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Investment Strategies for Entering the European Cannabis Market

By Niklas Kouparanis
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For U.S. venture capitalists (VCs), the burgeoning European cannabis market provides opportunities to break into the industry on the heels of adult-use legalization. Germany has set its sights on implementing a recreational market by 2024, and the country, along with several other European Union (EU) countries–Malta and Luxembourg–came together in September 2022 to draft a joint statement on why the EU needs a new approach to cannabis use for adult-use production, sale and consumption.

german flag
Photo: Ian McWilliams

In October 2022, Germany took further steps to solidify its plans for legalization further when its Health Minister Karl Lauterbach presented a cornerstone paper on planned legislation to regulate the controlled distribution and consumption of cannabis among adults. Such actions have signaled to both the EU and the world at large that cannabis legalization in Germany is imminent, and the country is championing the new age of cannabis policy.

With the new German cannabis market soon to be on the horizon, both foreign and domestic VCs are considering how to best leverage investment opportunities into existing cannabis companies within the current medical-only market that will transcend into adult use. For U.S. investors, it’s important to do their due diligence to find the company that will transcend into the next progression of cannabis policy. In addition, European cannabis companies must do their own meticulous research when it comes to aligning with investors to meet both their financial and business goals.

How U.S. VCs Can Evaluate Investment-Worthy European Cannabis Companies

As with any investment, VCs benefit from researching the company and market they are planning to invest in. Regarding the company of interest, it’s important to examine which part of the cannabis market the company is serving: growers, retailers, ancillary products, service providers and biotechnology companies all exist as potential investment options within the space. An investor should look into a company’s annual revenue, evaluating whether it has increased, remained steady or decreased over time. Revenue growth is often provided on a company’s income statement.

In addition to making sure they have a thorough understanding of the business model and its value proposition, investors should also familiarize themselves with the company’s management team to make sure that they are knowledgeable and experienced in both running a company and the cannabis industry. For those interested in entering the German market, VCs should consider the businesses that are currently key players in the country’s medical cannabis industry and that plan to expand their services into the adult-use sector once legalization comes into play.

For example, Tilray, founded in 2014, was one of Canada’s first licensed medical producers. When Canada legalized adult-use cannabis several years later, in 2018, Tilray was one of the companies that successfully transitioned to expand its market share in Canada’s medical to the adult-use cannabis industry.

Another consideration for VCs is the reputation of the business and its leaders. Investors should seek out those who have become authorities within the industry and the movers and shakers who are providing key insights into the market. These business leaders should be front and center, discussing everything from current operations and compliance to cannabis policy and legislation to new endeavors and growing their businesses. With recreational cannabis legalization being a completely new endeavor for the EU, it is important for leaders within today’s European medical space to be visionaries for the next phase of cannabis legalization and be guides for creating regulations for this new market to be safe, sustainable and scalable.

In addition to executive teams, VCs should check if the business is meeting the current marketplace’s expectations and is ready to adapt and evolve as needed. This means that the company has access to a steady supply of high-quality cannabis at an affordable price and access to consumers (medical patients) and potential consumers. With adult-use legalization soon to be a reality in Germany, investors must consider which players in the medical-only market will be able to not only survive the transition but grow to become leaders in Germany’s new recreational market and within the EU as a whole. 

What Do European Companies Look For in Terms of U.S. VCs

Just as VCs must find the right fit for them in terms of investments, cannabis companies must also align with investors that help them meet their financial and business goals. For cannabis companies, many seek to align themselves with VCs experienced in consumer, technology, and healthcare investments. While there are benefits to working with a VC with a cannabis background, companies should not deter investors who do not meet those specific criteria, as the cannabis market is still a fairly new and ever-transforming industry. In light of this, it’s important that investors approach opportunities with an open mind for both the industry’s current state and its potential.

european union states
The European Union

As with most investments, both VCs and companies should be prepared to agree to a term sheet, a document that outlines the relationship between the investor and the business. An ideal investor would need to be supportive, well-connected, and add value by providing relevant business knowledge. While some investors seek a more hands-on role, in most cases, the VC’s support will not be equal to the business’s micromanagement or control of its day-to-day operations. Generally, those responsibilities would remain with the company’s executive team.

As an investor, it’s important to be supportive of the business; be a cheerleader for the company when things go well, and lift up the business when challenges occur. In addition, offering a network of referrals and strategies to excel is key to being a good asset to the business. Also, having a diverse portfolio of companies with synergistic opportunities can be very beneficial to growing cannabis businesses.

A question many investors ask before entering the space is how much in assets they should have on hand to be considered an eligible investment size. Typically, this depends on the business and its financial needs. Small profitable cannabis businesses that want additional financing may be able to secure a bank loan, if possible, in their home countries or seek a seed investment-focused VC for some capital. Leaders in Germany’s current medical-only market are seeking investors, both from the U.S. and abroad, to partake in Series A/B funding, seeking financial partners that can help them reach a goal of $20-80M USD.

European cannabis companies are within a high-growth market, so U.S. VCs looking to enter through investment do not have to go through a private equity firm. An investor can approach companies through networking or direct outreach. It is also important to note that investors do not have to convert their assets from USD to EUR, as it is done automatically when making investments. For the first time in 20 years, the USD and EUR are about equal, so now is a great time for U.S. investors to consider making the leap into European cannabis.

New York Launches Adult Use Sales

By Cannabis Industry Journal Staff
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On December 29 just before the end of 2022, New York officially launched legal adult use sales in the state, but at only one location. The nonprofit dispensary Housing Works Cannabis Co. held a grand opening party complete with music, speeches from politicians and regulators and very, very long lines.

Chris Alexander, executive director of the New York Office of Cannabis Management (NYOCM), had the honor of making the first legal purchase, a pack of gummies and an eighth of flower, at the dispensary on the afternoon of December 29. “It’s been a lot of work that’s come to get us to this point,” Alexander told reporters on location. “We do have a lot more work to do, a lot more stores to open.”

New York originally legalized adult use cannabis in early 2021. Following almost two years of setbacks, missed deadlines and failed promises, the state just barely met one deadline: opening a dispensary in 2022. Governor Kathy Hochul has previously said that twenty stores would be doing business before the end of 2022. According to NPR, 36 dispensaries have been licensed, the NYOCM has another 139 licenses they need to issue and there are roughly 900 applicants that are still waiting.

To many in the cannabis space, New York is expected to become a massive boon to the country’s cannabis economy. It is just taking a bit longer than expected to materialize. Roy Bingham, CEO of BDSA predicts it will be the second largest contributor to growth in cannabis sales through 2026, just behind Florida. “With nearly 15 million residents over the age of 21 and tens of millions more tourists visiting the state annually, New York is one of the most exciting cannabis opportunities in 2023,” says Bingham. “Despite some expected growing pains in the early years, the market is expected to be the second largest contributor to sales growth through 2026, following Florida.” More dispensaries in New York are expected to open their doors in the early weeks of 2023.

In another second-place finish, New York follows New Jersey as the second state in the tri-state area to legalize adult use sales. New Jersey launched its market in April of 2022.

2022 Cannabis Labs Virtual Conference: December Program

By Cannabis Industry Journal Staff
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2022 Cannabis Labs Virtual Conference: December Program

Sponsored by Avivatech & Millipore Sigma

Click here to watch the recording

Agenda

Potency Inflation: The Problem, the Causes and the Solutions

  • Sarah Otis, Quality, R&D Manager, Anresco Laboratories
  • Erik Paulson, Ph.D., Lab Manager, InfiniteCAL

THC potency inflation by third-party testing labs has been an escalating feature of the cannabis industry since its legalization. In California, market forces and lack of regulation have allowed potency inflation to intensify in both its flagrancy and its pervasiveness, particularly within the last year. Two third-party testing labs in California, InfiniteCAL and Anresco, discuss how the industry got to this point, the different methods that labs use to inflate potency, and steps that can be taken to combat it.

TechTalk: Avivatech

  • Shawn Kruger, Senior Vice President of Product & Strategy, Avivatech

The Laboratory Information Landscape in Cannabis Testing

  • James Brennan, Sales & Marketing Specialist, LabWare
  • Eugene Olkhov, Data Scientist, LabWare

This presentation will guide attendees through the data continuum in modern cannabis testing laboratories supported by various software solutions. The presenters will describe the business and regulatory benefits of laboratory informatics and system deployment options, challenges, and financial considerations.

  • The current flow of cannabis testing data
  • An overview of informatics solutions for cannabis testing labs
  • Laboratory informatics and regulatory compliance
  • The impact of digital transformation on cannabis testing data

TechTalk: MilliporeSigma

Cannabis Testing Regulations & Implications for Environmental Monitoring

  • Sarah Powell Price, Regulatory Expert for Food Safety & Cannabis for North America, MilliporeSigma
  • Anne Connors Weeks, Senior Field Marketing Manager, MilliporeSigma

Cannabis testing requirements are continuously evolving, as are analyte detection capabilities.  This presentation provides a high level overview of the latest US cannabis testing regulatory landscape and how environmental monitoring is an essential component of safety and compliance planning.

Click here to watch the recording

Catching up with Jushi Creativity: A Q&A with Dre Neumann

By Cannabis Industry Journal Staff
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Jushi Holdings is a large multi-state operator with a massive national footprint and a presence in key markets, including Pennsylvania, Illinois, Virginia, Massachusetts, Nevada, Ohio and California. 

About a year and a half ago, Aaron Green interviewed Andreas “Dre” Neumann, Chief Creative Director of Jushi Holdings to learn about his journey to the cannabis industry, Jushi’s market presence, brand development and key trends in the marketplace. 

This time around, we’re checking in with Neumann to hear about his progress since the last time we spoke. In this interview, we delve deep into the world of creative influence, brand building, technology, what Neumann is working on now and what he is excited about in the future. 

Cannabis Industry Journal: It’s been a while since our readers have heard from you. What’s new at Jushi? What Are you currently working on? 

Dre Neumann: When I joined Jushi, we were building the foundation and laying the groundwork for a lot of the things we’re doing right now. One of them of course is our online pre-order platform. We have been focused on connecting all the dots in our vertically integrated markets to make sure our retail experience is really fine-tuned and represents what a diverse range of cannabis consumers find helpful and truly enjoy. In my time at Jushi, I have gained a much better understanding of the average cannabis consumer through constantly analyzing data from our retail spaces, and I very much look forward to analyzing more robust data that’s coming in through our new smartphone app. 

Andreas Neumann, Chief Creative Director of Jushi Holdings

The data we have now is allowing us to look at what product developments are most important for us to move forward with and what product categories we should be focusing most on. Because we may be on the cusp of a recession, the consumer value of our product is that much more crucial. With the introduction of new categories of fast-acting edibles and unique and exciting genetics and types of flower, we are paying close attention to how we can innovate in ways that will both excite our current customers and attract new customers to our brands. 

Jushi is interesting because the company really came together from two key pieces: the first being our strong financial and management backbone, and the second, the powerful creative team that I am a part of. We have such a special focus on the quality of products, with the goal of creating high-quality and consistency across our house of brands.

We have had a lot of acquisitions, which have played out very successfully over time, but early on, through these acquisitions, we found there were products and procedures that weren’t up to our standards. It takes time to fix those things from a quality, genetics and consistency perspective, and I’m thrilled to say we’re really getting there. Notably, we felt the need to improve our edible fruit chew brand, and we poured a ton of time into reinventing and relaunching simple, but high-quality, organic, 100% real-fruit chews. 

Now, we are really seeing the value in our three retail brands and the unique attributes of our branded flower, pre rolls, vapes and edibles. Also, we have been really focusing on improving sustainability as we move towards using much more sustainable, standardized mylar packaging across our product suite. This packaging not only reduces our carbon footprint, as mylar is a much more sustainable, recyclable and lightweight material, but also offers us more real estate to express Jushi’s personality through artwork on packaging and allows us to display our products with a larger presence in stores. 

CIJ: You mentioned Jushi’s new app and you sound so excited about it. Tell us more: how are you using the data to analyze what your customers want? 

The Jushi app, The Hello Club (THC)

Neumann: When we were building our online platform, we knew we needed to better understand our customers. What we found was that the most important marketing tools in cannabis are promos – specifically promos through text messaging. Our loyalty program has become our biggest channel to reach consumers, as we have over 200,000 people we can reach with a simple text message. The big problem with texting campaigns, however, is that mobile phone carriers can limit your deliverability if you don’t have the right verbiage and messaging. So working with and figuring out how to deliver the right message to our customers can be very challenging. 

Our smartphone app, The Hello Club (THC), came about as a natural progression of our customer loyalty program. Our team has a lot of experience working in UX and UI, so we were able to dive right in and build the app through Apple. We really took our time to build something that would add value to our customer, and it’s paid off. For instance, starting out we launched an exclusive weekly deal only available in the app. So, guess what happens? Just yesterday, on the 15th of November alone, 11,000 people downloaded the app. 

Their retail location in Alexandria, Virginia

The app will be something that we play around and experiment with as more and more customers download it. It provides us with a platform to be creative and have fun with our customers, where we can launch exclusive events and strain drops and grant exclusive access to our products before they’re available to the general public. 

The Hello Club was completely designed from scratch. It allows customers to choose their local, preferred store, with the ultimate goal of it becoming the central hub of their cannabis needs. The data we get from the app is so vast and there are so many opportunities on the horizon – we have only just scratched the surface. In the future, as we look to enter new markets, we’re excited to utilize the customer data from our app to guide us in deciding what to sell and where and create unique retail experiences tailored to each market. As we’re just in version 1.0, there’s tons of untapped potential ready to be unearthed and applied. 

CIJ: Around this time last year you said that PA was the most important market for y’all. Tell me about the states that Jushi does business in. Are you paying particular attention to any market more now given the midterm elections?

Neumann: Yes, so Pennsylvania is still our most important market today, mainly because we have so many retail locations in the state (18). Pennsylvania is interesting because it’s also the site of Jushi’s first acquisition ever. I think the inevitable move from medical to recreational in the state will be extremely significant; it will be one of the greatest transitions in cannabis history. Because of our footprint and brand presence in Pennsylvania, we are in an excellent position for when adult use comes online.

The Palm Springs retail location

We call Virginia the sleeping giant because it’s a market we have really cornered. We will have six stores in northern Virginia, close to Washington D.C., in areas with large populations, very diverse demographics and a lot of young people. Our retail locations in the state are freestanding buildings with ample parking – key attributes that benefit customers and lift sales, as we found from the data we collected in Pennsylvania. Virginia has incredible potential because we have made such a formidable early presence with our vertically integrated, IKEA-sized grow operation there. We have applied our findings from other states to Virginia, and we’re thrilled about the opportunity for us to showcase high-quality products in this market. 

California is such a tough market to be in, as it’s the most competitive cannabis market in the world, with some of the most discerning customers, so operators often fear entering the market. But it’s proven to be great for R&D for us, and we continue to learn how to navigate and work in this competitive market through our Palm Springs, Grover Beach and Santa Barbara retail locations. By necessity, we’ve been particularly creative with our marketing and operational strategies to carve a place in the market; we have to show people we have better products and a better experience, which is very difficult with stringent regulations in places like Palm Springs. So California, for us, continues to be a proving ground where we are learning how to be as competitive as possible, and this benefits Jushi as a whole.

2023 Dispensary Design Trends

By Melanie Coddington
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This year we have seen some awesome evolution in the design industry. Retail cannabis design is leading the way. Here are some trends to keep an eye out for as we approach the new year and look at the artistic elements that are elevating the cannabis retail experience.

Bold Color

House of Jayne dispensary interior

Goodbye all white Apple store. Hello bright colors of the rainbow. Design pioneers are tired of the safety of neutrals. Pattern mixing, bold use of colors, lights and art that blur the lines between ‘wildly tacky and holy cow that’s amazing.’ We’re not talking about a few fun pops of color; we’re talking full walls of color, bold displays and fixtures. Cannabis isn’t for the meek and it’s so exciting to finally see it reflected in design.

Experiential Retail & Sensory Immersion

The new vision for cannabis dispensaries (specifically in adult use locations) is one that absolutely combines multiple sense-touching points within the space and flexes the space to include adjacent hybrid areas. This is mostly driven by the Gen Z consumer. A quick example would be if the dispensary has florals or greenery, the shopper will want to feel like they’ve been transported to the great outdoors. Feel the wind, smell the grass, hear the birds. You get the idea, a full immersion into whatever theme or vibe the brand is putting out there. Customers love being transported to a new place and interior retail design is absolutely the coolest way to do it. This ties into the recent social media trend, ASMR (autonomous sensory meridian response), where you can experience a tingly euphoric feeling triggered by a carefully created clip. We love the way our environment can sway the senses away from the everyday and into somewhere extraordinary.

Ounce of Hope dispensary interior

The goal here is to pull customers into the store and offer them something far more than a quick and dirty sale. Experiential spaces will also have those hybrid areas that merge the brand with something other than cannabis. This is tricky due to compliance, but we are loving the mixture of yoga, spa, lounge, arcades, art gallery and even bowling within a dispensary. If you’ve shopped at Sheels, you know all about this. A full ferris wheel, restaurant, aquarium and spa inside the sporting goods store. This is definitely a trend that reshapes the standard shopping model and is unique to cannabis.

Digital Forward

Are we being bombarded with digital, phygital and AI in our everyday lives? Maybe. And cannabis customers love every drop of it. More and more we are seeing interactive, digital, full-on wall displays that make you feel like you’re at a museum exhibit. The initial investment can be spendy, but the ultimate flexibility and control (and shopper ooh’s and aah’s) make it all worth it. Imagine an incredible wall showing farm footage, where you can touch the image of the plant and an info bubble pops up describing the terpene and showing it being distilled into a tincture. Bored? Flip it to footage of your latest social event. Whatever you want your customers to see and interact with is completely up to you. More and more we are seeing the digital arts incorporated into dispensary design.

A greenhouse grow facility

Challenges Abound for Cannabis Industry Growth in 2023

By Jay Virdi
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A greenhouse grow facility

With an adverse regulatory environment, labor shortages, supply chain disruptions and the always-present threat of property damage and product recalls, cannabis operators are fighting an uphill battle to stay viable in today’s environment.

According to Politico, more than 20 of the largest publicly-traded cannabis companies lost about $550 million on revenues of nearly $4.5 billion in the first half of 2022. High taxes and barriers to interstate commerce continue to challenge the industry as well, while lenders and investors are demanding more detailed proof of future profitability. Those pursuing new capital must show how they will grow financially and present their risk management strategy for insuring themselves against losses.

Higher costs for fertilizer, building materials, packaging and more, along with rising inflation are hurting the industry’s bottom line as well, but the industry is hesitant to raise prices.

These challenges are expected to continue in 2023. However, the industry’s fast pace of growth, myriad opportunities for product development and increased access to insurance capacity offers the cannabis industry every reason for optimism.

Prioritize risk strategies

Cannabis facilities face hazards from the very components and systems required to cultivate plants, including high intensity discharge lighting, chemical exposures and butane in oil extractions. As a condition of insuring a property, underwriters are inspecting the equipment used in production and fire suppression systems.

Property policies typically don’t cover out-buildings for cannabis growers located near a hurricane or wildfire zone, and more carriers are limiting or excluding coverage for losses from large-scale natural disasters. Even coverage for crop losses from catastrophic events is limited and often prohibitively expensive.

Cannabis companies are shoring up their risk strategies and analyzing policies to ensure they’re aware of any gaps in coverage and planning how to address them. This includes adding cyber insurance, as cyber also remains a significant loss-driver in the industry.

Beware of new risks

The cannabis industry is introducing products to the market at a breakneck pace, causing new challenges to emerge. New products — such as THC-infused beverages, sugar-free cannabis tarts and cannabinoid-containing baking staples— require additional research and development for extraction, packaging, storage and distribution. And many products require refrigeration and bottling, adding complexity to distribution.

The continued growth of the cannabis edibles and beverages market is also driving companies to create new formulas, products, and strengths. But this innovation does add risk. States issued dozens of recalls in 2022 for marijuana edibles, including mislabeling and mold and salmonella contamination. These incidents have attracted the attention of plaintiffs’ attorneys, who have filed suits on behalf of consumers claiming injury from these mislabeled or contaminated products.

Invest in your staff

Although the number of jobs in the cannabis industry grew 33% between 2021 and 2022, and the need for new workers shows no signs of slowing, cannabis companies are experiencing high turnover rates and a skilled labor shortage. This is forcing operators to spend additional time and money to attract and retain employees.

Personalized benefits programs offer a partial answer. Personalizing benefits to meet individual employee needs results in positive employee experiences, helping build a workplace that attracts and retains workers. Many companies are adding health insurance and offering 401(k) plans, raising wages and adopting other worker-friendly practices to attract and retain workers.

control the room environment

Cannabis companies with solid risk management plans and advisors to help ensure their insurance policies cover exposures, will be well-positioned to overcome industry challenges, grow, and succeed in 2023. Here are four considerations to help develop a tailored strategy that will protect your bottom line, support your workforce, and build resiliency next year.

  1. Be transparent with your broker. Let your broker know what changes you’ve made to the business, so there are no surprises during renewal. Review exposures and insurance needs at least 90 days prior to policy renewal, so your broker can identify the best options.
  2. Prepare for a product recall. The odds of experiencing a product recall are high. Your first line of defense is your internal policies and procedures, and that includes thoroughly vetting your vendors and partners. Be thoughtful about the general liability and product liability coverage you purchase and ask your broker to clearly explain the differences in coverage.  
  3. Build resiliency within your company. With more carriers offering specialty coverages for the cannabis industry, now is the time to look at how best to protect your executives and build resiliency by insuring against director and officer liability claims, business interruptions and cyberattacks. Your broker can help identify the best policies for your company.
  4. Establish solid employee benefits. The cannabis industry can have access to the same benefits as other industries, including 401(k) plans. Talk to your broker about taking your benefits program to the next level with highly personalized options that won’t break your budget.

Even amidst the challenges, there is every reason for optimism in the new year because of the industry’s fast pace of growth, myriad opportunities for product development and increased access to insurance capacity.

Addressing Cannabis Price Compression With Science

By Mark Doherty
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Cannabis cultivators across the U.S. are confronting plummeting wholesale prices and tighter profit margins. Operators in Pennsylvania say flower prices have fallen from around $4,000 a pound to around $3,000, on average, and prices in the more mature markets of California, Oregon and Colorado have experienced extreme volatility. Prices in those states are averaging around $700 per pound but of course, that’s an average. There are whispers that prices are as low as $150, revealing how bad the situation really is.

Oversaturation of legal cannabis affects commercial growers everywhere. For example, when Oklahoma opened its free-wheeling medical cannabis program with unlimited business licenses, the pipeline of cannabis from legacy markets in California was disrupted and a glut of flower from the gray market began to influence pricing within the state’s legal market. Although cannabis is not federally legal and interstate commerce is banned, what happens in one state definitely affects what happens in another.

Competition in legal markets has also increased dramatically in recent years as multistate operators expand their footprint and consolidation proliferates. Vertically integrated cultivation, manufacturing and retail is becoming unsustainable for many mom-and-pop businesses, while MSOs can leverage their cash and resources to weather the current storm.

Economic Viability Meets High Quality Production

All of this news is not necessarily negative, but it’s a definite cautionary tale: Being complacent opens opportunities for others. Growing cannabis is complex. It is working with a living and breathing machine. Some businesses fail because operators are not able to find the perfect blend of horticulture, plant science and manufacturing efficiency necessary for success. Some see it simply as a manufacturing concern, others a scientific endeavor, and still others as an artform. An understanding of growing cannabis as a blend of all three is paramount.

Just like the LED evolution, other new cultivation technology is here to stay and should not be brushed off as just experimental

Squeezing more high-quality product out of existing facilities is essential. Costs for labor and electricity are relatively fixed, so operators must turn to technology to improve yield, quality, consistency and plant health without increasing operating expenses.

Over the years, growers have often resisted change surrounding what they view as “the way” or “the best,” but with the industry in such distress, the time is now to address facility inefficiencies.

Much like the evolution of LED use, there might be an initial skepticism at the cost and real value of new cultivation technology, but the economics are too compelling to ignore. The majority of all indoor grows now use LED. The progression from single-ended bulbs, to double-ended HPS, to LED is analogous to plants on the floor of a grow facility, to rolltop benches, and now to vertical farming using racks.

Vertical Cultivation Science

Crop steering applies plant science directly to commercial production. The methodology is based on the idea that plants can be manipulated to grow and perform a certain way. For cannabis plants, the science really comes into play with inter-canopy airflow.

When airflow occurs under the surface of the leaf of the plant, the stomata opens and gas exchange increases as water vapor and oxygen are released and carbon dioxide is absorbed. The micro-barrier of air trapped against the leaves is broken and the exchange of gasses and energy in the cultivation environment is improved, enabling the entire grow to increase its yield. And while CO2 supplementation is widely used and has been for years with positive effect, the under-canopy airflow provides greater efficiency relative to the operating expense of pumping CO2 into the grow room. Money can be saved by applying science to encourage the plant to uptake the extra CO2 that has been naturally released.

Proper Drainage Is Also Key

Controlling the space with proper drainage will keep a host of problems at bay

Drainage issues like the puddling of water in vertical farming are detrimental to the efficiency of a cultivation facility. Even when growers use precision irrigation techniques to give the plants pinpointed irrigation volumes over different time periods, rack systems can still suffer from drainage issues. That means that affected plants are not receiving the precision irrigation strategy and the entire purpose of the scientific application is defeated.

Precise drainage is critical because standing water opens the door to root born disease, pests, and microbial issues. Spray regimes can address this problem, but they cost money. The key is to reduce dependency on mitigation efforts by better controlling the agricultural space and improving outcomes with a scientifically approached plan.

Greenhouses, warehouses and vertical farming facilities all have potential environmental issues that reduce their economic viability, but with proper vertical air movement, drainage equipment and an understanding of microclimates and how to address them scientifically, efficiency and product quality are enhanced.

Time to Embrace Change

As with any industry, there is resistance to adopting new technology in cannabis cultivation. The original and legacy players will always claim they know how to best grow their plants, but the reality is that the business needs must be addressed.

As canopies increase within a facility, advancements like robotics, LEDs and advanced airflow technology define how the industry operates and continues to improve. Efficiency keeps business alive—cannabis growers must continually assess their operations and make the capital investments that will pay off as wholesale prices continue to decline.

2022 Cannabis Supply Chain Virtual Conference

By Cannabis Industry Journal Staff
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2022 Cannabis Supply Chain Virtual Conference

Sponsored by CannaSpyGlass

View On-Demand Now

Click here to see all available CIJ events and webinars

Agenda

A Smarter Cannabis Beverage Distribution Model

  • Jason Vegotsky, Chief Executive Officer, Petalfast

Current cannabis distribution models make it hard for emerging cannabis beverage brands to launch and scale their businesses successfully. Instead, the wine & beverage sector could provide a model that would allow these brands to build relationships with retailers, foster competition, and improve brand diversity for consumers. In this presentation, Jason Vegotsky will delve into the cannabis sales and distribution model, examine how current models hurt emerging brands and products, and analyze how other CPG models, specifically in food & beverage industries, can be applied to cannabis to build relationships and improve sales.

Track-and-Trace Technology: Building Resilience in the Cannabis Supply Chain

  • Michael Johnson, CEO, Metrc

Building resilience in supply chains is a goal for all parties involved in a given market. Governments have an interest in protecting the health of consumers while safeguarding the flow of goods; businesses want to stay compliant while efficiently moving products; and consumers want and should expect that the products they buy are safe and effective. With heightened awareness around transparency and consumer safety in the cannabis industry, track-and-trace technologies have been central to building broad trust by ensuring more secure supply chains. In this presentation, Michael Johnson will discuss how these tools will continue to be deeply transformational in the sector.

Improve Your Operations through Cannabis Industry Analytics – CannaSpyGlass Sponsored Tech Talk

  • Adam Hutchinson, Co-Founder, CannaSupplyGlass

As new markets legalize and additional business licenses are distributed, competition between cannabis operators is intensifying in every stage of the supply chain from seed-to-sale. It is now tougher than ever to carve out a piece of this increasingly saturated market and cannabis operators aiming to succeed must incorporate industry analytics into their decision-making process. With data analytics, cannabis is no longer an industry of trial and error, and in this session, cannabis operators will learn how to obtain and utilize data analytics to improve their businesses and sustain long-term growth.

Quality and Safety and the Edibles Supply Chain

  • Steven Gendel, Ph.D., Principal, Gendel Food Safety

As the number and variety of cannabis and hemp-containing edibles continues to increase, the supply chains for these products have become complex and diverse. This means that manufacturers must understand how to develop and apply supply chain controls that protect consumers and ensure product quality and safety.  For example, a simple cannabis-infused baked product might contain more than 20 non-cannabis ingredients sourced from multiple suppliers.  The manufacturer of this product must ensure that each of these ingredients meets specifications every time a new batch or lot is received and used.  Unfortunately, there is little guidance available to the cannabis industry (especially those who are not familiar with food manufacturing) on how to identify and evaluate supply chain risks or on what controls will be most effective in mitigating these risks.  This talk will look at the steps that cannabis manufacturers can take to evaluate their supply chain, monitor and control identified risks, and respond to changes in the industry landscape.

Managing Cash Flow in the Cannabis Supply Chain

  • Nohtal Partansky, Co-Founder & CEO, Sorting Robotics

The cannabis supply chain has pitfalls and landmines that can severely hurt a business if navigated improperly. The balance between branding, packaging, growing, distribution, testing, and quality is difficult to achieve. If one of aforementioned topics fails to deliver, it can mean huge financial losses or the death of a brand. In this presentation, we will cover how managing cash flow throughout the supply chain is critical to running a successful operation. There will be several case studies in improperly managed supply chains and their consequences on the balance sheet. There will also be an exploration of what the ideal supply chain would look like in the California market, how that correlates to other adjacent industries, and how it manifests into liquidity.

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The 3-Legged Stool of Successful Grow Operations: Climate, Cultivation & Genetics – Part 1

By Chris Wrenn, Phil Gibson
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Ideal cannabis profits come from high demand/high selling prices and low production costs. The spread between those two, or margin, can determine the life or death of your business. We want to share this series of articles so that your next investment can be highly successful and high margin out-of-the-box.

Regardless of the grow method (soil, coco, rockwool, hydro or aero), every plant performs best in its own ideal environmental conditions. Experienced growers gained success through hard work, and just that, experience. Many have tried more advanced grow technologies, but shied away due to early trial failures or the complexity of maintaining chemistry across a grow facility. The wonderful thing now is that precision sensors and software controls eliminate the risk to robust healthy plants and harvest success. Growers are now able to both manage production while performing research in line with their operations.

We have learned a great deal working with our grow partners over the last 6 years. Every grow facility and location are different due to local weather, business environment and scale. This series of articles and guide, authored by our expert, Christopher Wrenn, will include recommendations of the most successful approaches we have seen here in North America and all over the world.

A 4-Layer fully aeroponic flower room using movable racking systems

Building top-quality cultivation facilities is no simple task. Cultivators are also looking for new help as they shift from older soil or media approaches to more efficient grow methods. One powerful method is aeroponics, which is very good at growing any type of plant in air in a sterile environment, with labor, nutrient and water savings.

Where possible, we will share key vendors that support healthy grow operations and (since it is World Series Time), customer examples that are knocking it out of the park. In today’s competitive business environment, it is critical to do what we can to increase profitability and survival in the face of steep headwinds. We want you to crush it and be “the last man standing.”

So, let’s get to it.

Climate: Environmental Control

We begin with a critical leg in your environment. The process of photosynthesis is more than just light, plant and moisture. We want to do more than just grow plants. We want to grow highly profitable plants. That means we have to accelerate photosynthesis so we are growing faster, bigger and more potent than our competitors.

The Vapor Pressure Deficit (VPD) is the amount of “drying power” available in the air surrounding your plants. This is a useful way to understand the amount of moisture your atmosphere can remove from your plants as they digest carbon dioxide and aspirate water and oxygen into the air around your plants. A higher vapor deficit is a good thing for growth; It is also a measurement of how much nutrient you can uptake into the plant roots and convert into size and potency in the canopy. We recommend that you have resources in your grow rooms to maintain your environment to within 5% of both your humidity and temperature targets for ideal results.

Onyx Agronomics is a Tier 3 indoor cultivator in the State of Washington. This is the canopy in one of their 8 flower rooms.

In our Top Quality Cultivation Facility white paper, we review environmental settings for temperature and humidity for mother, clone/veg and flower rooms for day and night light cycles from early cuttings through to end of harvest flush. Day temperatures can be up to 20% higher than night temperatures for example.

Cooling

Managing temperature may seem straight-forward but the heat generated by LED lights, HPS lights or the sun will vary across rooms, time exposure and with the distance of the light source from the plants. Measurement sensors should be distributed across rooms to monitor and trigger temperature resources.

Humidification/Dehumidification

This is a topic that can be underappreciated by cultivators. It is important to slowly transition humidity as you move plants from cuttings to clones, to veg and to flower. Beginning in a very humid stage to motivate root start, humidity will be stepped down from an opening near 90% down to an arid 50% in your end of flush flower rooms. We detail the transitions in 5% increments in the white paper.

The 4-Layer aeroponic flower room with movable racking systems from the side with a tall human for scale. One can do a lot with 30′ ceilings.

Relative Humidity (RH) and the related VPD are the key metrics to accelerating growth throughout the stages. Not sizing dehumidifiers correctly is one of the most common mistakes our grow partners learn about as they move to full production. In the first phase of turning cuttings from healthy mothers into rooted clones, hitting your target VPD to motivate root growth is the number one success factor. This will require the addition of humidity into your clone room. It is also typical to require raise the humidity of your flower rooms when you transition clone/veg plants from the high humidity clone/veg room into an initially dry flower room, otherwise the plants may go into shock as a result of the dramatic change.

As flowering begins, if humidity remains high, and the VPD is below target, the plants will not be moving nutrients and transpiring moisture. We have seen lowering the humidity from 70% in a flower room down to 50%, results in a yield increase from 50 grams to 90 grams of dry trim bud per plant, so a smooth transition can both accelerate growth and have a big impact on your margins and profitability.

Plants in aeroponics can truly have explosive growth. This means that they will also transpire moisture at an accelerated rate. Fast automated growth in aeroponics means increased humidity output. Sizing these critical systems for humidification/dehumidification are a critical part of the design process.

Airflow

Fans combined with your cooling/heating/humidity/dehu systems need to mix the air in a room to break the boundary layer at the leaf surface for transpiration. As we covered, VPD is critical to growth success. A dry surface motivates the plants to transpire moisture. We recommend flow rates across the canopy in a 0.5-1.5 meter/second rate to align to your genetics and where you are in the flowering process.

A raw facility before it gets outfitted.

Airflow and flowering means rich beautiful aromas are generated. Every facility has to consider odor control. If you are in a populated area, you will have ordinances and neighbors to satisfy. The best way to do this is to minimize the amount of air that exits a facility. This is also the cheapest approach.

Sterile HEPA filters and scrubbing systems clean air of pathogens and odor but they also need to circulate and “condition” air to the correct temperature and humidity levels before it can be recirculated into a room. Oftentimes, this is a good place to also recapture humidity and reinject it into your pure water cleaning systems.

Key vendors to talk to about sizing air treatment systems are SURNA, Quest, Desert Aire and AGS. Each of these vendors have specialties and tend to be superior partners in different regions of the world. We would be happy to introduce you to excellent support resources for air management systems.

To download the complete guide and get to the beef quickly, please request the complete white paper Top Quality Cultivation Facilities here.

Click here to see Part 2 where we discuss water quality and management.