As the cannabis industry in the United States and throughout the world develops, the market is getting more competitive. Markets in a number of states are experiencing disruptions that will have lasting effects for cultivators, including oversupply and supply chain bottlenecks. Now more than ever, growers need to look for ways to differentiate their product or gain a bigger market share. Looking at yield efficiency, quality improvements and analyzing the cost of inputs versus value of the crop can help growers make the right choices in technology for lighting, irrigation and pest control among other technologies.
A series of free webinars in two weeks can help growers learn about some of the more advanced techniques in improving yield and quality. The Cannabis Cultivation Virtual Conference on May 23rd will explore a variety of tips and tricks for taking their cultivation operation to the next level. This event is free to attendees, made possible by sponsors VividGro and CannaGrow Expo.
Attendees will hear from experts in cannabis cultivation on a range of topics, including breeding, drying, curing, environmental monitoring and micropropagation. Adam Jacques, co-founder of Growers’ Guild Gardens and Sproutly, will discuss some of his experience with breeding high-CBD strains in Oregon. His talk will delve into some of the proper breeding procedures, along with how to hunt for particular phenotypes and developing specific cannabinoids and terpenes.
Dr. Allison Justice, vice president of cultivation at Outco, is going to present some of her findings in drying and curing at the company. She plans on sharing her research on how the post-harvest stages can affect and control the chemical makeup of flower. She’ll also discuss some new protocols to monitor the dry and cure of cannabis flowers so we are able to modulate the terpene and cannabinoid profiles.
We’ve covered the CannaGrow Expo previously, but this time around we catch up with Joseph De Palma, founder of CannaGrow, to talk about the genesis of his conference and what makes the event so special. This year’s CannaGrow Expo heads to Palm Springs, California, a new location for the event, on May 19thand 20th.
We’ve watched De Palma’s conference grow over the years, moving around the country and becoming the tight-knit community we know it as today. The meat and potatoes of the show are definitely the educational sessions, panel discussions, roundtables and the expo hall. But covering it year after year we’ve noticed a real sense of community develop, one where genuine idea sharing, collaboration and inclusivity are preached. There are no dumb questions at the CannaGrow Expo.
According to Joseph De Palma, CannaGrow started in 2014, when the original event was held in Denver. “From the beginning, we wanted to create an event specifically for growers, where the focus was always on education and ‘becoming a better grower’,” says De Palma. “We had experienced the existing events in the marketplace, and almost all fit into two categories at the time, festival, or generic tradeshow. Those were fine for their purpose, but they didn’t foster an environment of education, and that’s what we believed was most important to the emerging cannabis industry.” Back in 2014, their show only had 10 sessions and 30 exhibitors. “Passionate growers from around the country had 2 days of grow-focused sharing and learning, and you could see the energy and excitement,” De Palma says. “Discussions would dive deep, people made new friends, and it really elevated the conversation around cultivation.”
Since the show’s debut, it’s grown substantially. The 7th CannaGrow Expo is fast approaching, and this upcoming conference has four separate tracks and roughly 100 exhibitors. But it still keeps its sense of community, one where you don’t feel crowded, where everyone has time to chat and network, without the overwhelming feeling that can come with larger trade shows. “That inclusivity and open dialog is built in,” says De Palma. “If you go to an event that’s tradeshow dominant, most people are there to walk, shop, and leave. At CannaGrow, growers and extractors come together with a plan for the weekend, remaining in a constant state of engagement with others at the show.”
This year’s show has some exciting additions to look out for. The agenda covers a wide range of topics, including everything from an introduction to growing with living soil to a discussion of cyber security. The Extraction Summit, new to this year’s event and held on Day 2, is their response to the massive rise in popularity and demand of extracts.
Eric Schlissel, cybersecurity specialist, president and chief executive officer of GeekTek, is giving a talk focused on IT infrastructure. “My presentation will center around the actions cannabis businesses need to take right now to repel cybercrime and potential federal seizure,” says Schlissel. “As cannabis operators build their businesses and develop their security strategies, they often focus exclusively on the physical portion of their business – the merchandise and the cash in particular – and overlook the importance of designing and fortifying a secure IT infrastructure. I will discuss the importance of a holistic security strategy that embraces both and how you can both create one and prepare it for expansion into other states or even globally from the very start.” Schlissel’s discussion is one example of just how all-encompassing CannaGrow intends to be.
De Palma and his team leave few stones unturned as the show truly delivers vital information for cannabis cultivators in every area. Some things we are looking forward to? Seeing old friends and learning everything under the sun about cannabis science, growing and extraction. “People get to know each other, and with everyone sharing a core passion for cultivation and extraction, lifelong friendships are made,” says De Palma.
As many US States and Canadian provinces approach legalization of cannabis, the question of regulatory oversight has become a pressing issue. While public awareness is mainly focused on issues like age restrictions and impaired driving, there is another practical question to consider: should cannabis be treated as a drug or a food product when it comes to safety? In the US, FDA governs both food and drugs, but in Canada, drugs are regulated by Health Canada while food products are regulated under the CFIA.There are many food safety hazards associated with cannabis production and distribution that could put the public at risk, but are not yet adequately controlled
Of course, there are common issues like dosage and potency that pharmaceutical companies typically worry about as the industry is moving to classifying its products in terms of percentage of chemical composition (THC, CBD, etc. in a strain), much as we categorize alcohol products by the percentage of alcohol. However, with the exception of topical creams and ointments, many cannabis products are actually food products. Even the herb itself can be brewed into teas, added to baked goods or made into cannabis-infused butters, oils, capsules and tinctures.
As more people gain access to and ingest cannabis products, it’s only a matter of time before food safety becomes a primary concern for producers and regulators. So when it comes to food safety, what do growers, manufacturers and distributors need to consider? The fact is, it’s not that different from other food products. There are many food safety hazards associated with cannabis production and distribution that could put the public at risk, but are not yet adequately controlled. Continue reading below for the top four safety hazards for the cannabis industry and learn how to receive free HACCP plans to help control these hazards.
Aflatoxins on Cannabis Bud
Just like any other agricultural product, improper growing conditions, handling and storage can result in mold growth, which produce aflatoxins that can cause liver cancer and other serious health problems. During storage, the danger is humidity; humidity must be monitored in storage rooms twice a day and the meter must be calibrated every month. During transportation, it is important to monitor and record temperatures in trucks. Trucks should also be cleaned weekly or as required. Products received at a cannabis facilities should be tested upon receiving and contaminated products must always be rejected, segregated and disposed of safely.
Chemical Residues on Cannabis Plants
Chemical residues can be introduced at several points during the production and storage process. During growing, every facility should follow instructions for applying fertilizers and pesticides to crops. This includes waiting for a sufficient amount of time before harvesting. When fertilizer is being applied, signs must be posted. After cannabis products have been harvested, chemical controls must be in place. All chemicals should be labelled and kept in contained chemical storage when not in use to prevent contamination. Only food-grade chemicals (e.g. cleaners, sanitizers) should be used during curing, drying, trimming and storage.
Without a comprehensive food safety program, problems will inevitably arise.There is also a risk of excessive concentration of chemicals in the washing tank. As such, chemical concentrations must be monitored for. In general, water (obviously essential for the growing process) also carries risks of pathogenic bacteria like staphylococcus aureus or salmonella. For this reason, city water (which is closely controlled in most municipalities) should be used with an annual report and review. Facilities that use well water must test frequently and water samples must be tested every three months regardless.
Pathogenic Contamination from Pest Infestations
Insects, rodents and other pests spread disease. In order to prevent infestations, a pest control program must be implemented, with traps checked monthly by a qualified contractor and verified by a designated employee. It is also necessary to have a building procedure (particularly during drying), which includes a monthly inspection, with no holes or gaps allowed. No product should leave the facility uncovered to prevent fecal matter and other hazards from coming into contact with the product. Contamination can also occur during storage on pallets, so pallets must be inspected for punctures in packaging material.
Furthermore, even the best controlled facility can fall victim to the shortcomings of their suppliers. Procedures must be in place to ensure that suppliers are complying with pest and building control procedures, among others. Certifications should be acquired and tracked upon renewal.
Pathogenic Contamination Due to Improper Employee Handling
Employee training is key for any food facility. When employees are handling products, the risk of cross-contamination is highest. Facilities must have GMP and personnel hygiene policies in place, with training conducted upon hiring and refreshed monthly. Employees must be encouraged to stay home when sick and instructed to wear proper attire (gloves, hair nets, etc.), while glass, jewelry and outside food must not be allowed inside the facility. Tools used during harvesting and other stages may also carry microorganisms if standard cleaning procedures are not in place and implemented correctly by employees.
As the cannabis industry grows, and regulatory bodies like the FDA and CFIA look to protect public safety, we expect that more attention will be paid to other food safety issues like packaging safety (of inks and labels), allergen control and others. In the production of extracts, for example, non-food safe solvents could be used or extracts can be mixed with ingredients that have expiration dates, like coconut oil. There is one area in which the cannabis industry may lead the way, however. More and more often, risks of food terrorism, fraud and intentional adulteration are gripping the food industry as the global food chain becomes increasingly complex. It’s safe to say that security at cannabis facilities is probably unparalleled.
All of this shows that cannabis products, especially edibles (and that includes capsules and tinctures), should be treated the same as other food products simply because they have the same kinds of hazards. Without a comprehensive food safety program (that includes a plan, procedures, training, monitoring and verification), problems will inevitably arise.
Sunrise Genetics, Inc., the parent company for Hempgene and Marigene, announced last week they have successfully mapped the cannabis genome. The genome map was presented at the 26th Annual Plant and Animal Genome Conference in San Diego, CA during the panel “Cannabis Genomics: Advances and Applications.”
According to CJ Schwartz, chief executive officer of Sunrise Genetics, the full genome map will allow breeders to develop strains using DNA sequence information to complement phenotyping. “In this way a breeding program can be guided by the breeder versus blindly as it is for just pheno-hunting,” says Schwartz. “At the DNA level, we can identify what version of a set of genes a plant contains, and make predictions as to the phenotype, without ever growing the plant. As we make more and more gene markers, we have more genes to track, and breeding becomes more rapid, efficient and precise.” Schwartz says this is essential for breeding stable, repeatable plants. “A commercial strain will be grown in different environments, with solid genetics, the phenotype will mostly stay true, a term we call Genetic Penetrance.”
Determining a plant’s DNA can be extremely valuable and completing the map of the genome now makes this more precise. It can serve as a point of proof, according to Schwartz, providing evidence of lineage in a breeding project and confirming the uniqueness and identity of a strain. The genome map can also allow breeders to select specific genes to develop custom strains. And in addition to all that, it provides legal protection. “Knowing your plants DNA code is the first step to being able take action so no one else can protect it,” says Schwartz. “Well documented evidence in the development of a customized strains is essential to maintaining control of your plant and keeping those you distrust (big pharma) away, many of which have minimal interest in the whole plant anyhow.”
Schwartz says this project took them roughly 18 months to wrap up. “One of the biggest problems was just finding the right plants to grow,” says Schwartz. “In addition we used some emerging technologies and those had some challenges of their own.” According to Schwartz, a key aspect in all this was finding the right collaborators. They ended up working with CBDRx and the plant biology department at the University of Minnesota, where a DEA-licensed lab has been researching cannabis since 2002. “George Weiblen’s group at UM has been working on Cannabis for over a decade,” says Schwartz. “During that time they did repeated selfing to make highly inbred marijuana and hemp lines. The lines were instrumental in deterring the physical order of the genes.”
After finishing up some experiments, they expect to get the genome map published on public domain in less than a year, opening up their research to the general public and allowing breeders and growers to use their data. “This will be a very significant publication,” says Schwartz. “The genome assembly allows for the assimilation of all the currently incompatible Cannabis genome sequence datasets from academia and private companies,” says Schwartz. “Joining datasets from 1000s of strains, and from every continent, will generate an essential public resource for cannabis researchers and aficionados alike.” With a tool like this, we can discover the genes that help produce desirable traits. “This project is a major accomplishment for cannabis, bringing it on par with other important crops, providing a scientific tool to unravel the secrets of this incredibly versatile plant,” says Schwartz.
Sunrise Genetics is assisting cannabis businesses in evaluating strains and developing breeding programs, working with a number of customers currently to develop strains for many different specific traits. “We have the expertise to help select parental strains and guide the selection process at each generation using genotype and phenotype information,” says Schwartz. “Essentially we are bringing all the tools any modern plant breeder would use for improving strawberries to cannabis.”
This three-part series will provide an in-depth look at intellectual property (IP) protection that is available for innovative and new varieties of cannabis. In this first installment, we will examine the reasons why cannabis breeders should adopt a strong IP strategy and look briefly at the types of IP that they should be considering. In the second and third pieces, we will look at the types of IP protection that can be used to protect innovative cannabis varieties and the unique IP issues the cannabis industry faces right now. Taken together, these articles will provide insight into IP strategies that cannabis breeders and growers can employ today to help prepare for the day that cannabis becomes legal nationally.
Why should I use IP to protect my cannabis varieties?
First and foremost, as the cannabis industry continues to move from a small, tight-knit community of breeders and growers into a ‘big-business’ industry, IP is the only way for breeders to protect the investment of time, energy and money that they put into developing new and innovative strains of cannabis. At a recent cannabis growing conference, one sentiment felt among numerous breeders was a feeling of frustration– stemming from the fact that they had spent many years developing new varieties of cannabis and, now that the industry is exploding, they are not getting recognition for all that effort. The way to avoid this issue is to protect novel varieties with IP to ensure that you are given proper credit for all of your hard work.
Moreover, an examination of industries that have strong similarities to the cannabis industry, such as other plant-based industries and ‘vice’ industries, provides compelling evidence that IP will become a main driving force in the cannabis industry as it continues to mature. For example, the fruit and hops industries have been relying upon strong plant patent and trademark protection for many years. The extremely popular Honeycrisp apple is a patented variety and the Amarillo hops variety (officially called ‘VGXP01’) is protected by both a U.S. Plant Patent and a federally registered trademark. Similarly, the alcohol and tobacco industries rely upon strong trademark and branding strategies, with many consumers being extremely brand-particular.
Additionally, there is strong evidence that the cannabis industry is primed for intellectual property protection. Since long before cannabis was legalized, consumers who were buying cannabis on the black market often sought out a particular variety from their dealer, something that becomes more prevalent as the industry continues to mature.
Why is now the time to think about IP?
First, the relevant governmental bodies have now provided some clarity as to the types of IP protection that can, and cannot be obtained for cannabis. For example, it is now clear that the U.S. Patent and Trademark Office (USPTO) will issue patents that cover new cannabis plant varieties and related innovations, such as novel growing methods. In fact, the first U.S. Plant Patent that covers a novel cannabis strain, called ‘Ecuadorian Sativa’, issued in late 2016.
Similarly, though federal trademark registration is not currently available if the product being protected is a cannabis product that is illegal under federal law. Federal trademark registration may be available to protect products related to the cannabis industry that are not themselves federally illegal (e.g., grow lights, fertilizer, etc.). Many states with legalized cannabis will grant state trademark registrations for cannabis products regardless of whether the products are viewed as illegal under current federal law. With this increased clarity, companies can now begin to formulate a comprehensive IP strategy that ties together the various types of IP protection.
Additionally, cannabis breeders and growers should look to adopt an IP strategy now because there are certain time bars that exist that may result in loss of rights if they wait. For example, as we will discuss in Part 2 of the series, patent protection can only be sought if the variety to be patented was not sold, offered for sale, or otherwise made publicly available more than one year before the patent application is filed. So if a breeder chooses to wait to seek patent protection for a new variety, the ability to ever get that protection may be lost.
The bottom line is that, to solidify their place in the market, cannabis breeders and growers should be formulating an IP strategy sooner rather than later. Those forward-thinking growers and breeders that adopt a comprehensive IP strategy up front will gain a distinct competitive advantage over competing growers and breeders down the road – an advantage that will become even more important if and when large corporations begin to move into the cannabis space. Those companies that have strong brands in place will be better equipped to survive and thrive in the face of pressure from legal teams at larger companies.
The next two installments of this series will examine the specifics of the types of IP protection that can be sought and the unique issues that the cannabis industry faces with each of them.
Legal disclaimer: The material provided in this article is for informational purposes only and not for the purpose of providing legal advice. The opinions expressed herein are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. The provision of this information and your receipt and/or use of it (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.
Willamette Week, a Portland-based publication, is hosting the 2017 Cultivation Classic with Farma, Cascadia Labs, Phylos Bioscience and the Resource Innovation Institute on May 12th. The event is a benefit for the Ethical Cannabis Alliance, an organization that promotes sustainability, labor standards and education surrounding the integrity and ethics of growing cannabis. Cultivation Classic is a competition for pesticide-free cannabis grown in Oregon, according to a press release.
While the event’s focus is on the competition, it is just as much a celebration of the craft cannabis community in Oregon. This year’s competition incorporates scientific collaboration like genetic sequencing for the winners by Phylos Bioscience and carbon accounting for all competitors. Keynote speakers include Ethan Russo, medical director of PHYTECS and Dr. Adie Po, co-founder of Habu Health. Congressman Earl Blumenauer, a prominent cannabis legalization advocate in Oregon, will also be speaking at the awards ceremony. You can check out the full schedule and speaker lineup here.
Raymond Bowser, breeder at Home Grown Natural Wonders, is a judge for this year’s Cultivation Classic. He speaks at cannabis conferences around the country and his business created a number of different strains, so he has experience with a myriad of growers and strains. “This time around everyone has really stepped up their game,” says Bowser. “The entries are noticeably better than last year.” When looking at the different samples sent to him, he sees a few key factors as most important in judging the quality. “What I am looking for is simple; a nice smell and a decent look, generally speaking,” says Bowser. “Aesthetics can tell you a lot about how it was grown, temperature changes and the overall care taken in cultivating and curing the flower.” For him, flavor, smell and aesthetics are the big variables to consider.
Those are factors that his company holds to high standards in their work, so he judges the samples based on the same variables. “It is what we strive for in our gardens and so far the samples I have tried are fantastic in that regard,” says Bowser. In other competitions that Bowser has judged in the past, they sent him between 40 and 60 strains to judge in seven days. “That is not conducive to a fair evaluation,” says Bowser. “Here, we are getting fourteen or so different strains, so we can sample one strain a day which is how I personally like to do it.”
Bowser is supportive of Cultivation Classic because of their emphasis on the craft industry. “We talk about craft cannabis and breeding craft cultivars at conferences around the country,” says Bowser. “With the rec industry growing so much, we see so many people cutting corners to save money, that it is refreshing to see growers take pride in the craft.” He also stresses the need for good lab testing and sound science in the trade. “I am big on lab testing; it is very important to get all the right analytics when creating strains,” says Bowser. “Cascadia is a solid choice for the competition; they have been a very good, consistent lab.” Emphasizing the local, sustainability-oriented culture surrounding the craft market, Bowser is pleased that this competition supports that same message. “We need to stay true to our Oregon roots and continue to be a clean, green, granola-eating state.”
Cascadia Labs is conducting the pesticide and cannabinoid analytics for all submissions and Phylos Bioscience will perform testing for the winners. According to Julie Austin, operations manager at Cascadia Labs, pesticide testing for the Oregon list of analytes was of course a requirement. “Some of the samples submitted had previous tests from us or from other accredited labs, but if they didn’t have those results we did offer a comprehensive pesticide test,” says Austin. The competition’s fee for submission includes the potency and terpenes analysis.
Jeremy Sackett, director of operations at Cascadia Labs, says they test for 11 cannabinoids and 21 terpenes. The samples are divided into groups of THC-dominant samples, CBD-dominant samples and samples with a 1:1 ratio of the two. “The actual potency data will be withheld from judges and competitors until the day of the event,” says Sackett. “We are data driven scientists, but this time we want to have a little fun and bring the heart of this competition back to the good old days: when quality cannabis was gauged by an experience of the senses, not the highest potency number.” The event will take place on May 12th at Revolution Hall in Portland, Oregon. Click here to get tickets to the event.
PA Secretary of Health Dr. Karen Murphy last week announced applications for growers and processors, while dispensary license applications will be available January 17, 2017. License applications will be accepted from February 20 through March 20, 2017. Governor Wolf signed the medical cannabis bill into law back in April of this year.
“We’ve reached an important milestone in the program with the release of permit applications on January 17, 2017,” says Secretary Murphy. The PA Department of Health will issue 12 licenses for growers and processors and 27 dispensary licenses, according to Secretary Murphy’s statement. “The decision for which counties will be issued permits in this first phase was determined by using the department’s medical data, as well as comments from more than 5,000 patients and nearly 900 potential grower/processors and dispensary applicants.”
According to the Philly Voice, the highly populated Southeast region of Pennsylvania will get ten dispensary permits, including three in Philadelphia, two in Montgomery County and one in Bucks, Chester, Berks, Delaware and Lancaster counties each. The state will fully implement its medical cannabis program by 2018, but a temporary program with ‘Safe Harbor guidelines’ was effective in May of 2016, essentially allowing access for patients in the mean time, while establishing preliminary regulatory compliance guidelines.
In last week’s statement, Secretary Murphy also stressed the importance of their Physician Workgroup in developing the regulations. “We cannot underestimate the role of physicians in making sure that patients can access medical marijuana,” says Secretary Murphy. “That’s why the involvement of physicians and health care professionals through our Physician Workgroup is vital to the successful development and implementation of Pennsylvania’s Medical Marijuana Program.” The Workgroup’s recommendations include establishing quality monitoring, training for dosage recommendations while addressing rural and urban access, education and delivery.
Three health alerts were issued Thursday, November 4th for contaminated cannabis sold to consumers at North Bend, Salem and Eugene dispensaries. Green-Way Medicinal in Salem and Stonies in North Bend sold two strains of cannabis flower found to have high levels of piperonyl butoxide, an ingredient commonly found in pesticides that acts as a synergist to amplify the effects of certain compounds.
The two batches in question, including the strains Pleeze (batch number G6J0039-02) and Dryzl (batch number G6J0039-01), were found to contain the potentially dangerous chemical at levels of 15.39 ppm and 16.24 ppm, respectively. The Oregon Health Authority (OHA) action level for piperonyl butoxide is 2.0 ppm. To see the full health alert, click here.
The dispensary in Eugene, Flowr of Lyfe, sold one strain of cannabis that had levels of the insecticide spinosad over the 0.2-ppm action level. The very popular indica hybrid, Dutch Treat (batch number G6J0018-01), was found to contain 0.9-ppm of spinosad. Though it still tested above the 0.2-ppm action level for that insecticide, it pales in comparison to October’s health alert, where a batch of cannabis had over 200 times the acceptable level of that insecticide. Both spinosad and piperonyl butoxide are considered toxic to humans.
According to the health alert, “All tests were performed by an OHA-accredited and Oregon Liquor Control Commission-licensed laboratory.” It is unclear exactly how or why the cannabis was able to get transported and transferred from the grower to the dispensary and then sold to consumers after failing the pesticide test. According to Jonathan Modie, spokesman for the OHA, they are currently investigating the matter and following up with the dispensaries and growers to find out what happened. “We need to find out how this got transferred in the first place and then sold,” says Modie. “They had access to the test results and should have been able to determine for themselves that these products should not have been sold or transferred.”
“We don’t know, we are still gathering information, there is a risk of civil penalty as well as losing your registration for a dispensary or grower that illegally transferred products that have tested for analytes above the action levels,” says Modie, when asked if punitive measures would be taken. While there are no particular regulations for this scenario in performing a mandatory recall, the OHA is obligated under law to issue health alerts when there is a situation that might affect public health, according to Modie.
“We deal with this with infectious disease outbreaks or during a food borne illness outbreak; if they [the public] can avoid it by hearing from us then we want to get the word out and this is a very similar situation.” For medical patients that purchase potentially contaminated cannabis such as this, it is easy to contact them to have the patient dispose or return the cannabis. Dispensaries are not required to collect information from recreational customers, and most dispensaries do not, which is a major problem when this situation happens, as it has twice in the past two weeks.
“We can never do too much communication,” says Modie. “We will let the public know in any way possible that they should return this product or dispose of it responsibly.”
This November 8th, voters in five states will head to the polls to decide on legalizing recreational cannabis and another three states have ballot initiatives that would legalize medical cannabis. If any of those five states pass a measure for recreational legalization, including Massachusetts, Maine, Nevada, Arizona and California, (which are all leading in the polls) they could potentially create massive new market opportunities for cannabis brands that have their eye on expansion.
Nancy Whiteman, co-owner of Wana Brands and chair of the Cannabis Business Alliance Infused Product Committee, sees great potential in capitalizing on those markets early. Whiteman has been working with Wana Brands since 2010 in Colorado, starting out in the young medical market there.
After expanding to the recreational market, Wana Brands saw its sales skyrocket. From January to August 2016, Wana had the best-selling candy brand in Colorado with 21% dollar share, according to BDS Analytics. Wana Brands has already expanded to Oregon and will launch in Nevada on November 15th, with agreements signed to expand in other states as well. “The model we are pursuing is a licensing agreement where we partner with existing or new license holders in their state,” says Whiteman. “In many ways they are doing the heavy lifting, but we are providing an enormous lift by licensing our intellectual property to them.” That model for growth is becoming increasingly common in some of the more established brands, like Steep Hill Laboratories, GFarma Labs, Dixie and others. Whiteman says that Wana Brands also has a partner in Illinois, Massachusetts and a number of other states they hope to reach.
According to Mark Slaugh, executive director of the Cannabis Business Alliance and chief executive officer of iComply, a compliance services provider, brands from Colorado expanding to other states need to ask themselves if their reputation is on the line with these new operators. “If you are licensing to companies that are not compliant, the penalties could be huge and they vary state to state- that could potentially hurt the overall brand image nationally,” says Slaugh. “People doing the licensing that are operating with full compliance really need to look at controlling that risk and mitigating that as much as possible.” With brand trust on the line, there are substantial risks that come with expansion. “We help clients ensure quality is consistent so, for example, an edible product would taste the same in Colorado as it would in Nevada or Arizona. They need to follow the intellectual property consistently but more importantly follow those specific regulations in that state to stay afloat.” Managing ongoing compliance in different states requires monitoring regulatory updates across multiple markets, which can get incredibly complex.
“Six years ago, it was much easier to get into the market in Colorado,” says Whiteman. “There were no capital requirements, no limits on the number of licenses, but there was still a lengthy application and vetting process- as long as you met those minimum requirements you could get a license.” Other new states put stringent limits on the number of licenses granted and some have extraordinarily cost-prohibitive capital requirements, up to a million dollars, as is the case for New York. “Anyone who becomes a license holder in Massachusetts has to be prepared to embark on three separate business models, which is a massive undertaking,” says Whiteman. Massachusetts requires license holders to cultivate, process and dispense in a vertically integrated model.
In other states, Wana Brands is working with exclusive partners who will have the capabilities to manufacture and distribute throughout the entire state, but in Massachusetts that won’t be the case. “To cover the state, we need several partnerships; the partner we are working with is a little south of Boston,” says Whiteman. But all that could change if voters in Massachusetts legalize it recreationally, opening a much larger market than the current medical program. “With no legislation drafted yet, the regulatory environment is still up in the air in Massachusetts so there is no way of telling what the recreational market will look like.” In terms of ongoing regulatory compliance, Whiteman believes that Colorado still has some of the most stringent rules. The universal symbol printed on every individual edible product serving is one example. “Every state has different lab testing and licensing requirements, but Colorado looks like the most stringent currently,” says Whiteman. “Colorado requires a full gamut of lab testing including homogeneity, potency, residual solvents, contaminants and soon pesticides too.” According to Mark Slaugh, Nevada’s lab testing regulations are fundamentally different from Colorado’s with regard to sampling procedures, but the broader inconsistencies in lab standards need to be addressed. “The lack of laboratory standardization state to state with regard to methods creates a big challenge to get consistent, proficient lab testing across the board,” says Slaugh.
A big differentiator between Colorado and other states is that it was a first mover. “When Colorado came online there were not any established brands to speak of anywhere in the country- we were all pioneers,” says Whiteman. “Because it is so difficult to get a license in another state, either the organization or investor groups are looking to partner with established brands.” The advantages to this business model are many. Expediting your entry to market gets you the advantage of being a first mover. Working with an established brand also minimizes risks and the learning curve. “Bigger players understand that building a brand from scratch is time consuming and expensive so I think we will see a lot of these partnerships.”
As those new states come online, similarities in their regulations might appear in the form of standard operating procedures (SOPs) or good manufacturing practices (GMPs). “We might start to see a standardization from state to state that models FDA GMPs or USDA GAPs, [good agricultural practices] moving toward a framework that is more consistent with the possibility of federal regulation,” says Slaugh. Another commonality among a number of states is the implementation of a statewide tracking system. According to Slaugh, California has no such mandated system in place yet. “They will probably have one eventually but the market is so localized there- we will see if California will be ready with a statewide compliance system for tracking by 2018,” says Slaugh. “With such a weird patchwork of local governments allowing or not allowing certain operations to exist, it is a tough business to be in and it’s getting tougher every day.”
By Olivia L. Dubreuil, Esq., Brett Giddings No Comments
Most readers ought to be well aware that the cannabis industry is rapidly growing. The Arcview Group, an Oakland-based investor network, estimates the retail and wholesale cannabis market will reach $22.8 billion by 2020. That number represents a lot of people consuming cannabis in many different ways.
The average cannabis consumer is changing. A new range of social groups is consuming cannabis-based products. From yoga diehards, to middle-aged men and women, veterans that have ‘tried everything else’ and young professionals looking for a different way to relax, the market is broadening.
This new segment of cannabis consumers are often not looking to get high- they are looking for anti-inflammatories, relaxants and ways of dealing with chronic pains and stress. For these health and wellness seekers, the last thing they want is a product dosed with pesticides, insecticides or butane residues. We can expect to see these consumers to follow broader consumption trends- specifically when it comes to a product like cannabis that people are inevitably placing in or on their bodies.
These consumers come with new sets of expectations, similar to those when they buy fruit, vegetables, coffee or chocolate. They are increasingly curious about the contents of the products they purchase- they are a large part of the reason that the sales of organic produce has ‘ballooned’. They are asking questions like: Does the product contain pesticides? Has the product been cultivated in a way that minimizes negative environmental impacts? How do we know that the supply chain quality controls are rigorous enough to ensure no one has tampered with the product? Who is growing and picking this product and how are those people being treated?
When a curious consumer enters a modern American supermarket, they are guided by a range of messages relating to the contents and supply chain that was part of making each product. Organic, non-GMO, pesticide-free, fair trade, free-range and locally produced are some of the common criteria. The more credible labels are supported by codes and procedures in which the whole supply chain is audited, monitored and approved by the certifying body according to certain standards- for example the USDA certifies organic foods.
Being a Schedule I controlled substance under federal law, cannabis is probably not going to receive USDA organic certification any time soon. However there are organizations out there that are committed to increasing the availability of cannabis grown with organic practices. Certifying bodies like Certified Kind and the Organic Cannabis Growers Society are gaining popularity among growers who see the market evolving in that direction. At the same time, businesses such as Delicious Fog (an ‘organic-focussed’ delivery service in Santa Clara County) and Harvest (an ‘organic’ dispensary in San Francisco)- are specializing in the sale of these ‘organic’ cannabis products.
Just like any sustainability issue- ensuring your cannabis product comes from a well-managed supply chain cannot be a last minute add-on. Whether a business is small, large, mature or emerging, developing a strategic approach to the diverse spread of sustainability challenges is critical.
As a cannabis business what can you do to appeal to the new cannabis consumer?