been associated with recreational and medical use. Growers who cultivated marijuana were always interested in maximizing certain terpene and cannabinoid profiles for their chosen strain.
So, the distinction between industrial hemp and marijuana is still valid and useful as the cannabis industry expands. Growing hemp for industrial purposes is far more interested in quantity rather than quality. Marijuana cultivation, on the other hand, requires a greater degree of care and attention to detail.
Industrial hemp cultivators could often get away with planting their male and female seeds in rather tough environments. Professional marijuana cultivators, on the other hand, need to focus a lot of attention on making their environment hospitable for female seeds.
Of course, there are now many high-CBD hemp cultivators out there using similar marijuana grow methods. With that in mind, it’s still quite useful for cultivators to distinguish between industrial hemp and marijuana to better plan their growth cycle.
Does Hemp Look Different Than Marijuana?
Now we know how hemp and marijuana differ in THC content, growth features, and traditional uses… but do they look different?
To the untrained eye, mature hemp and marijuana might appear to be the same. Indeed, there are many cases of police accidentally arresting truck drivers for “marijuana possession” when they were actually transporting hemp. There are, however, a few key anatomical differences to look out for.
For instance, hemp plants are generally taller than most varieties of marijuana. Remember that many cultivators are interested in hemp’s fibrous stalks, which is why they’ve bred them to grow as tall as possible.
In addition to their height, hemp plants also tend to have thinner fan leaves compared with most strains of marijuana. These hemp leaves also tend to be concentrated at the top of the hemp flower with few leaves further down the stem. Marijuana plants, on the other hand, tend to have more leaves evenly spread throughout their branches.
Looking Into The Genes: Novel Research On Hemp v. Marijuana
After reading the above description, you might understandably conclude that hemp strains might lean more towards the sativa side. After all, sativas are typically associated with tall height and thin leaves.
While this makes logical sense, recent genetic research is changing how we think about the sativa v. indica theory. A team of Canadian researchers recently published a study examining the genetic makeup of over 80 marijuana and about 40 hemp strains. Shockingly, they found that hemp plants have a closer genetic tie to indicas rather than sativas. Most marijuana strains, however, showed a mix of sativa and indica influences.
The scientists concluded that there was enough of a genetic difference between hemp and marijuana strains to warrant the classification. Of course, more research will be necessary to understand these complex hereditary differences.
So, Is The Hemp v. Marijuana Distinction Valid?
While there will likely still be a debate about the hemp v. marijuana distinction, this classification system is popular for good reason. Also, there appears to be a scientific basis for grouping hemp and marijuana into separate genetic categories.
Distinguishing between hemp and marijuana can help consumers make a more informed decision when purchasing hemp flowers, hemp trim, oils, or other products. Plus, with the growing interest in hemp’s industrial uses, it’s important for farmers to separate out strains for industry and those for human consumption.
While it might not be a perfect classification system, “hemp v. marijuana” is still around because it continues to help cultivators and consumers make informed choices.
George Mouratidis is a cannabis writer and freelance contributor to Industrial Hemp Farms, Cannabis Tech, and Highlife Media.
IHF LLC is a Colorado-based, fully licensed & certified hemp farming and wholesale company. IHF wholesales CBD hemp biomass and many different cultivars of clones and seeds. The Company also wholesales CBD distillate, T-Free, Decarboxylated Crude, Isolate and other cannabinoids produced at our extraction facility. One of our primary goals is to make mutually beneficial deals, connections and contacts in the hemp industry.
Member Blog: Are Women In Cannabis Facing Some Headwinds?
So far, the cannabis industry is willing to elevate female executives more than other industries. And it’s been this way since adult-use legalization started to spread among states in 2014. That’s when a huge opportunity opened up for people with some leadership experience and a cool idea. Women who had hit a glass ceiling in more traditional industries saw a chance to make a rewarding career shift. Long-term success isn’t a given for anyone making this move, but it’s easier to get in and get noticed if you have a niche product, a specialized service, or fill a particular wellness need.
I fear the inroads women have made for higher ranks at canna companies are getting needlessly tougher. As our industry continues to mature and expand, larger amounts of funds are needed to get a business off the ground or scale a business, but securing funds could become harder if you’re female.
From the moment I first started helping cannabis companies, I was riveted by its diversity and inclusion. In my years of working with some of the most innovative companies in Silicon Valley, I was used to male-dominated cultures. It didn’t matter what I role I held — I started as an engineer in aerospace and later became involved in operations, marketing and sales, and professional services — a lopsided imbalance was often in play.
But with cannabis, this industry has seen a higher proportion of women rise to great heights. More than one-third of executives at cannabis companies are female. That’s remarkable when you also take into account that females hold only 21 percent of senior-level roles at other types of companies, according to Marijuana Business Daily survey figures. On a more anecdotal level, however, I suspect from what I’m hearing that the gains women have made could waver. With industry maturity, even at this early stage, comes the zealous interest of deeply pocketed investors (most of them men).
Why the Shift?
Female leaders in cannabis have made great strides, but history threatens to repeat itself. For instance, this statistic would make anyone wince: Female founders across all industries acquired only 2.2 percent of venture capital in 2018, according to PitchBook. And those who are able to get the funding they need don’t get as much as men in the same position.
We’re in the midst of rapid growth, and big-name investors are noticing. While I don’t want to generalize, it’s widely known that investors are more likely to be white males. This puts the more equitable playing field created by cannabis at risk.
In some ways, it’s natural that as more money comes in, there would be a shift. That’s the tradition, as more men have traditionally beendominantin business. I don’t buy into this tradition and it’s what attracted me to the industry — the cannabis industry is known for being non-traditional. We’ve been cracking glass ceilings and we’ve been shedding corporate conventions. The result has been fast growth, satisfied customers, and innovative products. I think we can attribute some of that to the diversity at work.
How can we ensure that women get their fair share? There are loads of opportunities here for entrepreneurs and seasoned executives, across genders, to make their mark. What matters less than someone’s gender is the ideas they have, their plan for making their business thrive, and whether they have a solid foundation for truly understanding the company as they make big decisions. When you encounter women entrepreneurs, I encourage everyone to give them a shot, hear out the business plan, and assess the opportunity they’re presenting with an open mind.
There is still time to build upon the momentum women have made. Let’s all, especially men and investors, make a concerted effort to fully support women-led businesses and recognize the need for diverse talents and skillsets. I made a similar call in a blog post for my firm, and I was pleased with the reaction — it really hit a nerve. Women in our industry clearly want to talk about this. The consensus is that when different perspectives are voiced, smart ideas and decisions rise to the top.
As vice president, Maureen Ryan leads the business development functions at Kukuza Associates, a finance and accounting firm dedicated to the needs of cannabis companies. She spearheaded Kukuza’s parent company’s (RoseRyan) 2014 entrance into the cannabis marketplace and developed Kukuza’s finance solution to address the common pain points across cannabis companies. Check out the Kukuza Rapid Diagnostic to find out if you have the right finance pieces in place to scale your business.
Member Blog: What To Know About Cannabis Business Valuations
The rapid growth and ever-evolving nature of the cannabis industry has resulted in wild and hyperinflated business valuations, making it extremely difficult for companies to zero in on a fair valuation as they seek to acquire or be acquired in the up-and-coming field.
What can cannabis companies do to counter overinflated valuations as they pursue an exit or acquisition strategy? The best approach is to better understand what investors are looking for when they evaluate a company for a potential merger and acquisition deal.
Many Ways to Determine Value
Pinpointing the value of a business is not an exact science. Investors rely on a variety of methods and evaluation techniques to help them land on a fair valuation. Let’s break down some of the most common methods.
Discounted Cash Flow: A Discounted Cash Flow (DCF) analysis attempts to determine a company’s value today based on projections of how much money it will generate in the future.
Market Transaction: This method estimates a company’s value by comparing the business to similar companies in the marketplace. This approach works really well with publicly traded companies.
Adjusted Net Asset Method: A company’s value is determined by analyzing the net value of its assets minus any liabilities.
Revenue Multiplier/EBITDA: A company’s value is determined by dividing its revenue multiplier ratio by its earnings before interest, taxes, depreciation, and amortization (EBITDA).
Unique Cannabis Challenges
Because of the unique nature of the cannabis field, each of the above-mentioned valuation methods come with their own challenges when applied in the industry.
Discounted Cash Flow: Because cannabis businesses’ operating costs are so high and their margins are so slim, a DCF analysis will likely produce a more modest valuation than some of the eye-popping ones seen throughout the industry in recent years. But that doesn’t mean it’s unfair or wrong. DCF analyses take into account the current realities of U.S. tax code and the impact it has on costs and earnings.
Market Transaction: A market method should not be used by cannabis companies in pinning down a valuation because cannabis companies that have gone public — most notably in Canada — have not been able to sustain their sky-high IPO values, which raises concerns that they were overvalued. Also, public cannabis companies north of the border have seen their values plummet in recent months because big promises of heady market growth don’t seem to be coming to fruition.
Adjusted Net Asset Method: While this method can be beneficial for certain cannabis businesses with a lot of assets (cultivators, for instance) one potential downside is it assumes the value of the company is simply the value of its assets and does not take into account any potential for future earnings.
Revenue Multiplier/EBITDA: This is currently the most widely used valuation method in the cannabis industry and is likely going to be used in tandem with another valuation method. That’s because EBITDA eliminates the impact of tax restrictions under IRS tax code 280E. It allows investors to look at a company’s hypothetical profitability for when those tax issues are eventually resolved. Most professionals in the cannabis industry agree those tax and legal issues will be eliminated in the next five to eight years. The risk or challenge with this method, then, lies in if that timeline ends up being longer than expected.
Other Valuation Considerations
Evaluating a company’s valuation is a multifaceted approach. Investors often rely on a hybrid approach, using more than one of the standard valuation methods. But they also take into consideration other metrics that have little to do with the bottom line. Some of those include:
Management Team: Who’s on your board? Who are your top executives? Investors take a look at management before any other metric. Because of the industry’s legal haziness, investors want to see legitimate industry expertise on boards and management teams.
Brand Loyalty: Brand loyalty is big in cannabis. If buyers find a strain they really enjoy, they are more likely to try other strains from the same brand when the preferred product is out of stock. Investors will look at how companies measure brand penetration as part of their due diligence.
State of Financials: How quickly are you able to produce them? Is your accounting managed through a cloud-based system? Are your company’s financials messy? Unbalanced? Clear and organized financials are important, as is responding to investor requests in a timely manner. Otherwise, an investor will get the impression that you are disorganized and don’t truly understand your business — which can have a huge impact on any potential valuation.
Be Your Own Advocate
Whether a cannabis business operator is pursuing an acquisition or an exit, it’s important to understand the standard approaches investors take when evaluating such opportunities. Also, don’t be afraid to suggest a particular valuation method or approach to potential investors. Ultimately, nobody knows your business better than you — it’s vital to be your own best advocate.
Advocating for your business and having a better understanding of the valuation process will go a long way toward landing on a fair valuation for your business.
Melissa Diaz is a co-founder and CFO of Arizona-based Rebel Rock, which provides cannabis businesses across North America with specialty accounting solutions, income tax services (U.S. only), CFO and controller services, and business system implementation. She guides companies of all sizes through GAAP compliance, financial modeling, financial reporting and general financial accounting inquiries and functions.
In addition to leading Rebel Rock, Melissa co-founded Rebel HR, which provides cannabis companies with technology-based HR solutions. She is also a partner in High Rock, a likeminded accounting firm focused on cloud technology integration. Melissa has additional experience as a financial statement auditor with a large international accounting firm, providing audit services for domestic and international businesses. Further, Melissa has experience overseeing global revenue and receivables for a Fortune 500 company.
Melissa earned a bachelor’s degree in Accounting from University of Arizona and a master’s degree in Accounting from Arizona State University.
Member Blog: The Value Of Cannabis Patents To Cannabis Startups
As of now, ten states have legalized recreational cannabis. Twenty-one other states allow medicinal use of cannabis, many of which are expected to legalize recreational cannabis in the near future. Investment in cannabis-related businesses totaled almost $10 billion in 2018 and is expected to top $16 billion this year.
Patent Protection
A patent, and the exclusivity it provides its owners can play a key role in assuring success for cannabis-focused businesses. However, protection and enforcement of cannabis-related patents faces unique challenges, since, despite its recent and spreading success at the state level, cannabis is still illegal at the federal level, while most intellectual property protection, as well as enforcement, is federal. Nevertheless, cannabis-focused businesses can benefit from patent protection.
Patents protect inventions, which meet the required criteria of utility, novelty, and non-obviousness. The four main categories of patents, including Utility Patents, Design Patents, Plant Patents, and Business Method Patents, are available to protect cannabis-related inventions. Despite illegality under federal law, the USPTO has been issuing patents for cannabis-related inventions for decades; a trend, which has significantly accelerated with the spread of legalization at the state level.
Recent examples of issued cannabis utility patents include USPN 10,028,987, issued on July 24, 2018, entitled “cannabis-infused milk,” and USPN 10,206,888, issued February 19, 2019, entitled “A cannabis-based therapeutic product for the treatment of chronic pain produced by separating hash resin from plant material of the cannabis plant.”
Plant patents protect new varieties of plants. USPN PP27,475, issued on December 20, 2016, is entitled “cannabis plant named ‘Ecuadorian Sativa’.” According to its specification, “The new strain has energizing and motivating psychoactive effects.”
Design patents protect ornamental, aesthetic and non-functional aspects of useful products. Design patents can protect cannabis-related products such as smoking paraphernalia and containers. For example, USPN D844,892, issued on April 2, 2019, issued for a “cannabis container,” and USPN D798,739, issued on October 3, 2017, is directed to a “cannabis storing container with individual tear-off lids.”
With issued cannabis patents multiplying, enforcement efforts have followed suit. Because patent enforcement disputes are predominantly within the jurisdiction of federal courts and cannabis remains illegal at the federal level, there have been questions as to whether a patent suit can be maintained in Federal court. The answer appears to be affirmative. Following several patent infringement cases, which were filed but then voluntarily dismissed prior to substantive court action, Cannabis Corporation sued Pure Hemp Collective, Inc. in federal court in Colorado. That case is still pending and recently survived a motion for partial summary judgment filed by Defendant Pure Hemp Collective Inc., where the court found that the asserted claims were subject matter eligible for patent protection.
The trend in the issuance of cannabis patents by the USPTO and enforcement by federal courts presents a unique opportunity to entrepreneurs, businesses, and investors to participate in the growing market on the “ground floor.”
Dr. Dariush Adli, Ph.D., Esq., is the Founder and President of ADLI Law Group. Recognized as a premier strategist in patent, trademark, copyright, trade secret, and complex commercial disputes. Dr. Adli is widely sought after by businesses large and small, seeking effective strategies for protecting their valuable intellectual property assets. In that effort, Dr. Adli partners with businesses to identify their protectable intellectual property assets and to develop customized legal strategies, which are consistent with the businesses’ goals, resources, and risk tolerance.
ADLI Law Group is a multi-service law firm providing legal services in the areas of Intellectual Property (Patent, Trademark, Copyright and Trade Secret), Corporate and Commercial Transactions, Labor & Employment, Media and Entertainment, Real Estate, Construction, Products Liability, and Cannabis. Since its inception in 2010, ADLI Law’s mission and focus has been on providing quality client service and maximizing the value of its legal services to clients. We appreciate the trust and confidence our clients’ place in us, which has earned us a place on the highly coveted and competitive Los Angeles Business Journal’s list of the top 200 law firms in Los Angeles county.
Member Blog: Stop The Illicit Market With Profitability, Save Lives
By now, we’ve all seen the concerning vape cartridge illnesses and deaths across various states. While the exact cause is still being determined, our industry has an opportunity to step up our game. So the question we must ask ourselves is: how can the cannabis industry help to prevent potentially dangerous illicit market cannabis sales?
The everyday consumer is seduced by lower-cost alternatives and some turn to the grey market with an assumption of safety. “If the price is half as much, why not?” wonders the consumer. Unfortunately, tragic examples slapped us back to reality and we are now seeing all too clearly the downsides of the laissez-faire approach that feeds the grey market. Low cost is good, but people are dying. This is where our crisis is real.
Safety protocols, procedures, regulations, and oversight, applied to the old methods of production, lead to increased costs that are duplicated on the way through the channel. High taxes multiply that effect, serving as a barrier to the consumer. The illicit market circumvents the bureaucracy and offers a lower cost that meets consumer demand at an increased risk.
Lower Production Costs = Lower Costs For The Consumer
As the end of cannabis prohibition nears, we have to remember that long before we had added regulations and government overhead, proponents of legal cannabis emphasized the medicinal value of the plant, for treating everything from chronic pain to post-traumatic stress syndrome. What started as a simple plant that grew outdoors with free sun and water has evolved, with numerous controls added to regulate, generate tax revenue, and improve the odds that this new medicine is safe. As well-meaning as those precautions are, they have added significant cost to the wonder drug through legal channels. Our best hope for migrating consumers away from dangerous shortcut products is to get a handle on production cost and make it easier for cultivators to follow the rules and enjoy profitability.
It pains all of us when we see the recent spate of illnesses — even deaths — increasingly associated with vaping cannabis, despite the fact that the majority of health issues appear to stem from the illicit market. If we don’t fix this, the market will be severely impacted by either consumer avoidance or government fiat. I’m proud to see that NCIA is taking a lead role in communications around this critical issue and in the fight to deschedule cannabis and enacting federal regulations at a reasonable cost, protecting consumers from potentially dangerous illicit cannabis distribution.
Raise The Quality, Lower The Cost Of Production
Safety, of course, has been and always will be a key concern of the legal cannabis industry. But as our industry grows up and competitive pressures bear down, we can’t afford to shortcut our responsibilities. Running a grow operation is full of potentially harmful contaminants that can strike at any time. Producers need to choose ways to protect their investments with safe operational procedures and new technologies that guarantee both safe and superior products for our customers. At a lower cost!
Where there is a need and a business opportunity, innovation will rise to the challenge. The vape crisis points to an urgent need for low-cost yields and profits for legal cannabis producers. This can be achieved through a highly controlled aeroponic approach for consistent, pure, clean yields that exceed regulatory and medicinal requirements. Using advanced technology, the cost of production can be reduced to as low as $0.30/gram, and the result is legal cannabis that can enter the channel at much lower cost at levels where the illicit market can’t compete, and legal producers can profit.
Fully automated environments, nutrients, pH, air, lighting, humidity, temperature — are all monitored and adjusted through software-controlled electromechanical systems in a soil-free environment. With minimal labor required, contamination risks are low, natural contaminants won’t take root and heavy metals and pesticides can be excluded from the environment.
Indoor aeroponic grow systems represent a sea change for many longtime growers and modernizing the industry means new opportunities. New technology replaces labor-intensive efforts with cruise control automation in an efficient climate-controlled environment. Cutting corners proves to be costly while the rewards for doing it right are considerable: precision fast-turning superior yields — and a dramatic reduction in the potential for contaminants to wreak havoc and impact safety.
We all know that risk is part of any business, and that a key element of our jobs is to reduce risk and cost for our customers. Growing in a highly controlled indoor environment at lower cost to the consumer can dramatically mitigate your risks so you, and your customers, can breathe easier, and we can ensure cannabis remains safe.
Phil Gibson, Vice President of Marketing has 30 years of sales, marketing, and channel experience with 3 years at AEssenseGrows, and is known as the creator of the WEBENCH online design environment now owned by Texas Instruments. Previously, Phil held executive marketing positions at Infineon, TI, and National Semiconductor. With 8 patents in web technology, Phil is an expert in digital marketing and built his first web site in 1995. Phil holds an MBA from the University of Southern California and a BSEE from UC Davis.
Member Blog: Sustainable, Indoor-Grown Cannabis Starts with LEDs
Despite cannabis’s down-to-earth appeal, it hasn’t been as friendly to the earth as one might assume. But cannabis growers have always been resourceful, and with recent developments in technology and improved growing methods – including full-spectrum LED grow lights – the cannabis industry is becoming increasingly sustainable. The end results? A healthier environment, better products and a notable cost reduction. It’s a win-win-win.
Cannabis’s Carbon-Intensive Past
Between staggering electricity usage, a ballooning carbon footprint, a habitually gratuitous use of pesticides and toxic runoff decimating local ecosystems, the cannabis industry hasn’t been the best steward of the environment. As more states pass adult-use and medical laws across the country, this seemingly blameless plant has come under scrutiny from environmentalists, consumers and policy-makers alike.
Evan Mills, Ph.D., is regarded as one of the leading minds in cannabis industry sustainability issues. A California-based energy and climate change scientist, he authored a landmark and frequently cited report in 2012, “The carbon footprint of indoor Cannabis production,” highlighting the cannabis industry’s not-so-green track record. The report devotes a few hefty paragraphs to indoor lighting needs at cultivation sites. Primary takeaways include:
Indoor cannabis production requires lighting levels 500-times greater than that recommended for reading.
Cultivation sites power densities are measured at 200 W/m2, on par with modern datacenters.
Grow facilities nationwide consume the same amount of electricity as two million average American homes.
A single cannabis cigarette, according to Mills’ calculations, is equivalent to 3 pounds of carbon dioxide emissions.
The data is clear: without adjusting equipment and techniques, the cannabis industry was on track to becoming one of the largest carbon emitters in the world. And amidst growing calls for improved business transparency and environmentally conscious methods (that have only gotten louder in recent years), cannabis businesses were desperate for solutions that matched performance with sustainability.
The LEDs of Today
Many outdated lighting technologies like HPS and fluorescents consume exorbitant amounts of energy for sub-par output, run hot (and therefore place additional pressure on environmental controls like HVAC and AC) and tend to burn out quickly. These technologies can leave many growers wondering if it’s worth the trouble – and encourage them to make the switch to LEDs.
While LEDs have certainly been around for a while, they’ve gained traction among cannabis growers more recently. At one time, large installations of LEDs needed at commercial grow operations were highly cost prohibitive, only allowing the biggest enterprises to reap the benefits. But, over time, LEDs have become increasingly affordable and accessible to smaller businesses, start-ups and hobbyists. Moreover, the technology has improved drastically.
Today’s cutting-edge LED grow lights come with built-in features leading to better performance paired with lower costs and emissions for the modern grower.
Unparalleled Efficacy and Efficiency LED grow lights today are able to deliver unmatched uniformity, ensuring every plant in your canopy receives adequate photosynthetically active radiation. They also use less energy while delivering plenty of brightness – meaning you’ll cut electricity costs and emissions without seeing a dip in performance.
Full-Spectrum Light and Spectral Tuning Wish you could bring the sun indoors? Invest in LEDs – they’re the closest thing to sunlight you can find because they deliver full-spectrum light. Your plants can benefit from the full range of spectrum as they would in their natural environment. Further, features like spectral tuning give cultivators ultimate control, allowing them to elicit certain biological responses, hasten flowering and shorten the growing cycle altogether.
Vertical Racking This capability, made available with some modern LEDs, can double or even triple your harvests without investing in additional square footage. Vertical racking allows growers to use their spaces in the most efficient way possible, resulting in verdant, multi-level gardens.
Automation Automating light cycles, watering and even nutrient distribution can cut down on labor-intensive tasks and human error that can result in additional, unnecessary energy usage. By pre-programming the necessary functions of your grow, growers are given peace-of-mind and can focus on other important tasks that require more of a human touch.
Low Heat Profile and On-Board Dimming A huge selling point for growers of all kinds, LEDs have a much lower heat profile than other lighting technologies. They present less of a risk for heat stress, reduce reliance on other environmental controls and can be placed much closer to the plant canopy (a plus when vertical racking!). On-board dimming is a helpful feature as well: growers can create an artificial sunrise and sunset to gently ease their plants into light-dark cycles and prevent spikes in both temperature and humidity.
Improved Durability LEDs are built to last, another selling point for environmentally conscious cultivators looking to cut down on waste. If you’re in the market for some new efficient grow lights, look for LEDs that are built with industrial-grade materials and come with the IP66 or IP65 waterproofing certification.
Looking Toward a Bright, Green Future
Cannabis has become a regular facet of countless American lives. It helps people relax and de-stress, mitigate crippling pain and calm seizures. In 2018, the Pew Research Center reported that 62% of Americans are in favor of legalizing cannabis. The once-villainized plant, long at the center of fear-mongering campaigns like reefer madness and gateway drugs, is now widely enjoyed by everyone from politicians to grandparents to entrepreneurs to professional athletes. It’s not going anywhere any time soon.
That means that cannabis industry professionals have a responsibility to produce cannabis with sustainable methods – and LEDs are a great place to start. Not only do LEDs help shrink your business’s carbon footprint, they can also save you money in the long run and boost profits. There are countless growers today who prefer using LEDs, and it’s pretty easy to understand why.
Andrew Myers is President and CEO of ProGrowTech, which helps commercial horticulture operations increase profitability, yield and energy efficiency with industry-leading LED lighting systems. For more information, visit progrowtech.com.
Member Blog: There’s No Place Like CBD For The Holidays
While April 20th, or “420” is the “high” holiday of cannabis, did you know there are a variety of lesser-known CBD-related holidays throughout the year that can be great grist for the promotional mill? To achieve notoriety and engagement, CBD purveyors may want to include lesser-known celebrations into their annual marketing calendar.
For example, there’s National CBD Month in January, National Hemp Day February 4, National Hemp Month in July, Oils and Concentrates Day July 10 (sometimes referred to as 710 because OIL upside down resembles the number), National CBD Day August 8 and National Pet CBD Month in October.
And let’s not forget Jack Herer’s (The Hemperor’s) birthday celebrated June 18. According to Wikipedia, the devoted cannabis rights activist and author promoted cannabis and hemp for decades. His book, “The Emperor Wears No Clothes” has been in print for three-plus decades. Herer was “frequently cited in efforts to decriminalize and legalize cannabis… Herer also founded and served as the director of the organization Help End Marijuana Prohibition (HEMP).”
CBD purveyors wanting to get even more innovative can use their branding — including labels — to tie to lesser-known holiday promotions. Here are some ways to use labels as powerful promotional tools in conjunction with “holiday” celebrations:
Extend their reach for a whole year via extended content labels (ECLs). For CBD purveyors committing to promotions tied to a calendar of holidays, ECLs can be a fun and impactful way to present information, offers and calls to action.
Create a major promotion around one celebration (e.g., January’s National CBD Month), and use ECLs to explain/inform. This could be a contest with details, one or more discount offers, or even a history of the CBD “movement.”
Print specific labels for each holiday. For example, create fun and informative labels around “The Hemperor’s” birthday month in June. A series of labels could detail various hemp-related accomplishments by Herer, even possibly going so far as to be small pieces of art depicting him and his life’s work.
Use them to link to digital media. There’s always a case to be made for labels containing QR codes, URLs and other links to more information. This can be especially appropriate for surveys, reviews and other interactive platforms where consumer feedback is desired. Any of these efforts can be themed around holiday celebrations (e.g., an upcoming anniversary of hemp or CBD adoption/legalization). In the CBD world particularly, companies need to understand how their consumers view them, assess the quality of products and express any concerns that may emerge.
Present labels as a quality control and consumer safety tool. At a time when buyers worry about the safety and authenticity of the products they consume, labels can help come to the rescue. And what better holiday than one which celebrates both the healthy effects of products and a concerted effort to protect those consuming them?
For example, new label technologies enable consumers to verify the authenticity of their products through a smartphone app that scans a small digital ID on the label. These track-and-trace digital IDs offer a powerful deterrent to counterfeiting, protecting consumers from harmful or ineffective fake products. In turn, CBD product manufacturers can demonstrate to customers that they are working actively to ensure their safety. That creates favorable word-of-mouth, goodwill and loyalty among buyers who will criticize or even pursue regulatory and legal remedies if they feel there’s a problem.
Gary Paulin is Director of Sales and Client Services for Lightning Labels, a Denver-based label printer that has been offering state-of-the-art affordable, full-color custom labels and custom stickers of all shapes and sizes to cannabis purveyors for more than a decade. They offer many options for materials and laminates and special effects to achieve digital short-run requirements (50 minimum) on up to 15 million labels, plus Lightning fast delivery. For more information and to place orders online, visit LightningLabels.com. For the latest in packaging news and labeling promotional offers, find Lightning Labels on, Facebook, Instagram, Twitter (@LightningLabels), Pinterest, and LinkedIn.
Committee Blog: Vaping-Related Illness – Applying Lessons Learned From The E-cig Market
by Ramon Alarcon, Wellness Insight Technologies, Inc. NCIA’s Cannabis Manufacturing Committee
THE ISSUE
In recent weeks, a growing number of respiratory illness cases associated with nicotine or cannabis vaporizer cartridges have been reported, leading to increasing concern among cannabis cartridge consumers, regulators, and medical experts. The vast majority of these reports are linked to cartridges that were produced and obtained in the illicit and unregulated market, or that were adulterated by consumers. The small number of cases that have so far been associated with legal cannabis products have not shown definitive links to those specific products.
Furthermore, similar cases of respiratory illness have not been reported in Europe, where the regulations governing vapor products are different. Even if, as we suspect, it is confirmed that the source of the current problem is limited to illicit-market products, there are valuable lessons to be learned to ensure the future safety of licensed vapor products and preserve our ability to promote vapor products as a viable and beneficial method of consuming cannabis.
Although cannabis vaporizers and nicotine e-cigs are not the same, there are important commonalities that we can learn from given that the nicotine e-cig market has been around for over a decade. First, it is essential to acknowledge the differences. Although some people view all vaping through the same lens, vaping cannabis and nicotine are as different as drinking alcohol and coffee. The formulations are vastly different in their chemical compositions, and usage patterns of cannabis consumption are far less intensive than those of nicotine e-cigs, which tend to be used many times throughout the day. Notwithstanding those differences, the principles of operation are the same; a heating element is generally used to aerosolize a stored liquid without combustion.
THE RISK
Moreover, in both cannabis and nicotine cartridges, the target active ingredient is typically combined in formulation with other organic compounds. These include glycerol (VG) and propylene glycol (PG) that are more commonly used in nicotine-containing cartridges and dictate the viscosity of the liquid. And flavorants, typically terpenes in the case of cannabis, are included in the formulation to provide particular taste and aroma characteristics.
Nicotine e-cigs have had numerous public health concern moments, some real and some manufactured, but one particular issue is especially illustrative to cannabis manufacturers. In the early days of e-cigs, some smaller e-cig manufacturers added diacetyl to their formulations in order to create flavored e-liquids with buttery notes. Those manufacturers assumed diacetyl to be safe because it is classified as GRAS (Generally Recognized As Safe) by the FDA (we eat it on our popcorn for goodness sake). Nevertheless, that GRAS classification was provided for ingestion, not inhalation. In fact, diacetyl had already been discovered to cause bronchiolitis obliterans, also known as “popcorn lung,” in popcorn factory workers in the early 2000s. And although no one was reported to have been hospitalized or died, the discovery of diacetyl in nicotine vapor products cast a cloud over the entire e-cig industry, even for those companies who employed scientists, practiced good product stewardship and developed internal lists of ingredients that led them to only include ingredients that had low inhalation toxicity risk profiles. This example illustrates that it is in our interest to ensure that all cannabis vapor product manufacturers understand that compounds that are characterized as GRAS are not necessarily safe for inhalation purposes and that an additional level of risk analysis must be performed.
THE SOLUTION
We must ensure vapor product safety because the potential of cannabis vapor products to deliver the necessary medicine to patients without the harmful byproducts of combustion must not be undermined by industry missteps or the loss of public trust. Again, using nicotine e-cigs as an example, we know that vaporization can eliminate the byproducts of the combustion of plant materials. In one study, approximately 1,000 times less harmful chemicals like carbon monoxide, formaldehyde, and acetaldehyde were measured in e-cig vapor when compared to combusted cigarette smoke¹. Designed with the proper materials, protocols, and formulations, nicotine vapor products can have a very low-risk profile relative to combusted cigarettes. In fact, one nicotine vapor product has been evaluated as low risk enough to have been approved by the MHRA (UK equivalent of the FDA), thus adding to the evidence that, generally speaking, vaporization can be considered safer than combustion. Of course, confirmatory studies need to be done with cannabis but combined with the ability of vapor products to deliver fast-acting, precise doses of formulations that can be tailored to an individual’s needs, the importance of vaporized cannabis as a low-risk method of consumption is real.
With this in mind, we, as an industry, must develop standards and best practices. Doing so will build consumer trust while also providing guardrails that still allow for innovation. Other industries have done precisely this, including the fragrance and food additive industries. Moreover, if we do not develop our standards and only react to state regulations, which can tend to lag, we run a higher risk of similar problems in the future. A few simple principles can be applied to this problem.
Test what goes into your body. In the case of vapor products, that is the vapor. In other words, we should test the aerosol, not just the liquid that goes into the cartridge. Labs in the e-cig industry already do this type of testing, and the methods can easily be adapted to cannabis products.
We should develop a list of analytes that have low inhalation toxicity risk profiles.
Stick close to what nature gave us. People have been smoking cannabis for thousands of years, and we have not seen similar health problems. As a matter of fact, we can say that the risk profile for cannabinoids and terpenes in the amounts typically consumed via smoking cannabis is low². However, we do know that some compounds that naturally occur in cannabis can pose a safety risk at high enough concentrations. So until we have more data on inhalation toxicity for all terpenes and minor cannabinoids, we should practice caution when creating novel formulations. In other words, try to remain close to the amounts found natively in the plant in order to preserve the same risk profile.
Whether or not required by state regulations, be transparent, and list all ingredients. This will not only help consumers better understand what ingredients are safe — it will help capture their long term trust.
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1 – Rana Tayyarah, Gerald A. Long, Comparison of select analytes in aerosol from e-cigarettes with smoke from conventional cigarettes and with ambient air, Regulatory Toxicology and Pharmacology (July 31, 2014)
2 – Pletcher, et al., Association Between Marijuana Exposure and Pulmonary Function over 20 Years, 307 JAMA 173 (Jan. 2012).
Member Blog: Changes in California Packaging Regulations are Coming – Are you Prepared?
Just when you thought you had a grasp on the tangled web of regulations governing California’s legal cannabis market, the packaging rules are changing again on January 1, 2020.
That’s right around the corner… so if you are a manufacturer, grower or producer, you need to pay attention or face consequences that could include product seizure, loss of revenues, and delays in getting compliant packaging on the shelves.
In a nutshell, current regulations in California allow that either the product must be in a child-resistant container, or it must be placed in a CR exit package.
New regulations, taking effect on January 1, mandate that all products must be in a certified child-resistant container. Moreover, edible products must be in a child-resistant re-sealable package.
While this will allow dispensaries to start offering interesting, branded shopping bags, it means that product packaging must be compliant and in place by the first of the year.
Accordingly, if your packaging currently does not meet the upcoming regulations, you are rapidly running out of time to replace it with new, compliant solutions.
Unfortunately, the fact is, it takes time to get new packaging designed, printed, shipped, fulfilled, and placed on shelves… Lots of time.
Let’s take a look at a typical timetable:
Creative
Getting your new packaging designed, revised, and approved. 2-4 weeks.
Sampling and Refinements
Once the design is complete, you’ll receive samples, which takes an average of 2 weeks.
Then, your team will analyze the packaging, and if necessary, the designers will make any refinements. 1 week.
Mass Production
Printing the packaging can take up to 8 weeks, depending on the supplier, season, and complexity of packaging.
Transit
A lot of printing these days is done overseas, where costs are lower. However, shipping times are much longer and can take 6-8 weeks to arrive. This includes loading and unloading, customs clearing, and ground transport.
Fulfillment
Getting your products into your new packaging takes time. Allow 1-2 weeks for this task, depending on the quantity and complexity.
Transit to Distributors and Stores
Finally, you’ll need to get your product to distributors and stores. Count on at least 1 week for each.
Summary:
If you add up the various steps – each critical to the process – you will see that your project can realistically take 20-26 weeks. That’s up to 6 months!
There are ways to trim this timetable, but inevitably, they start adding expense to the project. Accordingly, the best practice is to start the process at least 6 months before you need your packaging on the store shelves.
Granted, this schedule is for producing a premium packaging system. There are lower-cost solutions available, but these inevitably make your product look cheaper. This is especially important if you want to build an upscale brand and position your product as a luxury item.
The best advice is to contact a packaging professional as early in the process as possible and discuss your options, costs, and timetables.
Don’t start thinking about packaging a few weeks before a regulation change… get ahead of the game and start the process early to enjoy the most options, best results, and lowest costs.
CEO Kary Radestock
Kary Radestock, CEO, launched Hippo Premium Packaging in March 2016 offering an array of services to the cannabis market, including: Marketing Strategy, Brand Development, Social Media, Public Relations, Graphic and Web Design, and of course, Printing and Packaging. Radestock brings over 20 years of award-winning print and packaging expertise, and leads a team of the nation’s top brand builders, marketers and print production experts. Hippo works with businesses looking for a brand refresh or an entire brand development, and specializes in helping canna-business get their products to market in the most beautiful and affordable way possible. Radestock’s Creative Collective of talent and experts, allows her to offer world-class solutions to support the unique needs of the Cannabis Industry.
Member Blog: 6 Key Questions To Ask When Evaluating Water-Soluble Technology For Cannabis Products
Consumers and manufacturers of products that have been infused with THC or CBD are probably very familiar with two key issues that plague the product class: slow onset time and uneven dosing of the active ingredient. In a bid to provide a solution, many groups are marketing “water-soluble technology,” or “nanotechnology.” The vast majority of the groups claiming water-soluble (more properly referred to as “water-compatible”) technology are offering up a nanoemulsion.
Nanoemulsion technology is a very promising and accessible solution. It has the ability to allow for both (1) rapid onset and (2) uniform distribution of the active ingredient in infused products such as beverages, gummies, and water-based topicals. Unfortunately for most businesses and consumers, there are many factors that can destabilize a nanoemulsion and eliminate the benefits of the technology. Making things even more difficult is the fact that consumers and businesses are usually not equipped to properly evaluate their options, due to the technology being so new in its commercial use.
In order to evaluate your options, whether you’re a consumer or a business looking to enhance your products, you need to have a high-level understanding of nanoemulsions and how they are made. Put very simply, you create a nanoemulsion when oil is combined with functional ingredients and then blasted with energy or combined with a catalyst which, in both cases, causes the oil particles to split into smaller pieces. When made small enough, the particles disperse uniformly in water and won’t separate out into larger globs of oil. Other added benefits of the small size are a dramatic drop in the onset time for THC – from around 45 minutes to under 10 minutes – and increased absorption of the active ingredient.
Knowing this, there are a number of questions that you should always ask of your technology provider. Each of these questions helps you dig into how well-designed a formulation is and ultimately whether the technology you use will truly enhance your products. Every provider of nanoemulsion technology should be able to speak to:
Particle Size of the Nanoemulsion – You should be looking for an average size under 100 nanometers, preferably under 50 nanometers (as measured by the “dynamic light scattering test”).
Particle Size Test Method – The “by volume” test is far more optimistic, and less useful, than the “dynamic light scattering test.” Look for a solution that is less than 50 nanometers, measured using the dynamic light scattering test.
Temperature Stability – Nanoemulsions tend to destabilize (lose their nanoemulsion properties) over time when exposed to heat. This can be a major issue if the product is shipped or stored in warm/hot environments or if consumers use the product on a hot day.
pH Stability – Low pH environments, such as citric beverages, can cause instability and can also contribute to rapid degradation of the active ingredient (e.g. THC or CBD). Poor formulations can cause as much as 50% of the active ingredient to degrade over a period of one month – not ideal if the product is stored or sits on the store shelf for a while prior to being consumed.
Stability with Artificial Sweeteners – Many end products that are being infused use artificial sweeteners, which can cause the nanoemulsion to become cloudy and lose its rapid onset and enhanced absorption properties.
Active Ingredient Degradation – pH is just one of a number of factors that can contribute to rapid degradation of the active ingredient.
Creating a nanoemulsion that addresses these challenges is not an easy task, but each one of the parameters is important if it’s going to provide the performance benefits claimed by the technology provider. Regardless of whether you choose to engage in your own R&D or use a third-party solution, these questions will help you understand how well a particular water-soluble technology will work for you. Consumers will gravitate toward products that maintain the benefits of this water-soluble technology, and manufacturers will consequently need to do the same.
Andrew Wong – President of Axiomm Technologies
Having spent nearly five years at the nationally-recognized corporate law firm of Stikeman Elliott LLP, Andrew is experienced in securities, M&A and private equity matters. He has acted for both public and private companies, as well as private equity and investment funds with assets under management of $500 million to $1 billion. Andrew moved from Stikeman Elliott to Shea Nerland LLP in 2016, where he founded the cannabis practice group and provided clients with regulatory, structuring, finance and corporate governance counsel.
Andrew co-founded Axiomm Technologies in late 2017. Axiomm is a technology company whose team of technical experts combines academic and industrial expertise in the development and commercialization of novel manufacturing and consumption methods. All technologies and products are designed with the health and wellness consumer in mind, and each increases the efficiency and speed with which the body absorbs vitamins, nutraceuticals and cannabinoids.
Member Blog: Helping Mary Jane Is Good For Business
by Kharla Vezzetti, Business Membership and Advertising Manager at California NORML
Who is the cannabis consumer to you?
In a vast industry with so many important contributors, the one group that we all have in common and eventually serve is the consumer. The cannabis consumer is our shared financial bottom line, the foundation of our industry, our end-all reason for being in business. The cannabis consumer is one huge group. While your company may see your target market as including a specific demographic, the totality of the cannabis consumer group spans ages, genders, and socio-economic groups more so than the average marketed “widget.” That said, there are needs and concerns that the average cannabis consumers share.
I Call Her Mary Jane.
While we all move forward in California ‘s post Prop 64 environment, our ongoing goals, as both businesses and organizations, need to be consumer-focused. Mary Jane’s needs, as an individual, must not be overlooked.
Mary needs to be healthy and free enough to drive herself to work. She needs to not fear being honest with her doctor, nor be submitted to a job-ending drug test. She needs to be able to afford and have access to her choice of medicine. She needs advocates and educators to monitor our legislators, answer her questions, and to fight for her rights as a cannabis consumer. She needs all of us to honor her importance as the foundation she is.
Why You Should Support Mary Jane’s Rights:
An Employed Consumer Base Is Essential For Product Sales.
Think about how you would attempt to sell cannabis to the unemployed. California, unlike 15 other states, still subjects employees to the risk of losing their jobs or being denied employment due to their cannabis usage, even when Mary has a doctor’s recommendation. Read more about the solution here.
Consumers Must Be Free To Discuss Cannabis With Their Doctors Without Repercussions.
Medical Cannabis users are a large portion of the industry’s market. Unfortunately, California pain patients, who wish to reduce their use of opioids with cannabis, currently risk losing their prescription medication if they get caught supplementing with cannabis. Read more about this discriminatory issue here.
Californians Love Driving—Many Must Drive.
Year after year, unscientific and discriminatory driving laws are proposed by state legislators. Just imagine Mary losing her license due to simply having THC in her bloodstream. She is now unable to get to work or to her doctor’s visits. Good thing for Mary, this scenario is being regularly averted by California NORML, while cannabis delivery rights have also been maintained across the state.
Contributing To Mary’s Rights Is Good For Your Branding.
Showing yourself as a company that cares about the consumer, their health, happiness and well-being, as well as exhibiting respect for their history, sets you apart in a California cannabis community which has such old, strong roots alongside so many new players.
Sane Laws And Regulations Benefit All.
In this fast-growing and adapting climate, we must have a say on proposed laws and regulations that affect our industry and those who depend on our success. Read more about Cal NORML’s recent accomplishments and current plans on behalf of Californians here.
It’s often said that California “leads the way” for the rest of the United States. While this hasn’t always been true, a state our size with a cannabis history so long and distinguished should continue to strive to be a positive trendsetter. Let’s keep Mary Jane at the forefront of our plans for success. She is more than an email analytic or a dollar sign. Mary and her needs spurned this modern movement with the passage of Prop 215. She should continue to be the inspiration, and a significant focus for the industry. When we take care of Mary, as our combined consumer, we all win.
Kharla Vezzetti volunteered in the 1990s as a both a signature gatherer as well as the Media Liaison for the Sonoma County chapter of Californian’s for Compassionate Use, working on what was to become Prop 215/The Compassionate Use Act of 1996, the first successful medical marijuana initiative in the country.
From 1996-1998, Vezzetti was the owner and operator of Natural Harvest, a wholesale distribution and retail vending business specializing in Sonoma County produced industrial hemp products.
In the years 1997-1999, She was the Advertising Manager for HempWorld: The International Hemp Journal and Hemp Pages: The Hemp Industry Source Book, both first of their kind publications.
In 1998, Vezzetti served as a member on the Board of Advisers for the Industrial Use of Hemp (Marijuana) Initiative
She excitedly joined the staff of California NORML in 2017, where she continues as the non-profit organization’s Business Membership and Advertising Manager. Additionally, she is a graphic designer, marketing advisor, and blogger based in Santa Rosa, Sonoma County, CA.
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Glenn H. Truitt, Esq. is the Managing Partner of Ideal Business Partners, a boutique multi-disciplinary professional firm focusing on serving businesses in the cannabis, hemp and CBD spaces. He is a graduate of the U.S. Naval Academy and Stanford Law School, is licensed to practice in California and Nevada and has been practicing for 15 years. 
Sam Fensterstock is the SVP of Business Development at 
Taylor Robinson is the Research & Development Manager and Chief Chemist for Silver Bullet Water Treatment with expertise in molecular and cell biology, general water chemistry, microbiology, and industrial (oil and gas) water treatment and reuse processes/chemistries. For the past 4 years, Taylor has led, conceptualized, organized, and completed numerous Silver Bullet research and development projects related to water treatment for the livestock, cooling water, horticulture, aquaculture and data center industries. Taylor joined Silver Bullet in 2016 and has been a key contributor to the advancements in the company’s technology and research base.
With over 15 years’ experience, Kyle Lisabeth has been focused on improving water management programs across multiple industries, with a central focus of treating water for reuse applications. Kyle attended the University of Texas – Austin, and upon graduation with a BS in Biology and Environmental Sciences, gained years of international water management experience in both North and South America. Since establishing Silver Bullet’s Horticulture Division, Kyle has exponentially grown the business unit’s install base and cultivated a nationally known water treatment brand for many controlled environment agriculture applications, including cannabis.
Gabriel Cross is a Founder and CEO at 
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Gary Paulin is Director of Sales and Client Services for Lightning Labels, a Denver-based label printer that has been offering state-of-the-art affordable, full-color 
