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.
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.
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.
Felony Provisions, Harvest Schedules, and ‘Hot Hemp’ – NCIA Responds to USDA Hemp Rules
by Vince Chandler, NCIA’s Social Media Manager
On October 31, 2019, the USDA released its Final Interim Rule governing the domestic production of hemp within the United States. Going into effect immediately upon its issue, the interim rule regulates industrial hemp after the 2018 Farm Bill removed its Schedule I listing under the Controlled Substances Act. While the IFR is in effect, there is a public comment period happening right now, allowing for early input as the federal agency begins to “test drive” the program. Sunsetting after two years, the interim rules will inform permanent oversight and regulatory infrastructure after a full crop cycle has occurred.
National Cannabis Industry Association Director of Public Policy Andrew Kline formed a coalition of more than 100 leading hemp and CBD entrepreneurs, scientists, medical doctors, and FDA lawyers in May to provide comments and testimony to the FDA on their regulations and rulemaking for CBD. The committee produced 60 pages of formal comments to the FDA, as well as providing expert testimony. After the submission of the coalition’s comments, the NCIA Hemp Committee absorbed the effort to voice the cannabis industry’s position on federal regulation of low-THC cannabis.
On Wednesday, NCIA hosted a webinar with our Hemp Committee Chair Cindy Sovine and committee member Alex Buscher to discuss the cannabis industry’s official response to the USDA hemp rules. Concerns about definitions, the feasibility of harvest windows, and DEA oversight of testing laboratories all pose as potential hurdles in the program’s viability, and NCIA is committed to ensuring our members have all the resources they need to submit feedback to the USDA before the deadline.
It is important to note that, while the 2018 Farm Bill descheduled hemp with less than 0.3% THC, the federal agency has left it up to individual states to submit plans for regulations and oversight. Until a state has submitted their regulatory plan, and had it approved, the sale of hemp is not legal in that state. While states draft and submit their plans, NCIA is leading the quest for information on how federal rules will apply.
The administrative procedure for the USDA requires that they consider any comments put forth by the public, but do not have to adopt any of them. All indications are that they are open to influence and input from those, like National Cannabis Industry Association, with institutional knowledge on the matter.
Highlighted in the webinar as an action item deserving immediate attention and commentary is the USDA’s planned rule for “hot hemp.” The agricultural governing agency appears to have taken the position that they lack regulatory jurisdiction over cannabis plants that test above the 0.3% THC threshold, deferring instead to the Drug Enforcement Administration.
NCIA’s Hemp Committee recommends that, instead of handing oversight to the DEA, USDA should adopt particular procedures that will allow for the remediation of those hemp plants. This re-processing should render non-compliant plants compliant, thus allowing for their use rather than requiring the immediate mandatory disposal, per DEA regulations.
Remediation options could include:
Removal of THC through processing
Conversion of THC
Diversion to fiber market
Interstate commerce, harvest scheduling, and DEA testing laboratory registration need to be addressed, along with specifying definitions for ambiguous terminology. These issues can be changed through public comment at the USDA rules level.
Requiring legislative procedure to change is the felony provision rules in the USDA Final Interim Rule. Currently, the Farm Bill’s statutory felony provision reads, “any person convicted of a felony relating to a controlled substance under State or Federal law, before, on, or after the date of enactment on this subtitle shall be ineligible…”
The USDA could have interpreted this provision broadly, blanketing the ban to apply to anyone working in any capacity in the industry. Instead, the USDA has limited this provision in their licensure by stating that it will apply only to “key participants.” While NCIA wishes to see felony provisions removed as barriers of entry from working in the legitimate cannabis industry, our committee recognizes this liberal interpretation of the provision as a best-case scenario, until the Farm Bill is up for renewal and specific language can be amended or abandoned.
Public commentary is open until December 30, 2019, and all NCIA Members are encouraged to submit their thoughts. For suggested language or guidance shaping your comment, we’ve made available our slide show from the webinar with samples of copy and more information on individual recommended steps. If you are interested in shaping NCIA policy recommendations for hemp, CBD, or many other cannabis sectors, inquire about joining our Policy Council.
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!
Watch The Webinar: Michigan’s Adult-Use Market – What Comes Next?
In case you missed the December 3 webinar: The Midwest is becoming a major player in the cannabis industry and Michigan is now accepting applications for its adult-use cannabis licenses with the launch date fast approaching. Join our expert panel as we provide insights into the Michigan adult-use market: an update on what has transpired so far, what potential operators need to know about this key market, and how Michigan’s market will compare to others around the country. It’s an exciting time for our industry with the Midwest on the verge of launching adult-use sales. Watch this webinar from NCIA’s State Regulations Committee as they explain what you need to know.
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.
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.
________________________________________
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).
Committee Blog: The Employee Onboarding Process
by NCIA’s Human Resources Committee Kara Bradford of Viridian Staffing, Kerry Arnold of Canndescent, Heidi Quan of Murchison & Cumming LLP, Nichole McIntyre of Urban-Gro, Michelle Whitmore of H2 Talent, and Mark Hackett of Emerge Law Group
You’ve found, interviewed, hired the right person for a position in your business, and they have just accepted your job offer. Congratulations! Now what? In the second part of our three-part series, the HR Committee shares insights on the Onboarding of employees. Onboarding new employees can be critical to ensuring happy and productive workers that understand the culture and expectations of your company. Having an organized procedure for bringing on a new hire is crucial for both the company and the new employee. Your company should be as prepared and ready as the new employee is expected to be for their first day. This can be a missed opportunity to make a great impression on your new employee.
In order to help your company with the onboarding process, a new hire checklist can be utilized to help ensure that you are covering all the necessary areas for a successful and smooth entry into your workforce. We have prepared two checklists for the onboard process. One is more administrative in nature while the other is designed to assist managers to help smoothly integrate and transition the new employee into your company. In some companies, a Manager may need to perform the tasks on both checklists if the company does not have an HR Manager.
HR Manager Checklist
Starting with the HR Manager Checklist, it’s best to make sure that you’ve received a signed offer letter and/or employment agreement prior to the start date being determined. Some companies also prefer not to set a start date until the background check process has completed. Once this is completed, there are a series of steps to take prior to the new employee starting. You may need to order hardware/software, cultivation tools/equipment, etc. On their first day, it’s a best practice to have the worker complete all paperwork, including any W-4 documentation/I-9, etc, prior to starting on the job. We’ve also included instructions for I-9 completion.
Data has shown that employees don’t leave companies, they often leave managers; so provide your managers with the resources they need in order to inspire more confidence in the new employee for their manager. If the Manager isn’t the individual filling out the paperwork with the employee, have the manager greet the employee as soon as necessary paperwork is completed. Having a manager focus their attention on a new employee as much as possible during that first day will help to solidify the new employee’s sense of belonging to the organization.
Employee Onboarding Checklist For Managers
The manager should take time to introduce the new employee to all co-workers and other organizational stakeholders they may interact with while helping to familiarize them with the facility. The manager should then spend time setting/reiterating expectations of what the position entails and conveying any goals/metrics that the employee is required to meet. Finally, the manager should spend time training the new employee and setting them up for success, or delegating this to the appropriate subject matter expert on the team to do this.
We often have companies tell us they are struggling to retain their employees. By providing an exceptional onboarding experience from the very first day, this will help the new employee to realize you value them and the talents they are bringing to your company, thus helping to feel welcomed and continue their contributions longer to your firm.
In our next HR Committee Blog Post, we’ll provide a checklist with recommendations on how to handle Terminations.
by Madeline Grant and Michelle Rutter, NCIA Government Relations Managers
The sun is hot, and the halls of Capitol Hill are empty… it must be August recess, but as your congressional representatives take a break from their busy schedule in D.C., we are still hard at work in the nation’s capital. We are continuing the momentum that the 116th Congress has had in changing cannabis policy. This summer there were many important hearings and events. Let’s take a look back at a few of them:
In June, the House Committee on Small Business held a hearing entitled “Unlocked Potential? Small Businesses in the Cannabis Industry.” The hearing allowed members of the Committee to learn about the opportunities the legitimate cannabis industry presents for small businesses in states with legal cannabis, as well as entrepreneurs from traditionally underserved communities. The hearing also discussed the challenges also faced by “ancillary” or “indirect” cannabis businesses. The Chairwoman of NCIA’s Banking Access Committee, Dana Chaves, testified, as well as representatives from the Minority Cannabis Business Association (MCBA), the Veterans Cannabis Coalition (VCC), and The Heritage Foundation. In the testimony NCIA submitted for the record, we wrote, “[SBA] programs were specifically designed to stimulate economic activity and create jobs through small-business enterprises. Offering funding to the emerging regulated cannabis industry, which is mostly comprised of small businesses, would perfectly align with SBA’s primary objective to maintain and strengthen the Nation’s economy.” You can read NCIA’s full testimony here.
In addition to the Small Business Committee hearing, there was a resounding, victorious Floor vote in June that put every single member of the House of Representatives on the record when it comes to cannabis. Known as the Blumenauer-McClintock-Norton amendment, this provision that was added to the Commerce, Justice, Science, and Related Agencies (CJS) Appropriations Act of 2020, passed by a vote of 267-165 and would prevent any federal funds from being used to target state-legal cannabis programs. The vote was decisive: it had support from all but eight Democrats and picked up 41 ‘Ayes’ from Republicans.
In July, for the first time ever, lawmakers in the House of Representatives held a hearing to address the disproportionate ways in which marijuana prohibition has negatively impacted people of color and marginalized communities. The hearing, entitled “Marijuana Laws in America: Racial Justice and the Need for Reform,” was called by the House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security and exclusively featured testimony from witnesses in favor of sweeping cannabis policy reforms. Notably, none of the members of the subcommittee or witnesses advocated for keeping cannabis illegal.
Less than a month ago, the Senate Committee on Banking, Housing, and Urban Affairs held a public hearing, “Challenges for Cannabis and Banking: Outside Perspectives,” to discuss the current banking challenges faced by the legal cannabis industry and to assess the unintended consequences and public safety risks associated with commercial businesses operating in an all-cash environment. Earlier this year, to help find close the gap between federal and state cannabis laws, Senators Jeff Merkley (D-OR) and Cory Gardner (R-CO) introduced S. 1200 – The Secure And Fair Enforcement (SAFE) Banking Act, to provide protections for financial institutions that engage with state-legal cannabis-related businesses, including ancillary businesses that have a connection with cannabis businesses. The bill currently has 31 cosponsors in the Senate and is expected to have a House floor vote this Fall.
NCIA stayed busy outside the halls of Congress, too. In June, NCIA responded and submitted public comments to the U.S. Food and Drug Administration’s (FDA) request for comments on Scientific Data and Information About Products Containing Cannabis or Cannabis-Derived Compounds. Given the substantial interest in this topic and the need for regulations and standardization throughout the industry, NCIA and this coalition are providing specific insight into all facets the FDA would like to examine, including health and safety risks, manufacturing and product quality, and marketing, labeling, and sales.
Since your representatives are not here in D.C., you don’t need to buy a plane ticket for them to hear your voice. Many representatives take this month to listen to their constituents, so there are many opportunities to speak to your members of Congress and make your voice heard. Go to https://townhallproject.com/ to find town halls in your area, invite your members of Congress to tour your business, or go visit their local office and schedule a meeting.
This is an important time in our country – history is changing right before our eyes. Cannabis policy has taken huge steps just these past months, and we cannot let that momentum stop. With your continued advocacy and support, we can continue to lead the change in our community.
Do you have questions or want to learn more about how you can help our efforts on Capitol Hill? We’d love to connect and tell you more via email or phone. Please send an email to Madeline@TheCannabisIndustry to set up an appointment to chat.
Committee Podcast: The Emerging National Hemp Market
In this interview, industry specialist and NCIA Infused Products Committee member Ashley Hanson of Humboldt Green Light Kitchen speaks with Mike Perry, President and founder of PNX Botanicals, about the emerging national hemp market. Ashley and Mike discuss the relationship between cannabis and hemp products, the effects of regulation on small and medium-sized businesses, and testing standards for hemp CBD products. With state and federal governments rapidly developing new regulations, the conversation focuses especially on improving the conversation surrounding dosing, labeling, and product quality standards.
NCIA’s Infused Products Committee focuses on edible and topical products, reviewing existing business practices and state regulations. Regulation of these products is the IPC’s initial key focus, but the committee’s purpose is to ensure the infused product sector is helping shape its destiny, rather than being driven by differing jurisdictional regulations. The IPC is also working with the Council on Responsible Cannabis Regulation (CRCR) to develop standardized regulations for legislators and regulators to adopt as their states legalize the industry.
WEBINAR: Streamlining Your Packaging Process and Innovating for the Future
Be sure to join us at NCIA’s 6th Annual Cannabis Business Summit & Expo in San Jose, California, on July 22-24, 2019 at the Wednesday afternoon panel session titled “Cannabis Packaging: Evaluating, Streamlining, & Innovating.” Presented by members of NCIA’s Packaging & Labeling Committee, this panel session will dive into key aspects of cannabis packaging that impact today’s businesses.
Committee Blog: The Hiring Process Checklist
by NCIA’s Human Resource Committee: Kara Bradford of Viridian Staffing, Kerry Arnold of Canndescent, Heidi Quan of Murchison & Cumming LLP, Nichole McIntyre of Urban-Gro, Michelle Whitmore of H2 Talent, and Mark Hackett of Emerge Law Group.
Maybe you’re just getting your business started. Perhaps you’ve already been rolling full steam ahead. Either way, people are crucial to your business. The NCIA Human Resource Committee formed this past year. The committee, headed by Kara Bradford of Viridian Staffing, includes experienced HR Practitioners, Recruiters and Employment Attorneys, who have all brought their collective “best practices” together in an effort to assist NCIA members to navigate the often complex world of employment.
The HR Committee is starting off by releasing a series of checklists to provide some essential guidelines for your firm during the hiring, on-boarding and termination phases of employment. Without further ado…
Welcome to the first installment of the NCIA Human Resources Committee Employer Checklist Series! Today, we begin where every employer begins – the hiring process – and present the Hiring Process Checklist. Although laws may vary from state to state and each employer’s approach to hiring may differ, the Hiring Process Checklist provides a framework to assure your hiring process includes basic best practices, so you can attract and hire the best candidates.
Why is it important to have a well thought out hiring process? In this era of full employment, you just need to hire warm bodies before your competitors, right? Wrong! There are at least three critical reasons to make sure you put a good hiring process in place.
First, your hiring process must comply with the law. Are your job postings nondiscriminatory? Does your job application request potentially illegal information, such as criminal background, salary history or prior workers’ compensation claims? Are interviewers only asking applicants appropriate questions? Are you storing applications and other information about applicants for the required length of time? A good hiring process greatly reduces your risk of legal problems.
Second, hiring the wrong applicant is expensive. According to a study by SHRM (The Society for Human Resource Management), the average cost of hiring an employee is just over $4,100. This does not include the cost of training a new employee, a new employee’s lower productivity and greater likelihood of making mistakes or the stress on your other employees who must pick up the slack while the new employee ramps up. A good hiring process can improve your bottom line by significantly increasing the likelihood that you hire the right employee the first time.
The third and perhaps most important reason to lock down your hiring process: you are introducing potential employees to your company for the very first time. From the time they read your job posting until you inform them of your hiring decision, the applicant is assessing and judging your company. In this competitive job market, you need to quickly give that applicant a reason to want to work for you, rather than all the other hungry employers vying for their services.
An unstructured, haphazard hiring process sends all the wrong messages. Right or wrong, it tells an applicant that the company is not serious about hiring the best employees. It tells the applicant that you don’t value their time. Would you want to work at that company?
You only get to make one first impression, so make it a good one! Be upfront and clear with the applicant about the hiring process and your timeline and stick to them. Keep the interview process on schedule and make sure interviewers are well-prepared. If you tell an applicant you will get back to them by a certain date, get back to them by that date. If the timeline changes, let the applicant know. Treat every applicant with respect at every stage of the hiring process.
Once you establish your hiring process, the hard part begins – putting the plan into action. Even the best hiring process is useless if your staff doesn’t understand it. Clearly explain the hiring process to staff who will implement or supervise it. Provide them with the training and tools they need. Finally, periodically review the success of the hiring process and make improvements, so you continue to attract high-quality job applicants.
We hope you find the Hiring Process Checklist a useful tool as you develop your company’s hiring process, but it is not the only tool available. Take advantage of the many resources available to you in books and magazines, on the internet, and through the services of an HR professional or attorney.
Happy hiring!
The HR Committee needs and values your feedback. We exist to serve NCIA members, so please tell us how we can serve your needs by emailing us at HRC@TheCannabisIndustry.org. Thank you.
Committee Blog: Social Justice in the Cannabis Industry – Your Answers Will Take Minutes, But The Impact Could Be Long-Lasting
By Rudy Schreier, MMLG
NCIA’s Marketing & Advertising Committee’s Social Justice Subcommittee
The cannabis industry is evolving at light speed. From nationwide legalization, to massive corporations developing green thumbs, cannabis culture is shifting daily. Exciting, yes, but this rapid cultural shift poses a threat to social justice by disregarding the harms caused by the war on drugs. Now, more than ever, the cannabis industry needs to come together and determine a course of action to ensure that social justice isn’t brushed aside.
Where should we start? And how can all of us in the industry handle something as daunting as social justice with the appropriate sensitivity? Let’s review some of the basics.
Cannabis has been aggressively policed since the mid-to-late twentieth century. Minorities from marginalized communities were disproportionately punished for cannabis crimes, contributing to the rise of mass incarceration. Those same communities punished for past involvement with cannabis face an extremely high barrier of entry in the newly legal industry. Many cities and states are adopting social equity programs to lower the barrier. For example, Los Angeles recently approved $10.5 million in funding over the next three years for its social equity program. Initiatives like Los Angeles’ are a step in the right direction; however, there’s still a lot more to be done.
While social justice in the cannabis industry is a new focus for some, others have been fighting for decades. Omar Figueroa, a cannabis lawyer and advocate located in Northern California, helped to convince the Sonoma County District Attorney to clear cannabis convictions and has defended numerous activists pro bono over the years. When asked how the cannabis industry should address social justice, Omar replied, “[We need to] provide grants and loans to address disparities in access to capital, continue to advocate against cannabis prohibition, and create a leadership institute to empower people directly affected by the war on cannabis.” Omar, like many other committed ‘canna-pros’, are constantly fighting for fair and equitable practices in our industry. With so much work to be done, it can be challenging figuring out where to start. This is where you come in.
As we build the new cannabis culture, we have the unique opportunity to do things differently, ethically, and better. NCIA’s Marketing & Advertising Committee’s Social Justice Subcommittee is developing an approach to social justice for the cannabis industry, and we need your help. Since we can’t tackle everything, we’re asking you to make your voice heard and help us navigate the difficult terrain ahead. Please take this 4-question survey about what social justice should mean in the cannabis industry. Your answers will take minutes, but the impact could be long-lasting. Feeling ambitious? Share this ‘gram-sized graphic’ in your own social channels to spread the ‘poll power’ far and wide!
Interested in learning more? NCIA’s Social Justice Subcommittee will be hosting a panel titled “Cannabis Reform Stops Short: Why We Can’t Let Social Justice Get Lost” at NCIA’s Cannabis Business Summit & Expo in San Jose on Tuesday, July 23, from 1:30 PM – 2:30 PM. Register for the conference today!
Marketing and Advertising Committee: (MAC) of National Cannabis Industry Association (NCIA) — develops best practices in cannabis industry marketing /education, opening dialogues with media outlets that ban cannabis-related advertising.
Social Justice Subcommittee: An arm of the MAC committee, the aim is to ensure that social justice issues are positively addressed via cannabis reform. Team Members: MMLG, Cannawise, Canna Advisors, Annabis.
The Author: From operations and marketing, to office and project management, Rudy Schreier wears many hats for the Los Angeles-based licensing and compliance consultancy MMLG. Schreier co-founded the #StartsAtThePolls campaign, which utilized social media platforms to inform voters on how to register to vote, how to get to the polls, and pro-cannabis candidates running for the 2018 elections. The Panel: Be sure to catch the Social Justice Subcommittee’s panel featuring Lisa Jordan (Canna Advisors), Omar Figueroa (Law Offices of Omar Figueroa), Shanita Penny (Minority Cannabis Business Association), and Felicia Carbajal (The Social Impact Center) at NCIA’s Cannabis Business Summit & Expo titled, “Cannabis Reform Stops Short: Why We Can’t Let Social Justice Get Lost.”
WEBINAR: How to Approach Your Local Government – What You Don’t Know Could Hurt You!
Discussing cannabis and approaching government officials can both be daunting, but with a little knowledge and confidence, both can work together quite well!
Join members of NCIA’s State Regulations committee to get guidance and your questions answered so that you can be your best and help your community at the same time.
NCIA’s State Regulations Committee examines and reviews the varying cannabis industry-specific statewide regulations and work to establish best practices or guidelines for states and municipalities to facilitate the development of regulations and compliance procedures.
Committee Blog: Cannabinoid Analogues Offer a Promising Future for Medical Cannabis
As outside industries fuse with the cannabis market, we will begin to see innovations that will flesh out our understanding of cannabinoids and how they interact with the human body. I had the opportunity to sit down with chemist Dr. Mark Scialdone and Chris Barone, founder and lead chemist at The Clear™ to discuss the introduction of semi-synthetic cannabis compounds to the market. We focused on hydrogenated cannabinoids; cannabis with a slight twist that could change everything about why and how we consume cannabis.
Hydrogenation is simply treating a compound with hydrogen, which causes a chemical reaction between hydrogen (H2) and another compound or element, usually in the presence of a catalyst such as nickel, palladium, or platinum. This is done in order to reduce or saturate organic compounds, imbuing them with properties the original compounds did not have. These cannabinoid analogues (or semi-synthetic compounds) have a number of applications in manufacturing and medicine.
Hydrogenation is a minor modification to the natural framework of the compounds the cannabis plant produces biologically. Barone describes the process as, “adding hydrogens across the double bonds, thus changing the molecular weight, the molecules geometry, and also its effects on the body.”
Benefits of Hydrogenated Cannabinoids
A major benefit to hydrogenation is that it offers stability at the molecular level, assisting with both shelf life, and resistance to heat. Scialdone explained, “hydrogenation is a chemical transformation on unsaturated compounds to improve their stability and resistance to thermo-oxidative breakdown,” – which occurs when these compounds are in the presence of air. This is the reason you cannot leave cooking oils on the counter exposed to sunlight, as eventually this reaction will cause them to go rancid. Hydrogenation improves the oxidative stability by removing the unsaturation.
Based on a study referenced in Scialdone’s patents (US10071127B2 & US9694040B2), the effects of cannabinoids and hydrogenated cannabinoids were examined, in reference to tumor growth in mice. In these cases, the hydrogenated cannabinoids showed significant improvement in the reduction of tumor sizes; with Hexahydrocannabinolic Acid (HHCA) at a 39.70% reduction, and HCBDA at 55.83% reduction (compared to the non-hydrogenated compounds THCA at 37.67% and CBDA at 47.02%) (source). It’s possible that hexahydrocannabinoid (HHC), being more stable than tetrahydrocannabinoid (THC), and less prone to dehydrogenation (converting to DHC and CBN), may have an impact on resistance towards oxidative metabolic breakdown in the liver, though there is no critical examination at this time. It has been observed in metabolic studies that hydrogenated compounds are resistant to this kind of breakdown, suggesting that hydrogenated cannabinoids may exhibit this trait as well.
Image: Cannabinoid Structures
Difference Between Natural and Semi-Synthetic Cannabinoids
There is still much research to be done to define the exact pharmacological differences between hydrogenated and their plant-derived cannabinoids, but the chemical differences are quite distinct. “Tetrahydrocannabinoids like THC are metabolized into the 11-Hydroxy-THC-metabolite and ultimately the nor-carboxy-THC-metabolite; because we’ve converted the THC to HHC, metabolites will differ from the ones derived from THC,” explained Scialdone. Thus, they will have a different pharmacokinetic profile because the metabolites are going to be different in hydrogenated compounds. Meaning, the hydrogenated compounds could have a longer half life and bind to different receptors within the ECS.
A study published in the Journal of Medicinal Chemistry evaluates the ability of various cannabinoid analogues to modulate the production of reactive oxygen intermediates (ROI) various metabolic functions as well as their binding capabilities to the cannabinoid receptor (CB1). It was found that hydrogenated CBD and Cannabidiol-dimethylheptyl (CBD-DMH) demonstrated bioactivities different from their original compounds (source). The study focused on the anti-inflammatory and immune responses that have been previously observed in the non-analogue compounds. To compare the hydrogenated cannabinoids, they observed the derivative compounds for their ability to suppress the production of ROI, nitric oxide (NO), and tumor necrosis factor (TNF-⍺) by activated macrophages in vitro. Some of the compounds (7 and 4) exhibited an increase in their suppressive effects of NO, TNF-⍺, and ROI. Compounds 7 and 8 are strongly bound to the central cannabinoid receptor (CB1), but with an opposite effect on their ability to modulate the release of inflammatory mediators. When compared to the effects of natural cannabinoids, it is noted that isolated cannabidiol (CBD) also has tumor growth suppressive qualities, with similar functions of hydrogenated CBD (source). The distinction between the two is the bioavailability and slow breakdown of the hydrogenated compounds, however more research is required.
Image: Chemical Structure of Cannabidiol Derivatives
The JMC study concluded, hydrogenated cannabinoids exhibited good binding to CB1, but have varying effects on inflammation – which could spring opportunities for anti-inflammatory and immunosuppressive properties in murine collagen-induced arthritis, as suggested by the Ben-Gurion University. This is because the hydrogenated cannabinoids seem to have a strong effect on hyper-inflammation, which would reduce pain and swelling of the joints.
Public Health and Safety
When dealing with new compounds, it is crucial that health and safety are considered. “We will want to look at what impacts the hydrogenation has on the metabolic profile, and whether or not the hydrogenation is having a beneficial impact on biological actions with the cannabinoids,” explained Scialdone.
It will still take a few years for a product like this to be available to the public. Although the market may see hydrogenated cannabinoids present in medical and recreational states sooner, extensive research on these compounds will remain difficult under current federal laws. The Federal Analog Act states any substance derived from a schedule I or II substance will be treated as the same schedule substance when its purpose is for human consumption. “Pseudo-synthetic cannabinoids should be allowed in my opinion,” Barone adds, “but only through close analysis of the SOPs and quality control conditions. In states where they do not have the resources, I believe manufacturers should be mandated to hire third-party chemical manufacturers to audit and approve the techniques being used.”
Image: Crystalized HHCA Captured by CM Botanical
Research in this arena will provide greater understanding as researchers gain further understanding about hydrogenated cannabinoids and their impact on the human body. Barone pointed out, “I’d like to emphasize that the human interaction with this molecule is the driving force of the progression. Without the idea and the human, the molecules sit untouched and unexplored.” Utilizing the unbound creativity of science, the cannabis plant has more to offer than we once knew.
Courtney Maltais is co-founder and lead biologist at The Clear; a California-based extract company that brought the first Cannabis distillate to market in 2013. Maltais works with industry leaders in cultivation, manufacturing, and product development to create efficient, safe, and standardized lab practices. Her passion for science and education has led her to expand into educational outreach for both business owners, employees, and consumers alike.
NCIA’s Scientific Advisory Committee is comprised of practicing chemists and other scientific field professionals to advise other NCIA committees as they work to develop standards and guidelines for the various sectors of our industry, ensuring that any formal recommendations produced by other NCIA committees are scientifically sound, sustainable, and legitimate.
Committee Blog: Accurate Pasteur Pipette or Grandma’s Turkey Baster – Cannabis Dosing
by NCIA’s Infused Products Committee; contributors Todd Winter, Ashley Hansen, Danielle Maybach, Lee Hilbert, Trevor Morones, and Greg Scher
Where is cannabis in the journey of dosing edibles?
Edibles are growing as a market share only behind concentrates. It is essential to have accuracy across the industry to protect human health and stabilize the consumer market. Potency, homogeneity, absorption rate, interpretation of dose (by State, County, International), percentage error/variance, labeling, and source of raw materials are just some of the items always questioned.
While we are discussing this issue, there will be no right answer for everybody. What is the dose? What is a serving? A check of an operator’s shelves will show chocolate bars with 800 mg of THC and a similar sized bar with 80 mg of THC. If you walked off the street and bought the 800 mg bar with only experiencing the 80 mg bar; you are in for a trip, and not a good one.
BDS Analytics’ GreenEdge Retail Tracking Platform as presented by Tamar Maritz in February had shown that when California consumers purchased cannabinoid products in 2018, they often want to know the CBD and THC content.
Label requirements vary state by state on the THC side and are often inaccurate both in the reporting of potency and the way they are displayed on CBD products. Extracts used as raw ingredients in product formulation come in various forms, it is important for the manufacturers to know the percent of actual CBD or THC when making purchase decisions. CBD extracts can be in the form of isolates with low bioavailability, or full spectrum which means the cannabinoid retains more of the plant’s original components.
Additionally, there are infused products, where the flower is extracted by an infusion into an oil, retaining even more of the original cannabinoid profile. All these extracts have specific formulation and labeling nuances that need standardization. The medical community wants even more specific terpene profile information as individual levels of Limonene, Myrcene, and other terpenes gain recognition for properties that have some additional benefit.
Do the terpenes solely earn the credit for their benefits or is it in combination with the other chemical compositions?
There are many ways to add cannabinoids into edibles; for example, when developing cannabis-infused products, are the manufactures using the “sprinkle” method to add the raw material/additive by literally sprinkling isolate? Are they using a pipette for exact measurement from a reputable supplier that is approved for food contact having been third-party audited, or a turkey baster from grandma’s kitchen utensil drawer which has seen some years? Methods abound!
Perhaps the most accurate method to create a homogenous product is to incorporate the raw material during the mixing step; before cooking, gassing (CO2), or pasteurization. Not everybody that starts an edible factory comes from the food or pharmaceutical industry. A standard serving size or dosage, whichever you prefer, could make life easier for all stakeholders with a few exceptions. As yield models mature for extraction, markets will adjust, and prices can stabilize based on real data.
In Iowa, they have just legalized for medical use, but the flower is not legal. It is 100% treated as a drug. Any product needs to have no more than 3% THC to be permitted. We can’t forget our colleagues dealing with burdensome regulation. I doubt they can measure with turkey baster there, and if we saw a manufacturer in Iowa, we would probably see a pipette. Consensus on a dose can help elected officials know more and lift heavy restrictions.
Caffeine, like cannabis, is a naturally occurring alkaloid in 60+ plants. Cannabis produces THC and CBD, which are cannabinoids. The next step for the industry in supporting cannabinoid dosing of THC and CBD or any other cannabinoid is to increase general public recognition, routine toxicology studies, and develop appropriate data and work methods to obtain public recognition or certification for food safety, public safety, and documentation.
In the United States caffeine, when in soda, is limited to 65 mg per 12 liquid ounces of beverage. In pill form, the FDA allows 200 mg of caffeine. While this is about THC/CBD, the parallels are plain. While the Cannabis industry addresses dosing challenges are many. Stakeholders composed of consumers, operators, manufacturers, laboratories, distributors, and regulators would like to see the order in the industry.
The Federal Government does not yet consider cannabis as a food additive that is “Generally Recognized as Safe (GRAS).” Caffeine, a GRAS substance under current regulation, attained status under industry practices over 60 years ago. Within our industry, GRAS is not a deeply-rooted measurement for quality or safety standards. Cannabis has no history of being hazardous when infused in products and defining a serving, or a dose should not impact the operations of notable brands that provide excellent food safety and quality.
Each consumer (patient or recreational user) has their personal approach to cannabis dosing based upon their due diligence. Manufacturers are producing THC and CBD products that range from “micro-dose” to “mega-dose” because they understand that no one standard dose is the right for every individual.
Consumers look at labels to determine which product to buy. Manufacturers rely on testing to confirm THC and CBD content. CBD and micro-dose product categories are trending; unfortunately, many laboratories are not equipped to test CBD products accurately and consistently. THC Micro-dose products have similar problems. Not all laboratories have equipment that can report trace amounts accurately. Homogeneity, labeling, and raw ingredient sourcing are opportunities for manufacturers to set themselves apart to the retail operators in a wide-open market. Let us collectively work together towards clarifying the issue and work with all the stakeholders to define for the public some language that can be understood by all, encourage federalization, and develop a standard of excellence.
NCIA’s Infused Products Committee (IPC) focuses on edible and topical products, reviewing existing business practices and state regulations. Regulation of these products is the IPC’s initial key focus, but the committee’s purpose is to ensure the infused product sector is helping shape its destiny, rather than being driven by differing jurisdictional regulations. The IPC is also working with the Policy Council and Council on Responsible Cannabis Regulation (CRCR) to develop standardized regulations for legislators and regulators to adopt as their states legalize the industry.
WEBINAR: Cannabis Testing & How to Read Test Results
Learn from expert panelists: Alena Rodriguez, Managing Director, Rm3 Labs; Garrett Cropsey, Project Manager, Canna Advisors; and Tiffany Coleman, Director of Quality, Copperstate Farms.
Without delving too much into the testing methodologies used, we discuss reporting limits and some reasons for variability in test results. We also discuss the basic terminology used in test reports, provide examples of test results, and show you how to read them.
This webinar is great for general audiences that want to learn more about why we test in cannabis, how to interpret test results, and how you can use results as a consumer or cannabis business.
The Scientific Advisory Committee (SAC) is comprised of practicing chemists and other scientific field professionals to advise other NCIA committees as they work to develop standards and guidelines for the various sectors of our industry, ensuring that any formal recommendations produced by other NCIA committees are scientifically sound, sustainable, and legitimate.
For a deeper dive into cannabis testing policy, download this report prepared by NCIA’s Policy Council, where we explore recommendations for cannabis testing policies including requirements for proficiency, contaminants, potency and active ingredients, as well as records retention and laboratory accreditation.
Committee Blog: Streamlining Your Cannabis Packaging Process – Four Steps For Success
The beginning of a new year brings an opportunity to take stock of your cannabis business and ensure you’re doing everything possible to succeed. And because packaging is such a critical piece to brand wins and losses in this market, now is an ideal time to evaluate your process. It’s absolutely possible for your cannabis packaging to stand out while staying operationally efficient, it just takes careful planning. Get started with these four steps to streamlining your cannabis packaging process.
Step 1: Look for Flexibility
Rules and regulations for the cannabis and hemp industries are continually evolving. Streamlined cannabis packaging and labeling should accommodate data that changes regularly—as well as any required content that may be revised in the future. Always leave space on your package for legibly printed variable data (state-mandated warnings, potency, testing results, etc.). Utilizing secondary labels are often an unfortunate necessity of cannabis packaging. However, if these additional labels are composed creatively, they can actually serve a functional purpose and enhance the package design. A great example of this is a well-designed label that offers messaging while making the package tamper-evident. If possible, consider using an on-demand printing system on pre-printed label stock to minimize material cost and waste.
Step 2: Confirm Compliance
Now that you’ve dialed in your packaging options and are confident you can be agile with information, it’s time to ensure your product is compliant with state regulations. Brands with non-compliant packages can have their products pulled from store shelves or even face fines from state regulators. Re-printing labels or packaging can be very costly in print, labor and time.
Confirm that your package or label includes correct warnings, universal symbols, and produced with the correct material thickness and opaqueness if necessary. Edible products may need to include allergen information and other FDA requirements. Many states require tamper-evident or child-resistant packaging. Verify that your packaging container is compliant by requesting child-resistant certification from your supplier, or check to see if it is already on your state’s pre-approved packaging list.
It is highly recommended that brands don’t rely on their own interpretation of the laws. Consulting legal counsel is well worth the investment of confirming your packaging meets all the necessary requirements.
Step 3: Efficient & Effective from Sale to Shelf
Key to streamlining the packaging process is making sure your packaging is efficient and effective from the time you sell it, to the moment it’s merchandised on shelf. This relates to both the process of packaging your product and protecting your profits. Being efficient and effective with packaging will have a significant impact on your bottom line.
We suggest brands design their packaging to fit the size of the item. Oversized packaging costs more and can be misleading to the customer. In addition to selecting an appropriately sized package, brands need to accurately determine the labor cost associated with packaging options. Adding a sealed pouch for a pre roll takes labor hours. Consider the amount of time it takes to package a single product in comparison to the wholesale unit price. It’s easy to overdo packaging for a small profit margin. Make sure to test prototypes or samples with your production team or partners before you order a large quantity of packaging or labels. It’s essential to understand what the package will be subjected to once it leaves your facility. If at all possible, consult with existing distribution associates or wholesale customers for their input before investing in packaging. For example, your retail clients may prefer to display their products utilizing slat wall, which means that peg holes would be a valuable consideration to your package design.
Another consistent issue is knowing how dispensaries store your product in the back of house. If you have big mylar packaging for a small item, organizing those in bins, drawers or big safes becomes a mess down the line. Wholesale cannabis producers can also benefit from a primary panel label paired with a child-resistant container or mylar bag to streamline their distribution or sales process.
Step Four: Timing is Everything!
Advice we consistently offer brands? Understand your production timeline before you place any packaging order.Think about the implications of ordering stock or custom containers, and your shipping options. While custom containers and labels ensure differentiation in retail stores, they may take longer to produce than ordering off the shelf solutions. Processing art, approving proofs, production and shipping will all impact how fast your product can get to market. Packaging shortages in the cannabis industry are widespread so if you do decide to use stock containers such as glass jars or child-resistant tubes, make sure to place an order far in advance or well before you run out of packaging. Having a plan B can also be helpful. Ordering custom packaging may take longer, so stock items (like a label on a pouch or pop-top) can be used in the interim and may also be used for samples.
One Last Tip
It’s always smart to network with other brands that have similar packaging challenges to you. If they are willing to share them, lessons learned in the market are invaluable to brands making packaging decisions. Doing your fair share of market research by seeing what’s working in retail can also guide you in the right direction.
Have any tips yourself? We’d love to hear them in the comments!
Member Blog: Advice for Surviving and Thriving in the New Era of Legal Cannabis From Those Who Have Climbed The Mountain (Part 1)
The challenges facing companies pioneering a new industry where each state deals with its own issues are numerous. The importance of strategic business planning and the ability to predict future problems are essential to survival.Colorado, Washington, and Oregon have each dealt with their unique issues and challenges but there are also common problems that every cannabis business experiences: burdensome regulation, unfair taxation, and banking prohibition to name a few. Building your company and brand is dependent on your ability to maneuver your company through the obstacles that will arise in your state market while also planning for a future of legal interstate commerce through a change in federal policy. To place your company in a position to be successful, you should understand the past to predict the future.
Quick Summary of Cannabis History
The history of cannabis is long and distorted, however a few basic points of what brought us to the current state of federal prohibition and individual state markets should be noted for context.
Cannabis use as medicine dates back to 2700 BC in China, and has been used throughout history. In 1850, it was added to the U.S. Pharmacopeia. Prior to state and then Federal prohibition, cannabis was an elixir/tincture used in many common household cough/cold syrups and other medications for stomach-aches, asthma, depression, and many others. In the 1930s, cannabis was regulated as a drug in all states, and in 1937, the passing of the Marihuana Tax Act regulated it federally. Then in 1970, the Controlled Substances Act determined cannabis to be a Schedule 1 drug meaning it has no medical benefit and a high risk for abuse. From 1970 to 1996 the manufacture, use, or possession of cannabis was illegal in all fifty states.
CALIFORNIA
In 1996, California became the first state to legalize the medical use of cannabis through Proposition 215. California was the first domino to fall and further background of the early days of California medical cannabis will be addressed in later blogs in this series focusing on California. Over the next twenty years, 37 states have joined California with medically legal cannabis, and nine states have passed and implemented legal “recreational” (now referred to as “adult use”) cannabis programs.
OREGON
Oregon was the second state to pass medical cannabis in 1998 and that was the start of this author’s journey through the cannabis industry. Prior to 1998, Oregon had been a bastion of black market cannabis cultivation due to its climate and wide open spaces especially in rural southern and eastern Oregon. After 1998, the state “protections” offered by medical cannabis state law allowed the cultivation industry to flourish. However, as opposed to California the state was more focused on growing weed and selling it around the country rather than setting up a distribution system to the medical patients of Oregon. This led to some of the early challenges of the medical cannabis program in Oregon. At this time, the Oregon population was relatively small compared to the state’s cannabis production. Oregon was on its way to being one of the largest cannabis producers in the country. But because cannabis was so easily accessible there was little effort put into a healthy distribution system to Oregon patients. Most patients either grew for themselves or had a designated “grower” and that is where I started in the industry.
OREGON: FORMATION OF RETAIL ESTABLISHMENTS
As a nurse who had self medicated with cannabis for ADHD, I began growing for patients because I wanted to provide others with access to the amazing health benefits of cannabis. This was the common way most patients accessed their cannabis. There were no dispensaries when the program started and patients who didn’t have a grower were relegated to barter trade types of acquisition. In 2005, the Oregon Legislature allowed growers to be reimbursed for the cost of production and in 2010, the first dispensaries began to pop up. However, it wasn’t until 2012 that legal retail entities were allowed. This lack of a retail access point for patients was one of the first impediments to the program and allowed states like Colorado and California to take the mantel on progress of a robust program of medical cannabis distribution.
COLORADO
In 2000, Colorado became the sixth state to allow medical cannabis with Amendment 20. Its medical program remained low key until 2010 when the Colorado Medical Marijuana Code was created, which provided for licensing of production and retail establishments. This change was a giant step to the progress of cannabis legalization.
Colorado followed the early model presented in California and began implementing licensed retail establishments for card carrying medical cannabis patients. Retails stores began to flourish and this laid the groundwork for the establishment of the Adult Use program. In 2012, Colorado became the first state to legalize what was originally referred to as recreational cannabis now called “Adult Use” cannabis, which allowed the sales of cannabis to all adults aged twenty-one and older and the boom began. Colorado’s medical program developed into a rapidly growing Adult Use system and with the new federal guidance of the Cole Memo in 2013 canna-businesses began growing rapidly.
COLORADO: SEED TO SALE TRACKING
The primary language of the Cole Memo highlights a “robust tracking system” of all products produced and sold. The Cole Memo did not provide protections for cannabis businesses but provided guidance that helped assure businesses of some safety from federal interference. With the advent and implementation of a tracking system we could now be assured of where products came from and be able to track them back to their origin.
COLORADO: LAB TESTING
Once tracking was in place, lab testing for the safety of the consumer came to the forefront of industry progress. This was one of the first problems Colorado realized it had with its blossoming industry. As opposed to Oregon which required all products sold through its immature dispensary system since 2012, Colorado had not required lab testing of all its products until 2016 after several large quarantines and destruction of unsafe contaminated products. Many Colorado producers struggled with new pesticide regulations and was an early sticking point to growth of the industry. Over the first years of Adult Use cannabis program, Colorado struggled with the infancy of a brand new industry and how to regulate it and consequently, businesses suffered.
Other early challenges that the first legal state dealt with were allowable dosages and changes to dosing, as well packaging changes and the look of products, specifically how or if the products were attractive or marketed to children. The obstacles of a new industry most directly affect the businesses and their bottom lines. These are important points to consider when strategizing your business model and planning for inevitable changes to regulations. The time spent preparing for a system that will change will go a long way to ensuring for success.
WASHINGTON
Now let’s talk about Washington.
Washington was the third state to approve medical cannabis but had problems with implementation due to legislative issues. As multiple pieces of legislation were offered, adopted, and repealed, the lack of clarity prevented the medical cannabis industry from launching. Washington passed its adult use cannabis program at the same time as Colorado in 2012. In Washington, the two major obstacles the industry faced were licensing issues and taxes. A previously existing strong medical program in Colorado allowed for a seamless transition to an adult use program, but that was not present in Washington and this added to difficulties with implementing an adult use program.
Because the industry was just getting off the ground, both states relied on their medical programs as a foundation to the adult use. However, Washington’s medical program was murky and disorganized which lead to complications, Washington also limited licenses and put unfair taxes on the industry. These two factors aided in keeping the black market as the primary driver of the industry, rather than pulling people or businesses into a controlled, tracked, and regulated system.
280E TAX CODE
This provides a nice segue to one of the challenges all cannabis business face: unfair taxes in the 280E tax code. Internal Revenue Code section 280E specifically denies a deduction or credit for any expense in a business consisting of trafficking in illegal drugs “prohibited by Federal law or the law of any State in which such trade or business is conducted” which translates to only “Cost of Goods Sold” as the only deductible expenses. This means administrative costs, executive salaries, marketing and advertising, banking fees, etc., are non-deductible expenses for any cannabis business and subjects them to much higher taxes as most normal business deductions are prohibited. This challenge is one all cannabis businesses deal with and must be factored into financial modeling.
BANKING
While we are on the the subject of taxes and non-allowable deductions, banking is the other major challenge all cannabis businesses face. Due to federal policy around an illegal substance, FDIC insured institutions force canna-businesses to operate in all cash for fear of prosecution under racketeering and money laundering laws. There are a handful of financial institutions, credit unions, or state banks that offer “Enhanced Monitoring Accounts” for cannabis companies. However, they are highly priced and rare. The average cannabis bank account is likely to run $1,000.00 a month, just to have access to banking services, not including additional fees. This $12,000 a year budget line item, while not only expensive, is not a tax write-off per 280E tax code.
One can quickly see from just these two major hurdles or challenges to the industry, normal operations can be difficult. These obstacles are not to be taken lightly; they can be addressed but it must be factored into operating procedures, financial planning/budgeting, and strategic vision.
NOW BACK TO STATE SPECIFIC ISSUES
As Washington and Colorado dealt with its issues, Oregon voted to approve “Adult Use” cannabis in 2014. Using Colorado and Washington as a guide, Oregon implemented their system with more deliberation and vision based on what had been experienced in the first two states. But as was seen with the unique challenges in the first two states, Oregon encountered an entirely different set of problems. Oregon currently faces a massive oversupply problem which has affected all facets of business across the industry. In normal business and supply and demand economics, if an area is oversupplied, business move their products to where the demand is higher or the supply is lower. However, cannabis remains a federally illegal product and therefore interstate commerce remains illegal.
Oregon’s unique problem originated from two main issues:
Oregon had already established itself as a cultivation mecca
The regulatory authority decided against a cap on licenses
This lack of license caps has allowed the number of licensees to explode and thereby allowed the oversupply issue to occur and continue to grow. As stated, this is not a problem exclusive to cultivator/producers. Because of a 75% drop in value, cannabis attorneys, electricians, HVAC, security companies and other ancillary businesses are not getting paid. The oversupplied market and decreased revenue has reverberated across the industry and driven otherwise thriving companies into bankruptcy.
As you can see, each state deals with its unique challenges when implementing its Adult Use cannabis program, while we all deal with some issues that affect us all. The key to thriving… or surviving is to prepare your company to deal with the current challenges shared by us all and predict the challenges that your business will face in your state while preparation is taken for a national and international market.
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of CascadeHigh Organics with 20 years experience cultivating legal cannabis. James is a self-described organic minimalist cultivating in the most sustainable manner. James believes in clean cannabis and its use as a wellness drug. His Oregon licensed cultivation, Cascade High, has been featured in Dope Magazine and on the cover of Oregon Leaf’s Sustainability issue (March ‘18). James was featured as the Inaugural Stoner Owner by OR Leaf in Dec 2018. He has articles published by Dope Magazine about Cannabusiness and the Pharmaceutical Industry (May 2017), as well as a medical cannabis article in the Jan. 2019 Healthcare issue of OR Leaf. James is currently on the NCIA Cannabis Cultivation Committee and has presented Cannabis topics to multiple audiences at conferences including Cannabis Science Conference, PDX Hempfest, Cannabiz Convention, CBD Expo and Webinar series, Cannabis Collaborative Conference(CCC), Cannabis Nurse Conference, NCIA and educational industry mixers. His business, legal, medical, and agricultural knowledge provides a unique perspective on the industry. James has lobbied for Cannabis on both the national and state level with Oregon Cannabis Association and is a fierce advocate for the plant and all who use it.
WEBINAR: Michigan Voted to Legalize Adult-Use Cannabis – What You Need To Know Now
On Election Day, Michigan voters resoundingly approved Prop 1 to legalize and regulate adult-use marijuana under state law. It’s an exciting time with great possibilities, but what does this mean for the future state of Michigan’s legal cannabis landscape?
Watch this recording of the webinar from NCIA’s State Regulations Committee, presenting its first-ever interactive webinar designed to help you answer the pressing questions about Michigan’s new adult-use market.
Join NCIA’s State Regulations Committee members, including Chair Maureen McNamaraof Cannabis Trainers, Committee Vice Chair Michael Cooperof MadisonJay Solutions, and Barton Morris of Cannabis Legal Group, as they help us fill in the blanks for adult-use regulations in the state of Michigan. The webinar helps answer what we currently know about the laws, any key open questions that remain, and what potential market entrants should be doing now to get ready.
Watch the webinar “Michigan Voted to Legalize Adult-Use Cannabis: What You Need To Know Now” hosted by members of NCIA’s State Regulations Committee.
As 2018 came to an end, the FINAL proposed text of the permanent regulations for California cannabis were submitted to the Office of Administrative Law (OAL) by the three regulatory agencies – the California Department of Food and Agriculture (CDFA), California Department of Public Health (CDPH), and the Bureau of Cannabis Control (BCC). The cannabis regulations submitted to the OAL are currently undergoing a 30-day administrative review to ensure alignment with MAUCRSA and statutory requirements. These “final’ regulations shall become effective immediately upon approval/adoption which should be on/before January 16th 2019.
What “final” means in this evolutionary process of California cannabis regulations is debatable, as there are already several Assembly and Senate bills queued up to be put through the legislative tango and all three of the regulatory agencies have indicated that there will be further clean-ups and clarifications of the “permanent” regulations. Although there will assuredly be changes ahead, this is a highlight reel of where California Cannabis stands now.
For those that dug into the October redrafts, much of the substantial changes that occurred in that version carried over into the final proposed text. Here we will highlight the top eight changes impacting cannabis businesses in California.
The Final Statement of Reasons from the BCC, which also included responses to pertinent comments received during the previous 15- and 45-day comment periods, is where some greater clarity about the regulatory changes and intents can be found. It is by spelunking into these deeper caverns of reasoning where the sweet ore of further clarity can sometimes be extracted.
Here are 8 highlights for anyone interested in California cannabis.
1. Ownership and Financially Interested Parties
In October we saw the expansion of the definition of ownership and financially interested parties that clearly sought to capture the identification of any and all warm bodies that stand to direct, control, or financially benefit from commercial cannabis. While there were some changes in sections §5003 and §5004 between the previous and current version, the scope and intent remained the same. One particularly vague line §5003.b.6.D “Any individual who assumes responsibility for the license.” was removed from the BCC’s definition of owner, this very line turned up over the in the CDPH’s update in §40102.a.4.D.
The Ownership and Financially Interested Parties disclosures dovetail into the White Labeling issues (See #2) in that “Brand Owners” that may be licensing IP to contract manufacturers have been impacted by the prohibition on non-licensees conducting commercial cannabis business with licensees. In the response to comments in the FSOR was this gem of insight, “In response to commenter’s questions, if a licensee includes as one of their owners a brand-owner, the licensee can produce the branded products because in this case the licensee is not engaged in commercial cannabis activity on behalf of an unlicensed person. Because the owner of the brand is an owner of the licensee, there is no unlicensed person involved.” Of course, before everyone runs off and adds brand-owners as owners of their contract manufacturing business, let’s take a moment to reflect on the value and critical importance of a well-drafted contract.
2. §5032 (b) The So-Called “White Label Prohibition”
5032.b shall go down in infamy as one of the more talked-about sections of the BCC’s regulations. This simple sentence, “Licensees shall not conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with any person that is not licensed under the Act,” brought with it a level of confusion and white-hot panic regarding the inferred white label prohibition contained therein. October’s version had more explanatory examples for the types of “on behalf of, at the request of, or pursuant to” activities that the BCC was talking about, such as, “procuring or purchasing cannabis goods from a licensed cultivator or licensed manufacturer. Manufacturing cannabis goods according to the specifications of a non-licensee, Packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee, Distributing cannabis goods for a non-licensee.” This language was removed in the final version submitted to the OAL and is one of the examples of where the FSOR is enlightening.
From the BCC’s FSOR: “Initially, the Bureau determined that it was necessary to assist licensees with determining what types of activities may or may not be allowed under the Act and its implementing regulations. The initial proposed change identified certain transactions that would generally be considered commercial cannabis activities under the Act. However, the Bureau has determined that inclusion of the clarifying example transactions is causing more confusion. Accordingly, the Bureau has decided not to move forward with the proposed changes which identify examples of specific commercial cannabis transactions.” The definition of “commercial cannabis activities,” therefore, is an important one, and we can refresh ourselves on that one (Business and Professions Code §26001.k) “‘Commercial cannabis activity’ includes the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products as provided for in this division.”
This has been a hot, hot topic, and there have been some great analysis articles of this provision that dig further into solutions and scenarios related to this section. Get thee to Google and find out more!
3. Option to label THC/CBD post-final testing by Distributor
This was a big win for the industry! A substantial percentage of testing failures for “label claims” are due to products, previously required to be labeled with THC/CBD content prior to final testing (the one test that counts!) not falling within the 10% allowable variance threshold. It’s common knowledge that the science of cannabinoid testing is still getting dialed in, and the labs have some serious challenges in hitting the same tiny target twice. Especially when they are dealing with the vast array of cannabis product matrices, and an industry that it still learning about important things such as homogenization. The good news is, the CDPH now allows products to be labeled for THC/CBD content after that all-important final test, which should eliminate well-upwards of 50% of the product failures in California and ensure a steadier supply chain.
4.Regulation of Technology Platforms
The cannabis industry has always been a place of innovation and loophole-finding. These regulations are an attempt to close some of those loopholes that seem to have created a situation where unlicensed tech platforms were enjoying the privileges of licensed commercial cannabis without undergoing the slings and arrows of local/state licensure and regulation. Seeing themselves outside of the regulatory purview, certain business claimed that agencies such as the BCC had no dominion over their activities. Well, they may have wanted to wait until the ink dried on the final regs before making such an assertion, as now it seems the BCC has expanded its reach to embrace all kinds of advertising, facilitating, and delivery platforms.
5. Delivery to a Physical Address
This was (potentially) a huge win for patient access, however, it remains to be seen how this truly shakes out. When the BCC added the line that “a delivery employee may deliver to any jurisdiction within the State of California” it caused some serious outrage from municipalities that have banned commercial cannabis activity, the League of Cities, law enforcement, and others that saw this as a huge overstepping of the local authority ensured by Prop 64 and MAUCRSA. The LOC even launched a “wandering weed” campaign, in response to which it seems that a subsection that includes “a restriction on delivering cannabis goods to a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center” was added to the regulations, for clarity. Whether the OAL will approve as is, and how this interacts with local bans, tax requirements, and law enforcement, and lawsuits… stay tuned! While the BPC (§26090.e & 26080.b) explicitly prohibits a local jurisdiction from preventing delivery, and transportation, of cannabis goods on public roads, it does not prevent localities that have banned commercial cannabis in their area from adopting ludicrous tax rates for deliveries that would in effect ban via taxation delivery in their area.
6. Sale of Non-Cannabis Goods (aka No Hemp)
While the seeming victory of the Farm Bill has folks leaping with joy for the future of hemp, statements from the FDA and other agencies have certainly rained on the parade of many a CBD vendor. Add to that the collections of California cannabis regulations that in effect eliminate hemp-derived CBD from cannabis dispensaries and products.
“In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and any licensee’s branded merchandise.” (BCC §5407)
This limitation for retail (and retail delivery) is further clarified in the BCC’s FSOR in their responses to comments:
“Cannabis retailers are licensed to sell cannabis goods. The definition of cannabis within the Act explicitly excludes industrial hemp products. Industrial hemp is regulated by the California Industrial Hemp Program under the California Industrial Hemp Farming Act.”
“A retail license from the Bureau authorizes the retailer to sell cannabis goods and cannabis accessories. A retail license from the Bureau does not authorize licensees to sell items that are unrelated to cannabis.”
Combined with the retail prohibition on non-cannabis products, this trifecta from the CDPH extends that prohibition to manufacturers:
“A manufacturer licensee shall only use cannabinoid concentrates and extracts that are manufactured or processed from cannabis obtained from a licensed cannabis cultivator.” (CDPH §40175.c)
“Except for cannabis, cannabis concentrate, or terpenes, no product ingredient or component shall be used in the manufacture of an edible cannabis product unless that ingredient or component is permitted by the United States Food and Drug Administration for use in food or food manufacturing, as specified in Everything Added to Food in the United States, or is Generally Recognized as Safe (GRAS) under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act.” (CDPH §40305.a)iii. “Except for cannabis, cannabis concentrate, or terpenes, topical cannabis products shall only contain ingredients permitted for cosmetic manufacturing in accordance with Title 21, Code of Federal Regulations, Part 700, subpart B (section 700.11 et seq.) (Rev. March 2016), which is hereby incorporated by reference.” (CDPH §40306.a)
For now, it seems, non-cannabis derived CBD is DOA in CA.
7. Child Resistant Packaging (CRP) Requirement
Heads continue to spin (and cannabis business’ cash to hemorrhage) in response to the changes in the packaging requirements. As of July 1, 2018, all cannabis products were to be in child-resistant packaging, and retailers had converted back to the statutory requirement that all exit packaging was to be “opaque,” allowing them to use reusable totes and paper bags to satisfy this requirement. In the October regs, we saw a pivot that allowed for a seeming “grace period” for the child-resistant requirement to return to being able to be satisfied by the retail via CR exit bag. Some confusion remained as to whether products that were already IN child-resistant packaging would have to be put INSIDE of child-resistant packaging for the next year. The addition of the statement from the CDPH, “Until the date specified [1/1/20] the child-resistant package requirement [§26120] may be met through the use of a child-resistant exit package at retail sale.” (CDPH §40417.d) suggests that the significant ecological impact of CR packaging within CR packaging MAY be avoided, however, most legal counsel will probably be advising retail clients to use the CR exit bag to avoid potential liabilities. Viva Kafka!
In the CDPH’s Statement of Reasons, they said “This is necessary to comply with the packaging requirements in Business and Professions Code section 26120 while providing licensees with time to comply with packaging requirements.” Compliant operators were left somewhat confused, as they had been required to comply with these packaging requirements since July!
8. OSHA Training for Everyone!
All three regulatory agencies added the following requirement for OSHA training:
“For an applicant with more than one employee, the applicant shall attest that the applicant employs, or will employ within one year of receiving a license, one supervisor and one employee who have successfully completed a Cal-OSHA 30-hour general industry outreach course offered by a training provider that is authorized by an OSHA Training Institute Education Center to provide the course.”
This will be an additional training requirement, on top of existing state and local training requirements for cannabis operators. And remember, all that training documentation must be kept, like all other records, for seven years!
As with everything in life, more will be revealed as we get deeper into 2019.
Juli Crockett is a member of the NCIA’s State Regulations Committee and is Director of Compliance at MMLG. Slides from Juli’s recent Workshop on this topic are available for download here. You can also watch the workshop video in its entirety on MMLG’s Facebook page.
Committee Blog: Transacting in Equity – The Basics
by Charlie Christopher, VP, Finance, Cirrata NCIA’s Finance and Insurance Committee
“A prudent man must seek to satisfy himself about the means to an end. This demands that he must revisit, again and again, the very elemental principles of his craft independent of how others think and act.” – Tony Deden
In businesses of all sizes it is common to transact in a number of currencies other than cash. The focus of this piece is on transactions involving common equity, the most fundamental unit of business ownership. The first section establishes a framework for how to view equity as currency, and what differentiates equity from other mediums of exchange such as cash. The second section introduces the process for creating reasonable projections based on sound logic. The third section demonstrates a somewhat novel application of concepts, and provides an example of the flexibility that can be introduced into the process. The conclusion is a reminder that these concepts can easily be misused, and that nothing should replace common sense when dealing with extreme uncertainty.
The Problem
Valuing any business is hard. Valuing a start-up is even harder still, not because of process, but because of the ambiguity associated with the output. When a valuation is based on multiple layers of high variance variables then the resulting distribution of value is rightfully broad. This poses a major challenge for operators and investors trying to agree on fair terms, and it can lead to irreparable damage to a young company.
Imagine for a second that you, and everyone else, have a crystal ball that can see the future with just enough variance to keep things interesting. How would that change the way you think about your equity? Would you be offering the same equity deals to your entire team? Would you be flexible with investors interested in your business? Of course not, you would look into the future every morning, update your projections and you would transact in equity in a similar manner to how you would with cash. Even though we do not have a crystal ball in the real world, it stands that to transact in equity with absolutely no opinion of value is the equivalent to being indifferent between paying $.10 or $100,000 for the same product or service.
Equity is a form of currency. It has value. However, its value has a built-in variance that rewards beating expectations, and punishes missing expectations. This is why equity awards are typically used to incentivize contributions that can increase the odds of achieving the former. The act of issuing the reward, in theory, immediately increases the value of the firm through the alignment of incentives. The common exaltation of the aforementioned qualitative attributes of the incentive over the quantitative attributes is also why the standard practice of ignoring a non-cash expense like share-based compensation is so indefensible. The value creation may be real, but to deny that a currency has transacted to create that value is to double count the benefit to shareholders.
The Process
Valuing a business begins from the top down and ends from the bottom up. Top down refers to projections based on the broader market while bottom up refers to firm specific capabilities extrapolated into the broader market. A common mistake operators make is to build up based on capabilities with no regard for how the aggregate ecosystem will react to the sum of all fundamental behaviors in the ecosystem. Starting from the top-down with a defensible position regarding both the size of the addressable market and the number of competitors participating in the market provides parameters for the business’s potential revenue.
Arguing for market share using a top-down analysis is fundamentally flawed if it does not reflect the true capacity of the business. A bottom-up analysis reflecting firm-specific capabilities should be compared to the top-down analysis for reasonableness. Ultimately, bottom-up analysis drives operating assumptions, and operating assumptions are the inputs to nearly every valuation technique.
I subscribe to the theory that posits that the variance in all of the assumptions can be quantified using an appropriate discount rate. In other words, if I’m uncertain and find my forecasted outcome to be highly unreliable I may choose to use a much higher discount rate to calculate the present value of the business than for a business with lower variance assumptions. When valuing a start-up company, I consider the corresponding ultra-high discount rate to cloud too much insight. For start-ups I first calculate a probability of firm failure in each of the forecast years and multiply my operating assumptions by the cumulative probability of success, I then use a more reasonable discount rate as if the firm was not highly speculative. This allows start-ups in the seed stage to more easily defend increases in value before launch. For example, the filling of a major executive leadership position justifies a small reduction in the probability of failure. Thus, your first executive hire has a reason to have received a higher percentage equity award than your last hire, even though the dollar value of the award might be equal. The process facilitates fair negotiations among all shareholders who may commit under vastly different circumstances and with different information. All too often this doesn’t take place, and the animosity that can develop as a result is as real as it is avoidable.
Valuation is admittedly more art than science. Many astute readers will point out that markets don’t operate in the orderly, fundamental matter I’ve proposed. Those critics are absolutely correct. It is a fair caution that not only are the trappings of certainty intoxicating, but sometimes simply observing how others are transacting is sufficient to make decisions. The market is often wrong, but it’s also often right. Remember to update your assumptions as new information becomes available.
Charlie is a Co-Founder of Cirrata where he lends his extensive knowledge from being both an entrepreneur as well as a securities analyst. As VP of Finance, Charlie combines his skills to assist clients through the application process, ongoing operations, and exit strategies.
Prior to joining Cirrata, Charlie co-founded a luxury women’s ready-to-wear label where he oversaw two separate rounds of funding as CFO. He has consulted numerous clients in the cannabis, construction, music, financial services and software industries in which his primary focus was on information systems, optimization, cash forecasting, securities offerings, licensing and capital allocation.
Brought to you by NCIA’s Marketing and Advertising Committee, Social Justice Subcommittee
Lisa Jordan, Canna Advisors; Rudy Schreier, MMLG; and Carolyn Gerin, Cannawise
The objective of the Social Justice Subcommittee of NCIA’s Marketing and Advertising Committee is to ensure that the social justice work of addressing convictions, providing opportunities, and reinvesting in poor and minority communities that have been battered for decades by the “war on drugs” is not lost in the broader cannabis reform efforts. The Social Justice Subcommittee’s recent activities have been focused on the #StartsAtThePolls campaign, and bringing NCIA members and their staff this #StartsAtThePolls Voter Kit.
This simple Voter Kit was created to help voters prepare for the Election Day on November 6. It includes prep tips, resources, voter rights, and what to do/who to contact if they sense a violation (i.e.: can’t find their polling place, etc). #StartsAtThePolls is where it all begins. We all need to show up to vote as Americans and an industry. NCIA helps bring it all together in an organized fashion at the national level.
The Voter Kit is an excerpt from the recently published title ‘Road Map For Revolutionaries: Resistance, Activism, and Advocacy For All” written by authors Elisa Camahort Page (co-founder of BlogHer), Carolyn Gerin (Co-Founder, Cannawise), and Jamia Wilson (Executive Director, Feminist Press). This Voter Kit was created by the publicity team of Random House/Ten Speed Press with their permission for NCIA committees to use as a resource for NCIA members and their staff, and published with the endorsement of the Marketing and Advertising Committee, and Social Justice subcommittees.
By NCIA’s Infused Products Committee
Contributors include Radojka Barycki, Noval Compliance; Karin Clarke, KC Business Solutions; Lee Hilpert, Organnx; Danielle Maybach, Eva Gardens; Trevor Morones, Control Point; and Todd Winter, Winter LLP
You have spent months fighting sleep deprivation to build a strong pitch deck as the next most desired infused cannabis company. Educating staff, family, and friends, through role-plays and recent published journal entries. Blog after blog, inspirational book after book, and you start to believe that the deck is complete. Dress to impress then review the multi-colored sticky notes that list the risks of your operation. Some are likely, others are less, but what about the ones that are high? Is ALL of your due-diligence completed to pitch to the venture capital groups in the cannabis world?
The Issue
While legalization has quickly brought cannabis and cannabis-related products into international markets, relevant food safety regulations need to be implemented and adopted to protect patients and consumers. The infused product manufacturing sector, in particular, requires more uniform safety requirements to guide operating professionals, many of whom lack knowledge, resources, and incentive to standardize safety.
As target consumers range from large groups of adult consumers to medical users, safety is a paramount concern for all. This is especially true for medical users, as they are predominately high-risk consumers regardless of their specific medical condition.
The cannabis industry, especially the infused edible products sector, has a prime opportunity to incorporate and implement existing food safety regulations into their manufacturing processes. This will demonstrate alliance with the general food manufacturing industry and help to ensure that cannabis-infused product manufacturers are regulated no more stringently than any other food manufacturer.
The Risk
In addition to the already controversial nature of our industry, safety issues will undoubtedly garner public and press attention when as few one people become ill as a result of an unsafe product. Contamination inevitably comes from a variety sources, such as chemical, physical, or biological hazards in the growing and extraction process (and lack of testing), employee contamination (failure to use gloves, wash hands, dirty garments and tools, etc.), failure to adhere to basic food safety processing standards and practices (clean food contact surfaces, improper chemical concentrations, introducing biological contaminants).
Without clear and industry applicable guidelines and processes, product safety issues will emerge and take over headlines. Issues of product safety damage consumer and industry trust, resulting in lost revenue, loss of market share, decreased share value and loss of talent. One most recent example of the exorbitant cost related to product safety was made ominously clear in the multi-state Chipotle case. This incident caused a tragic decline in customer confidence and many days of double-digit stock value plunges.
The Solution
Site-specific training for all team members is the preventative action to reduce risks and generate positive audit results. Rigorous training programs expand food/product safety knowledge, generate a stronger culture, reduce risk, and prevent contamination. By focusing on how each employee can positively impact safety through their daily actions and contribute to the market value and customer satisfaction, employees take on a stronger safety and excellence culture, resulting in higher Net Promoter Scores (NPS).
Measurement is critical to quality control and ongoing excellence. Food Safety Management Systems (FSMS) provide operating structure and validate the process to prove the system is operating as intended. These proven systems operate on a foundation of integrity that mitigates risk throughout the process of a product. No doubt the learnings there transfer to the cannabis products, especially infused products.
What’s Next?
The IPC’s goals are to raise awareness, effectuate positive change, and help establish protocols and standards for food safety, dosing, and testing within the cannabis industry. This will establish baselines from which cannabis business operators can rely upon, prevent inapplicable regulatory requirements that are not relevant to our industry, and most of all provide for the safety of consumers.
Now, when did food safety leave a bitter taste in your mouth? Precisely! Never would we need an Upton Sinclair to transform the industry from a negative outlook on the truths. Collectively we will unite and hold our operations to a standard of excellence that will be called upon during the end of cannabis probation on a national level.
Committee Blog: “Cannabis Reform” Stops Short
by Lisa Jordan, VP of Marketing, Canna Advisors NCIA’s Marketing and Advertising Committee, Social Justice Subcommittee
As support for legalization continues to climb and speculation of “cannabis reform” at the federal level continues to swirl, one critical opportunity stands to be lost in the fray of voices and messages: Social Justice.
Cannabis reform, alone, stops short. The deeper work is addressing convictions, providing opportunities, and reinvesting in poor and minority communities that have been battered for decades by the “war on drugs.”
With focused attention, we can shape policies and legislation that expunge records, provide employment opportunities, and further offset the disproportionate effects on people and communities of color. Expungement of misdemeanor charges, alone, can mean the difference in getting a job or housing for residents of poor and minority communities across the country.
The objective of the Social Justice Subcommittee of NCIA’s Marketing and Advertising Committee is to make sure this opportunity maintains visibility and action and that cannabis reform doesn’t stop short.
#StartsAtThePolls
This level of policy change starts at the polls.
The November 6 elections are pivotal to voting in candidates who are not only in favor of cannabis reform, overall, but will also push forward with social justice initiatives.
3 Actions for Everyone
In these final days before the election, each person can take a few, mindful actions to make sure that social justice doesn’t get lost:
1. Register to Vote:
Some states allow voter registration until election day. Check your state’s deadlines here: https://www.headcount.org/deadlines-dates/
If you missed your state’s deadline for this year, go ahead and register now so you’ll be ready next time.
2. Know Your Candidates
Do your research to know where your state and federal level candidates stand on cannabis reform, overall, and on social justice issues.
It’s up to us to make sure this opportunity maintains visibility and action and that cannabis reform doesn’t stop short.
#StartsAtThePolls
Lisa Jordan leads the brand development and marketing strategy for Canna Advisors and provides expert guidance in these areas to clients. With proven success in emerging industries, Lisa’s work has won numerous awards including a Bronze Lion at the Cannes Lions International Festival of Creativity, national awards for predictive analytics, and local ADDYs. Lisa has spoken at cannabis industry conferences and was selected to serve on the NCIA’s Marketing and Advertising Committee and serves as Chair of the Social Justice Subcommittee.
Over time, Lisa hopes to make cannabis brands as mainstream and iconic as familiar, big brands. In her downtime, you will find Lisa on a hiking trail with her husband and four big mutts or finding any excuse to spend time at Red Rocks.
Member Blog: Common Cannabis Capital Cadence
by Sumit Mehta, CEO of MAZAKALI
NCIA’s Finance and Insurance Committee
Companies often benefit from capital infusions that can help them grow their businesses. When and how much capital to raise is a common question, once that is best addressed by balancing need for cash with dilution of equity. This article outlines typical stages for corporate growth along with potential sources of capital and required documentation along the way.
Common Cannabis Capital Cadence
Introduction
While a business does not need to raise money to be successful, one of the primary reasons businesses fail is that they run out of money. Businesses that do need money to survive or to accelerate growth can benefit from outside capital balanced by the related loss of ownership. Effective capital management is thus crucial to business growth and success.
Access to necessary capital can be a significant challenge, as money is cheapest to borrow when you least need it. Access to liquidity, while difficult in any industry, is even more challenging in the cannabis industry for a myriad of reasons. Despite these challenges, cannabis capital infusions are at an all-time high. Companies are well-served to be focused on ‘capital readiness’ well in advance of their desired capital needs.
The true entrepreneur does more and dreams less
Fail to prepare and you may be preparing to fail. Maintaining focus on cash needs and related documentation at every stage of your business growth is crucial to its ultimate success.
Idea Stage – Founders
A founder collaboration agreement can help lay out a working agreement along with conflict-resolution steps for future disputes. A common stock purchase agreement is a binding contract which highlights basic terms for the sale of shares to founders. This agreement will define the parties, the shares to be sold, the purchase price, the timing and method of payment, and the closing date. A shareholder agreement typically accompanies the stock purchase agreement and highlights shareholder rights, pricing mechanisms, voting arrangements and shareholder privileges and protections.
Documentation: Founder collaboration agreement, common stock purchase agreement, shareholder agreement.
Early Stage – Friends & Family
Friends and family can be some of the easiest sources of capital. They are typically more forgiving about business ups and downs, and having a resourceful network of trusted early investors is a good step towards securing money from future investors. It is common to use convertible notes at this stage, and relevant here are a convertible note purchase agreement along with a board of director consent. The intention of this note is that it converts to equity when the company conducts an equity financing.
Documentation: Convertible note purchase agreement, board of director consent.
Seed Stage – Angel Investors
An angel or seed investor is an affluent individual who provides capital for a business start-up, usually also in exchange for convertible debt. An advantage of this type of financing is that it is less risky than debt financing. In the event of business failure, invested capital does not have to be paid back. In addition to the documentation above, most angels will want to see a business plan and a pitch deck.
While the term ‘Venture Capital’ broadly applies to any capital provided to a venture, it typically describes a structured institutional scenario. Advantages of venture capital include amounts typically larger than angel funding rounds along with valuable information and resources that can contribute to business success. Challenges here include the length and complexity of the diligence process along with the documentation burden as highlighted below.
Documentation: A robust data room that includes the above documents along with a 5-year pro-forma model, cap table, valuation, subscription agreements, stock purchase agreements, incorporation documents & bylaws; and vendor, contractor & employee agreements.
Growth Stage – Private Equity
Private equity investments typically result in either a majority or a substantial minority ownership stake in a company. These generally come with strings attached, which can be wound tightly at times. While private equity offers the opportunity to raise large amounts of capital, it is also often accompanied by a loss of control. In order to amplify returns, private equity firms typically raise a significant amount of debt to introduce leverage into the transaction. This has helped coin the term ‘Leveraged Buyout’.
Documentation: A robust data room as above with PE specific documents that may include supply chain verification, tax and audit, legal reviews, intellectual property opinions and management team background checks.
Final Stage – Public Equity
A substantial increase in liquidity is one of the main advantages of this final stage of liquidity. Other advantages include increasing brand and prestige, attracting employees with a stock option plan, and making acquisitions with company stock. Going public is no easy task and requires a large absorption of new obligations, including filing SEC reports, getting shareholder approval for corporate actions, additional legal liabilities and other regulations as introduced by the Securities Act of 1933 and its many subsequent amendments.
Documentation: In addition to compliance with Regulation FD and Sarbanes-Oxley, filing and reporting requirements include annual reports, quarterly reports, proxy statements and insider holding filings.
Conclusion: A sustained and successful capital cadence raises investor confidence and subsequent recommendations to others. Determining a timeline for liquidity is the cornerstone of capital raise decision-making, and a plan created with financial rigor is useful for management and investors alike. While the preservation of liquidity is of primary importance, this is best balanced by the desire to retain ownership and control. When and how to raise money are amongst the biggest challenges for any business, and preparation is paramount to the capitalization of the arrival of opportunity.
Chance often favors the prepared.
In addition to his role as Founder and CEO at MAZAKALI, Sumit is a consultant to The Arcview Group and the Managing Partner of Emerald Ventures. A frequent speaker at investment seminars, Sumit acts as a mentor to Arcview and Canopy companies and serves on the Canopy Investment committee as well as the NCIA Finance & Insurance committee. Sumit and MAZAKALI support NCIA, the Marijuana Policy Project and Students for Sensible Drug Policy.
Sumit has earned an MBA from the University of Michigan, a BA in Economics with Honors from the University of Texas and currently holds Series 7, 63, 65 and 79 licenses. He resides in San Francisco where he enjoys riding his motorcycle, yoga, and craft beer.
Committee Blog: Progression in Packaging – Challenges & Opportunities for Cannabis Brands
Any visit to a licensed dispensary is proof of how far we’ve come with the packaging of legal cannabis. Sure, we still have plenty of standard glass jars, CR pouches, pop-tops and cans; but we also now see proprietary package structures, full branded lines commanding shelf space and packaging so beautiful it doubles as a merchandising tool. Just in the past several months, cannabis packaging design trends have been covered by mainstream media including The Dieline and Packaging Digest.
These are exciting times to say the least, but packaging and labeling remains at the crux of the serious challenges and opportunities that cannabis brands face today.
Keeping Up With Compliance
Here in California, the challenge of keeping up with compliance is beyond real. The race to meet state regs by July 1st were only met with a new set of checklists (literally) the following day. Added labels is the name of the game for any California supplier. This is a real problem for those brands who are trying to stand out with their packaging. Understandably, companies are hesitant to invest in their packaging when the regulations are still in flux. Those who are in this for the long haul need to be agile and forward thinking when it comes to packaging and labeling.
Branding… Because it Really Does Matter With limitations on how a brand can reach today’s cannasumer, packaging is a critical marketing tool. It’s the one guaranteed touchpoint we have, and just like in traditional retail environments, every second counts when trying to capture a shopper’s attention. While it’s tempting to go with the standard compliant packages, a lack of brand value will commoditize your product (and thus, the price point). Brands should ensure that their package is reflective of their unique position in the market. Whether it’s a regional play, a potency position or targeting the growing number of boomer consumers—your packaging should speak directly to who your target market is. Now is the time to create brand loyalists!
Taking a Note from Natural Products
All across retail industries, we are seeing a market demand for products that have a more “natural” approach. From clean ingredients to plant-based everything, it’s impossible to avoid this trend. As the OG natural product, cannabis brands have a real opportunity to take advantage of today’s more discerning shoppers. Tell your story, explain your growing practices, show us your social responsibility… It’s all part of the package, literally and figuratively.
A Need for Sustainable Solutions
To really take our natural story to the next level, we can all agree on the need for more sustainable options for packaging and labeling. It’s great to see some brands, companies, and organizations like W Vapes initiating recycling programs. But as an industry, we need to rally together to work on this issue. It’s definitely a challenge that NCIA’s Packaging and Labeling Committee discuss regularly.
An Optimistic Future for the Realists
For those cannabis brands who can be agile, patient and focused—there is a bright future ahead. Despite the challenges of cost and compliance, an effective package can pay for itself. And if other industries like food and beverage are integrating technologies beyond the QR code (think AR and VR), we’re just getting warmed up. As both in-store and retail experiences evolve, so will the opportunities for cannabis packaging. Form, function, technology and product development are bound to take packaging and labeling to exciting new heights.
Committee Blog: How can we help your cannabis business?
What can we provide that can help you in your cannabis business?
NCIA’s member-driven Marketing & Advertising Committee is focused on developing best practices in cannabis industry marketing; opening dialogues with major media outlets that ban most or all cannabis-related advertising; holding in-person or virtual educational events for NCIA members; and developing educational content that supports the industry.
This year, the NCIA Marketing & Advertising Committee is creating a Resource Kit for cannabis business owners. Which tools would be most valuable to you? Please take a moment to share your opinion on what topics you are most interested in.
This site uses cookies. By using this site or closing this notice, you agree to the use of cookies and our privacy policy.
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. 
Gabriel Cross is a Founder and CEO at 
In his role as 
Watch this webinar from 
Watch this webinar from 
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of 
Lisa Jordan leads the brand development and marketing strategy for 
Branding… Because it Really Does Matter
A Need for Sustainable Solutions