Cannin Commentary

A Closer Look at Village Farms

By Cannabis Industry Journal Staff
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Village Farms International (NASDAQ: VFF) manages and operates greenhouse facilities in North America. They’ve worked with growers for over 30 years and started supporting cannabis growers in 2017.  The company was founded by Michael A. DeGiglio and Albert W. Vanzeyst in 1987 and is headquartered in Delta, Canada. But is Village Farms stock a strong buy?

What is Village Farms International?

Village Farms International has a long history of managing and operating energy efficient grow facilities for agricultural crops. This includes cannabis, recently, and vegetables which bring in over $200 million in revenue annually.

Their 2021 acquisition of Pure SunFarms, one of Canada’s best known cannabis brands, gave them around $17 million in extra revenue and a large opportunity in the flower competition in Canada. Current goals have them taking 20% of the flower market share. They also deal in vapes, oils and infused edibles.

Bottom Line: Is Village Farms Stock a Strong Buy?

Village Farms stock shows plenty of promise. They have a large footprint in Texas as well, supporting hemp cultivation and processing into CBD products for distribution in the USA. With a small stake in Altum International, they also have a presence in Asia.

Excitingly, their subsidiary Balanced Health Botanicals, has come out with their Synergy Collections of SKUs (cannabinoids such as CBDA, CBG, and CBG with non-hallucinogenic mushrooms and Kava roots). These products will come as tinctures, capsules and drinks (around 31 SKUs pending) and should diversify their product offerings even more.

Their revenue remains strong, with adjusted EBITDA up 49% YoY and Pure SunFarms reporting 12 straight quarters of positive adjusted EBITDA. They have a lot of cash and are paying off their debt and recent acquisition costs quickly. With really low P/S, Price/Book and EV/Revenue ratios (all under 4) we see a bargain price now for a company that should slowly grow for the next six quarters.

Village Farms stock presents a longer buy and hold opportunity but the recent price drop (37% in 1 year?!) is making much more of an enticing deal now.

For all these reasons we rate VFF as Strong.

83% of Cannin’s fundamentals prove true within 30 days or less on 100+ recommendations over the past 3 years.

At Delic Labs, We Have a Dream: A Cannabis Better Future

By Dr. Markus Roggen, Amanda Assen, Dr. Eric Janusson
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Many people associate cannabis with eco-friendly, counter-cultural movements, but we know the environmental impacts of the cannabis industry are significant. Given the climate crisis, cannabis production companies have a responsibility to ensure future demands of the industry are met in an environmentally sustainable way. We also know that as the world is seeing the impacts of climate change, consumers are changing their spending habits 1. As a result, companies also have the financial incentive to seriously consider implementing more environmental policies, to align their interests with the interests of consumers. Unfortunately, restrictions on cannabis research and the legal industry create barriers to implementing many environmentally friendly alternatives in production. However, this does not give us an excuse to do nothing while we wait – there are many steps that can be taken while we work to overcome these barriers. Our team at Delic Labs aims to help companies ensure the environmental and economic sustainability of the cannabis industry. So, we did some research and developed the Cannabis Better Future (CBF) concept, a guide that considers the impacts of cannabis cultivation and processing on the environment. The pillars of CBF are:

  1. Use of renewable/recyclable materials in production

The packaging used for legal cannabis products is infamously excessive. A standard 3.5-grams of dried cannabis is estimated to come packaged in more than 70 grams of plastic. This seemingly redundant packaging is done to meet regulations surrounding cannabis packaging that often require single-use plastic with labels and warnings at specific sizes 2. Despite this, there is work being done to get biodegradable packaging approved in the industry.

More companies, such as Knot Plastic, are using plant-based materials to provide medical-grade biodegradable alternatives to single-use plastic 3. As members of the industry, we should support these companies and call for regulations to approve biodegradable packaging. As for immediate actions that can be taken, we can turn to companies that reduce the amount of plastic from the industry that ends up in landfills. The Tweed x TerraCycle Cannabis Packaging Recycling Program accepts all cannabis containers from licensed producers in Canada – free of charge – and melts down the plastic to create new products 4. This includes tins, plastic bags, tubes and bottles with child-proof caps. The program has saved more than 165,000 containers from ending up in landfills.

  1. Upcycle biomass waste

It is estimated that for every pound of cannabis harvested, up to 4.5 pounds of plant waste is generated 5. Cannabis biomass waste can be discarded in four different ways: via landfill, composting, in-vessel digestion or incineration 6. Cannabis bio-waste usually ends up in landfills because this is the cheapest method. However, landfill disposal represents a missed opportunity for companies to use biomass waste for economic and environmentally-friendly uses.

Converting biomass for other uses will drastically limit waste

To reduce landfill waste, some companies are looking at sustainable bio-circular solutions, where cannabis biomass is converted into something of industrial use such as compost, bio-plastics and paper packaging for cannabis products 7.  The easiest way to reuse cannabis biomass with current regulations in place is to upcycle it to produce compost and greywater that can be used for industrial cultivation 8. Currently, bleach is commonly used to remove THC from biomass, making it unfit to be used for these purposes 6. However, Micron Waste Technologies Inc. have shown enzymatic denaturation can be adopted on the industrial scale to remove THC from the biomass, resulting in reusable water and compostable matter 8. Turning to this alternative method would also reduce the amount of required fertilizer and replace bleach with a more environmentally-friendly solution.

  1. Recycle production side streams

Terpenes are the compounds in cannabis that give it distinctive aromas and flavors sought after by consumers.During the cannabis drying stage, over 30% of terpenes can be lost along with the water phase from the product 9. This terpene-containing water phase gets trapped in drying rooms and decarboxylation ovens and is usually thrown out. To reintroduce the terpenes in their products, companies usually purchase them 10.However, they instead could be recapturing terpenes that are otherwise going to waste, and re-introducing them into their products. Recapturing terpenes would not only reduce the production and shipment energy that goes along with purchased terpenes, but also the costs of buying them.

There are many other wasted by-products that can be recycled. Ethanol that has been used as extraction solvent can be reused as cleaning solvent, reducing the need to purchase ethanol separately for cleaning purposes. Further, the condensation caught in HVACs can be recycled to water plants.

  1. Optimize production energy efficiency
LED lights use less energy and omit less heat than other more traditional options

A study by Summers et al. 11 found that from producing one kilogram of dried cannabis flower, the emitted greenhouse gasses emissions range from 2,283 to 5,184 kg of CO2. Electricity used for indoor cultivation is the major culprit in producing these emissions. In fact, over $6 billion is spent annually to power industrial cannabis growth facilities in the U.S. alone12. Growing outdoors is significantly more energy efficient; however, non-auto flowering, high-THC cannabis plants depend on the specific timing of daylight (and darkness) to grow properly 13. Optimal conditions for these plants are not always achievable in outdoor setting. Meanwhile, auto-flowering plants that are hearty outdoors are generally lower in THC content 14. Promoting research into generating more stabilized cannabis cultivars may help outdoor growing be a more feasible solution. Given the recent work being done with genetically modified and transgenic plants, upregulating THC production in cannabis and increasing the heartiness in different climates is well within the realm of possibility 15–17.

In the meantime, cultivation facilities can do their part to maintain a controlled growth environment with reduced energy waste. Companies that are still using high-intensity sodium lights should consider switching to high-efficiency LED bulbs 12. These are a good alternative option as they produce less heat, and as a result, require less mechanical cooling. It has been shown that many plants, including cannabis, might even do better under blue-red LED lights 18,19. Growth under these conditions correlated with an increase in THC and CBD levels, and overall larger plants 18. In addition to low energy consumption, LED lamps have flexible mobility and a tunable spectrum range. This makes it possible to mediate the spectrum specifically for cannabis crops by controlling each spectral range and manipulating spectral quality and light intensity precisely. Finally, lights can also be brought closer to plants, to further reduce the amount of mechanical cooling needed.

  1. Utilize high-precision processes

Reducing energy use while maintaining production rates can only be done if the process is optimized. Our own research improves process optimization in the cannabis industry. A key component of industrial optimization is reducing wasted time on various machines. For cannabis producers, this machine “junk time” can accumulate when the instrumentation is not progressing the reaction.

Reducing energy use in this case means ensuring machines are not in operation if they are not progressing the reaction. For example, many companies spend approximately two hours on the decarboxylation step because decarboxylation is always complete after two hours 20; however, decarboxylations are often complete in as little as thirty minutes 21. Companies can save energy by installing a monitor on decarboxylation systems to stop reactions once they are complete.

Reducing the environmental impacts of the cannabis industry is crucial to combat the developing climate crisis. While lifting restrictions on cannabis research and mitigating stigmas surrounding the legal industry will be what ultimately paves the way for meaningful changes toward a sustainable industry, cannabis companies cannot wait for regulatory changes to occur before considering eco-friendly practices. As outlined by CBF, there are existing actions which all companies can take to reduce their carbon footprint immediately. Delic Labs, and many other companies we have noted, aim to support companies in making these decisions for a better future for cannabis.


References:

  1. Statista Research Department. Share of consumers worldwide who have changed the products and services they use due to concern about climate change in 2019. https://www.statista.com/statistics/1106653/change-made-consumer-bevaviour-concern-climate-change-worldwide/ (2021).
  2. Akeileh, O., Moyer, E., Sim, P. & Vissandjee Amarsy, L. Chronic Waste: Strategies to Reduce Waste and Encourage Environmentally-Friendly Packaging in Canada’s Legal Cannabis. https://www.mcgill.ca/maxbellschool/files/maxbellschool/policy_lab_2020_-_strategies_to_reduce_waste_and_encourage_environmentally-friendly_packaging_in_canadas_legal_cannabis_industry.pdf (2020).
  3. Bauder, P. Ry Russell of Knot Plastic️: 5 Things We Must Do to Inspire the Next Generation about Sustainability and the Environment. (2020).
  4. Waste360 Staff. Tweed, TerraCycle Take Cannabis Packaging Recycling Across Canada. (2019).
  5. Peterson, E. Industry Report: The State of Hemp and Cannabis Waste. CompanyWeek (2019).
  6. Commendatore, C. The Complicated World of Cannabis Waste Generation (Part One). Waste 360 (2019).
  7. Drotleff, L. Cannabis-based packaging and paper could reduce waste, promote sustainability. MJBiz Daily(2020).
  8. Waste 360 staff. Micron Secures U.S. Design Patent for Waste Treatment Tech. Waste 360 (2019).
  9. Challa, S. R. DRYING KINETICS AND THE EFFECTS OF DRYING METHODS ON QUALITY (CBD, TERPENES AND COLOR) OF HEMP (Cannabis sativa L.) BUDS. (2020).
  10. Erickson, B. Cannabis industry gets crafty with terpenes. chemical and engineering news (2019).
  11. Summers, H. M., Sproul, E. & Quinn, J. C. The greenhouse gas emissions of indoor cannabis production in the United States. Nature Sustainability 4, (2021).
  12. Reott, J. How Does Legalized Cannabis Affect Energy Use? Alliance to Save Energy (2020).
  13. When To Plant Cannabis Outside: A State By State Guide. aPotforPot.comhttps://apotforpot.com/blogs/apotforpot/when-to-plant-cannabis-outside-a-state-by-state-guide/ (2020).
  14. 15 Pros And Cons of Autoflowering Cannabis. aPotforPot.com https://apotforpot.com/blogs/apotforpot/15-pros-and-cons-of-autoflowering-seeds/ (2019).
  15. Ye, X. et al. Engineering the Provitamin A (β-Carotene) Biosynthetic Pathway into (Carotenoid-Free) Rice Endosperm. Science 287, 303–305 (2000).
  16. Giddings, G., Allison, G., Brooks, D. & Carter, A. Transgenic plants as factories for biopharmaceuticals. Nature Biotechnology 18, 1151–1155 (2000).
  17. Hu, H. & Xiong, L. Genetic Engineering and Breeding of Drought-Resistant Crops. Annual Review of Plant Biology 65, 715–741 (2014).
  18. Wei, X. et al. Wavelengths of LED light affect the growth and cannabidiol content in Cannabis sativa L. Industrial Crops and Products 165, (2021).
  19. Sabzalian, M. R. et al. High performance of vegetables, flowers, and medicinal plants in a red-blue LED incubator for indoor plant production. Agronomy for Sustainable Development 34, (2014).
  20. LunaTechnologies. Decarboxylation: What Is It and Why Is It Important? LunaTechnologies.
  21. Shah, S. et al. Fast, Easy, and Reliable Monitoring of THCA and CBDA Decarboxylation in Cannabis Flower and Oil Samples Using Infrared Spectroscopy. (2021).
Cannin Commentary

Why Should You Add Columbia Care to Your Cannabis Portfolio?

By Cannabis Industry Journal Staff
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Investors looking to gain exposure to the cannabis space have several options given the increase in the number of cannabis producers in the past decade, the recent wave of legalization in the U.S. and a rapidly expanding addressable market. However, one undervalued cannabis stock with enticing growth prospects that remains a top buy today is Columbia Care (OTC: CCHWF). Let’s see why we are bullish on the large-cap multi-state operator right now.

What is Columbia Care?

Columbia Care is one of the largest cannabis producers in the world with 31 manufacturing and cultivation facilities. It has 99 dispensary locations in the U.S. with more than two million square feet of cultivation capacity and over 300 acres of outdoor cultivation capacity.

The company’s rapid expansion over the last few years has allowed Columbia Care to increase sales from $77.45 million in 2019 to $179 million in 2020. Wall Street expects sales to more than triple to $626 million this year and grow by another 55% to $970 million in 2022. In case Columbia Care manages to meet analyst estimates, the company would have grown its revenue at an annual rate of 132% between 2019 and 2022.

While several of Columbia Care’s peers, especially in Canada, are grappling with negative margins, this cannabis company is racing towards profitability. It has already narrowed its operating losses from $81 million in 2019 to $31.5 million in the last 12-months. Analysts expect its bottom-line to improve from a loss per share of $0.48 in 2020 to earnings of $0.27 per share in 2022.

We can see that Columbia Care is valued at a forward price to 2022 sales multiple of less than 2x given its market cap of $1.15 billion. Its price to earnings multiple is also quite attractive at 11.8x. 

What’s Next for Columbia Care Investors?

Columbia Care has a strong presence in markets such as Virginia, Ohio and Pennsylvania that provide limited licenses to cannabis producers. This allows Columbia Care to improve customer engagement and ensure repeat purchases of its products.

In the second quarter of 2021, it increased revenue by 232% year over year to $110 million. Its adjusted EBITDA also rose to $16 million, compared to a loss of $4.7 million in the prior-year period.

Columbia Care acquired Medicine Man for $42 million.

Now, Columbia Care has shifted focus to larger cannabis markets including New York, Arizona, Columbia and New Jersey. In Q2, its sales in Arizona and Illinois rose by 23% and 15% respectively, on a sequential basis.

The cannabis heavyweight recently completed the acquisition of Medicine Man, a Colorado-based cannabis producer, for $42 million. Columbia Care explained the acquisition will be accretive to its bottom-line and is valued at 4.5x projected EBITDA for 2021.

Columbia Care has improved its gross margins to 42% in Q2, from 36% in the prior-year period. Its operating costs have also fallen from $61 million to $51 million in the last year, making it one of the best cannabis stocks on the market today.

Bottom Line: Why Should You Add Columbia Care to Your Cannabis Portfolio?

Columbia Care expects its total addressable market in licensed U.S. states to reach approximately $31 billion by 2026. In the event that cannabis is legalized at the federal level, this figure will surge significantly higher. Additionally, Columbia Care is well poised to gain traction in the future and leverage existing expertise, as it already has wholesale distribution agreements in 13 operational markets.

Its capital expenditure investments continue to generate returns as the company continues to benefit from economies of scale and higher margins.

Columbia Care stock is currently down about 60% from its 52-week high, providing cannabis investors the opportunity to purchase a quality growth stock at an attractive multiple.

For these reasons, we believe investors should consider adding Columbia Care to their cannabis stock portfolios while it’s still trading at a discount.

Creating a Deeper Client Relationship with a Customer Success Mindset

By Samantha Smith
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Why is customer success a critical differentiator when evaluating technology partners for your cannabis operations? You’re probably familiar with a customer service department. Typically, a customer service team is a reactive relationship that you call on when you have a question or problem. Customer success is different because it takes a proactive approach to relationship management and focuses on your company’s desired outcomes.

It Starts with Transparency

The customer success team is introduced during the sales process, so they know the customer’s goals, objectives and the pain points they’re looking to solve. Keeping these priorities top of mind allows the entire implementation process to align to the customer’s objectives, ensuring immediate success after purchase and a long-term roadmap for future deployments.

A boilerplate solution in software implementation is often not a good idea. While you need standard processes in software deployment, it’s mostly about listening and learning to adapt to a customized approach. Each client can weather different levels of change and advancement, so a customized strategic effort starting in the beginning of the process can help avoid issues later on.“Customer success ensures you are not making unnecessary investments while educating you on available software that would complement existing technology.”

Implementing new software can be a lengthy and challenging process, depending on how many team levels need access, what software integrations are required and the level of business activity you have on a seasonal basis. Adopting new technology into facilities can be even more complicated when implementation delays occur, or the product isn’t working as intended during the initial rollout. Customer success provides transparency throughout the deployment process by conducting ongoing timeline reviews, drafting enablement plans that work within your schedule and driving awareness and adoptions throughout your organization, resulting in a faster return on investment.

Creating a Deeper Partnership

Customer success works as an advocate for the customer while balancing the needs of the business. With software products, it’s easy to turn capabilities on as it is to turn them off, so determining the right timing for each new feature is part of the balancing act. Knowing when customers are ready for specific features and functionality provides a software roadmap for a customer. In this role, the customer success advocate becomes a trusted advisor and becomes integrated into the customer’s business operations.

Being Proactive, Not Reactive

A simple way to describe the differences between customer service and customer success is to consider how your software vendor works with you. Is it a proactive approach or a reactive one? Customer success always leads proactively, strategizing on solutions to benefit the customer immediately while also keeping the long-term vision top of mind.

Creating Benchmarks for Success

Software as a Service (SaaS) has become a competitive advantage for cannabis operators looking to implement a consistent, cost-effective cloud-based technology. Still, many companies end up overspending or paying for more licenses than needed. Customer success ensures you are not making unnecessary investments while educating you on available software that would complement existing technology. Customer success does this by providing tailored reporting, enabling existing and new team members within your facilities on product features and functions, and aligning your software deployment to your facility’s requirements.

When considering a technology partner, inquire about post-sales support. Do you only hear from your technology providers when it’s time for renewal or when you call in for help? Are they offering a “set it and forget it” support model approach? Customer success is about a mutually beneficial relationship between the customer and the software vendor, retaining a happy, using, paying customer who achieves a measurable outcome when using the software. Your success is customer success.

Cannin Commentary

3 Cannabis Stocks That Can Gain Over 50% According to Analyst Estimates

By Cannabis Industry Journal Staff
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Welcome to the Cannin Commentary Column. We’re happy to announce our partnership with Cannin Investment Group, a cannabis investment analysis firm. In this new column, we will provide readers with a taste of Cannin’s insights and analysis that they offer to their members. Throughout the new installments of this column, you’ll find articles that will touch on investment tips, trends, predictions, market updates and more.


Companies in the cannabis sector have the potential to increase your wealth at an enviable rate over the upcoming decade. But what are the 3 cannabis stocks that can gain over 50% according to analyst estimates?

The wave of cannabis legalization sweeping through the U.S. right now as well as the prospect of decriminalizing or even legalizing adult-use will be key drivers for licensed producers.

Here, we take a look at three cannabis stocks in Columbia Care, Green Thumb Industries and Cresco Labs that should be on your buying radar right now. Each of these stocks is also trading at a deep discount according to Wall Street estimates, allowing investors to derive market-beating gains in the next year.

Columbia Care

U.S.-based multi-state operator, Columbia Care (OTC: CCHWF) is valued at a market cap of $1.12 billion. The company has already increased revenue from $77.4 million in 2019 to $179 million last year.

Now, Wall Street expects sales to more than triple year over year to $625 million in 2021 and surpass $970 million next year. These stellar growth rates in revenue should allow Columbia Care to improve its bottom-line from a loss per share of $0.48 in 2020 to earnings per share of $0.3.

Columbia Care has a presence in 18 jurisdictions across the U.S. and Europe where it operates 31 cultivation and manufacturing facilities.

The company generated $110 million in revenue in Q2 which was 232% higher than the prior-year period. Columbia Care has 73 active dispensaries and another 26 under development, enabling it to target a rapidly expanding addressable market that is forecast to touch $31.6 billion by 2026.

So, is Columbia Care a cannabis stock that can gain over 50%? Well, analysts tracking Columbia Care stock have a 12-month average price target of $9.38 for the stock which is more than 200% higher than its current trading price.

Green Thumb Industries

A cannabis giant trading 46% below its all-time high, Green Thumb Industries (OTC: GTBIF) is valued at a market cap of $4.4 billion. Headquartered in Illinois, Green Thumb Industries has 13 manufacturing facilities, licenses for 111 retail locations and currently operates in 14 domestic markets.

In the second quarter of 2021, the company’s revenue rose by 85% year over year to $222 million – driven by strong demand in Pennsylvania and Illinois. The Q2 of 2021 was also the fourth consecutive quarter where Green Thumb reported a profit, with a net income of $22 million compared to a loss of $13 million in the prior-year period.

Green Thumb currently has 65 retail stores and just opened a third store in the state of New Jersey which is a market that recently legalized cannabis for adult use. While retail sales in New Jersey are expected to begin next year, Green Thumb’s presence in the medical space will enable the company to gain traction in the highly competitive adult-use cannabis vertical as well.

So, is Green Thumb Industries a cannabis stock that can gain over 50%? Well, analysts expect Green Thumb stock to rise by 95% in the next 12-months given its average price target of $37.54.

Cresco Labs

The final stock on our list is Cresco Labs (OTC: CRLBF), another cannabis heavyweight valued at a market cap of $2.16 billion. A vertically integrated cannabis operator, Cresco Labs currently has 40 dispensaries in 10 states and has grown its sales from $43 million in 2018 to $476 million in 2020.

Most states have a limit on the licenses they are allowed to issue and this barrier to entry allows Cresco and peers to enjoy a competitive advantage in the markets they operate in. Cresco Labs reported revenue of $210 million in Q2, a rise of 123% year over year.

It reported a net profit of $2.7 million in Q2 compared to a loss of $41 million in the prior-year quarter. Cresco expects to generate $1 billion in sales by the end of 2021, making it among the first cannabis companies to reach the milestone.

We believe Cresco is certainly a cannabis stock that can gain 50%. Wall Street expects Cresco Labs stock to gain over 60% compared to its current trading price.

The Path Forward to a Safer Cannabis Industry

By Roshan Sebastian
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Two decades ago, California became the first state to legalize the medical use of cannabis. In 2021, medical use of cannabis is legal is 36 US states, and 17 states allow adult (‘recreational’) use. This trend of rapid legalization of the cannabis industry, while encouraging for industry growth, attracts more attention from federal regulatory bodies such as the Occupational Safety and Health Administration (OSHA). Following a number of incidents and near misses, cannabis facilities have been increasingly frequented by OSHA visits, leading to a spike in citations and fines. A review of past OSHA citations reveals that the most common citations in the cannabis industry pertains to the employer’s lack of awareness about the hazardous nature of some operations and materials handled in the facility. This leads to an absence of a formal fire prevention plan, lack of proper hazardous chemical training, deficiency in proper documentation related to workplace injury and limited evaluation of required personal protective equipment (PPE).1

Cannabis industry data suggests that as of today, an incident is often followed by an OSHA inspection.  This naturally leads to the facility asking, ‘How do we prepare for an OSHA inspection and prevent future citations?’ The answer is a combination of identifying and mitigating risks in advance to avoid incidents and developing management systems that support the identification and risk mitigation efforts. Recent collaboration between cannabis business owners and organizations that write codes and standards have provided a framework in which to address the industry’s unique safety challenges to help reduce inherent risk to a facility. These codes and standards typically impact building construction/safety features and operation of the facility, however, additional risk mitigation can be drawn from the best practices already in place in process industries with similar hazards. These process industries have embraced process safety management (PSM) programs, which are built around principles flexible enough to be successfully implemented in the cannabis industry. Adopting such programs will serve the dual purpose of improving the overall safety record of the cannabis industry while enhancing company sustainability2 and help avoid events that lead to OSHA citations.

Figure 1. Risk Based Process Safety Management System

The risk-based process safety (RBPS) approach developed by the Center for Chemical Process Safety (CCPS)3 may prove to be the most effective framework to implement PSM programs in the cannabis industry. Unlike the prescriptive regulatory approach provided by OSHA 29 CFR 1910.119, the RBPS methodology recognizes that not all hazards and risks are equal. By assessing risk, an organization can develop an effective management system that will prioritize allocation of limited resources to address the highest risks. Figure 1 shows the four foundational blocks (pillars) of RBPS and the various elements that make up each pillar.

If a cannabis business owner were to develop programs on each of the pillars presented in Figure 1, a comprehensive safety program would be in place that delivers sustainable risk reduction and mitigation.  However, as with any industry, the elements can be prioritized and tackled over time, starting with the elements having the most influence on the overall safety of a given facility. For example, a given facility may have great procedures and practices, but may not consistently train or instill employee knowledge or competency. Conversely, a facility may have personnel with great knowledge of hazards and risks, but are less developed with regard to documenting procedures, safe practices or training for new hires. Focusing available resources on the less developed elements will lead to an overall improvement in facility risk, leading to a lower likelihood of an incident and OSHA inspection.

Figure 2. Still image from surveillance video of an explosion at New MexiCann Natural Medicine in July 2015.

As with any industry, positive and negative public perception is driven by the media, which tends to focus on attention-grabbing headlines. The majority of past incidents reported in the news for the cannabis industry were explosions that occurred during the extraction process. One such extraction explosion, shown in Figure 2, occurred in July 2015 at the New MexiCann Natural Medicine facility in Santa Fe, New Mexico. With a focus on the ‘hazard identification and risk analysis’ pillar of RBPS, future such events may be mitigated.

Of the twenty RBPS elements, hazard identification and risk analysis (HIRA) stands out as having the highest potential for immediate impact on the cannabis industry’s safety profile.

HIRA is a collection of activities carried out through the life cycle of a facility to ensure that the risks to employees and the public are constantly monitored to be within an organization’s risk tolerance. The four major areas to analyze are:

  • Hazards – What are the possible deviations from the design intent?
  • Consequences – What are the worst possible consequences (or severity) if any deviation occurs?
  • Safeguards – Are there safeguards in the system to reduce the likelihood of this event?
  • Risk – Is the risk within the tolerable level? If not, what steps are needed to reduce the risk? (Severity X Likelihood = Risk)
Figure 3. A simplified HIRA flow chart for an Extraction Process

Let us consider an example case where the extraction process utilizes propane or butane as the extracting solvent. Figure 3 shows a simplified HIRA flow chart for the extraction process.

This systematic approach helps to understand the hazards and evaluate the associated risk. In addition, this approach highlights operator training as a crucial safeguard that can be credited to lower the overall risk of the extraction facility. Remember, lack of proper safety training (another element!) is one of the most cited OSHA violations in the cannabis industry. Another advantage to the HIRA methodology is that other safeguards that may be present can be identified, their effectiveness evaluated and additional risk reduction measures may be recognized. This will help business owners allocate their limited resources on the critical safeguards that provide the greatest risk reduction. Identifying, analyzing and solving for potential hazards is a key step in safe operation of a facility and avoiding OSHA citations.

While this article discusses only a single RBPS element, this example demonstrates how best practices from process industries can become a powerful tool for use in the cannabis industry. The “hazard identification and risk analysis” element of the RBPS approach is pertinent not only for the extraction process as discussed above, but also directly applicable to other aspects of the industry (e.g., dust explosions in harvesting and processing facilities, toxic impacts from fertilizers, hazards from the CO2 enrichment process in growing facilities, etc.).


References

  1. Top 5 OSHA Infractions for Cannabis Businesses
  2. The Business Case for Process Safety; 4th Edition; Center for Chemical Process Safety; 2018
  3. Guidelines for Risk Based Process Safety; Center for Chemical Process Safety: An AICHE Technology Alliance; published March 2007
  4. Video: Explosion rips through medical marijuana facility
Soapbox

User-Generated Data Brings Revenue: It’s Time for the Users to Get Some

By Dr. Markus Roggen, Amanda Assen, Dr. Tom Dupree
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You generate the product, you should benefit from it too.

If you are not paying for the service, you are the product. This pithy phrase is often heard in discussions about social media’s use of personal information and user-generated content. The idea can be traced back to a 1973 short film that critiques television’s impact on culture and politics. Although about television, the quote, “you are the end product delivered en masse to the advertiser,” still rings true when talking about major online corporations.

We have all seen it with big corporations. In the first three months of 2021, of Facebook’s $26.2B revenue, a whopping $25.4B was from advertising sales. However, the space for an advertisement to be delivered en masse to the public is not the only thing purchased from Facebook. Access to personal information such as your search history, likes and posts are also purchased by companies to determine which advertisements they should target you with.Access to user-generated data by advertisers has sparked privacy and ownership concerns regarding large internet platforms. The idea of being surveilled all the time is uncomfortable, and many large corporations like Facebook have royalty-free and transferable licenses to your posts.

Similarly, many websites in the cannabis industry gain value from information submitted by consumers. As an example, the website Leafly provides over 1.3 million consumer product reviews that are often used for purchasing decisions. These reviews play a role in attracting more people to websites that operate with a similar system to Leafly, and in turn advertising space to reach those people is sold. According to their About page, more than 4.5 million orders for advertising space are placed with businesses on Leafly each year, generating annually about $460 million in gross merchandise value. So, the users work for free to attract an audience to these websites for the advertisers, and the websites make money from advertisers.

Can we empower users with ownership of their content, data and participation in profits?

Frustrated social media users exclaiming “We are the product!” does nothing to change our reality. It is unlikely we will change how big corporations like Facebook work, but can we ensure users receive some of the benefits in our own cannabis industry? Many of these websites, especially those for medicinal cannabis, are designed to genuinely help users. Can we further increase this feeling of having a transaction with the websites rather than feel like we are being sold to advertisers? The world of NFTs may offer some guidance.

An NFT (or non-fungible token) acts as a digital certificate of authenticity. Unlike cryptocurrencies (like Bitcoin), each NFT is unique, so it cannot be exchanged or multiplied. They are kept on a blockchain system, which is a growing list of computationally secure ledgers. The blockchain allows proof of ownership to be established for the person with the NFT, and prevents others from being able to tamper with or claim ownership of the artwork, game, tweet or cat picture it is assigned to. Although non-exchangeable, NFTs can be traded on a digital marketplace, like how a physical piece of art can be auctioned.

While NFTs and cryptocurrencies are certainly not without controversy and flaws, an NFT-like system that provides users with proof of ownership for their data and grants them control over what is done with it may be the way of the future for websites in the cannabis industry. Just like Facebook, when it comes to sales, online display advertisements are some of the top revenue generators for websites in the cannabis industry that utilize user-generated content. With an NFT-like system, users could be granted a royalty for their content, which would obligate websites to give a portion of their profits to the users when their content is sold to an advertiser. Users may be able to have a portfolio of their generated content, have some control over who can access their content and who their personal data can be sold to.

Websites that are more focused on cannabis for medicinal use often pride themselves on being more patient-focused and professional – no pothead puns or crass logos. An NFT-like system might be especially beneficial for these companies, as it would further increase the emphasis of trust and respect for users. In this case, an NFT-like system could be used to assign ownership of reviews to individual website users. Since these reviews attract new people to these websites, when access to a user’s data is sold to advertisement companies, then a portion of that revenue is given to the people who created the reviews. The estimated amount of revenue that reviewers help to bring into the company can be calculated and distributed accordingly. While this may seem like it would cause a significant loss of revenue for the websites, the increased trust that would come with this system would likely promote more users, generating an overall increase in revenue and credibility. Users could become more engaged and spend more time writing reviews, increasing web traffic considerably. Advertisers would be more attracted to the larger audience and the prestige of having their advertisement on a well-respected site.

An NFT-like system could hold large internet corporations accountable.

The new normal is corporations on the internet making money from the content created by users. In return, users receive none of the monetary benefits and have their personal information shared with hundreds of businesses. An NFT-like system, although theoretical, may be able to empower users to hold large corporations accountable for what is done with user-generated data. It is unlikely we can change big companies like Facebook, but if adopted early, this may be plausible in our cannabis industry. This in turn may not only give more ownership to the website users, but could also benefit the websites, and the advertisers. Overall, the product should be the website and the services it provides. An NFT-like system might help promote this and could make users who generate value for the website partners in business.

Soapbox

Is There a Place for Perpetual Tele-Monitoring and Clinical Research in the Medical Cannabis Industry?

By Christina DiArcangelo
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As we continue to witness and experience the medical cannabis industry grow and mature, many of us are wondering where the head-to-head clinical studies are, and why aren’t there more clinical research studies taking place?

Cannabis products created with the intention for medicinal use often state that their formulations and products stack up against traditional pharmaceutical treatments. However, without a substantial number of clinical studies being performed, it’s difficult to truthfully make such a claim. It’s one thing to share testimonials from people who use particular products and report what their experiences were like. However, to go head-to-head in a controlled environment where factors such as underlying conditions, height, weight, medication, lifestyle and nutrition habits are taken into account to accurately compare the efficacy of a traditional pharmaceutical product versus a cannabis-derived product are two completely different things.

The Need for More Capital

Wouldn’t you agree that if a company is having tremendous success with a particular product, that they’d reinvest capital into a true clinical study to have data to support their marketing efforts? Investing into proper studies would not only benefit a company working hard to earn market share, it would benefit those who are relying on a particular product to regain a quality life. As we’ve learned over the years from numerous scientists and researchers digging into the cannabis plant at a more granular level, there’s much more to the medicinal benefits than meets the eye. Discovering new information about how cannabinoids such as CBG and CBN combined with CBD and certain terpenes can create specific effects has helped make a greater impact on the medical cannabis community. Bringing these powerful blends of anti-inflammatory, cannabis-derived compounds and other immune boosting nutraceuticals to head-to-head clinical studies could be a huge step forward towards further legitimizing the healing effects that cannabis has to offer.

Measuring Efficacy Goes Beyond COAs & Product Reviews

Determining the efficacy of medical cannabis products should be viewed in the same light as traditional pharmaceutical products. Traditional clinical studies are designed with an Institutional Review Board (IRB) approval, subject recruitment, electronic data capture as well as electronic patient reported outcomes. Some companies within the cannabis space have made attempts to conduct surveys with measuring efficacy in mind, but using outdated survey technology that hasn’t been validated only leads to insufficient data collection.

Discovering new information about how cannabinoids can create specific effects has helped make a greater impact on the medical cannabis community.
Image: Peggy Greb, USDA

There is nothing wrong with adult-use cannabis. However, for the medical cannabis space to be taken more seriously, it is time for organizations to step up their efforts and take note of certain practices from traditional biotech organizations when it comes to clinical research and collecting data to correctly quantify efficacy of certain products. Well-thought-out studies designed with clinical endpoints and validated questionnaires is a strategic way for the industry to take big steps towards doing what is right for patients.

Patients Are Asking For More Research

After speaking with patients who are interested in pursuing a treatment that includes the responsible use of medicinal cannabis, the one thing they all have in common is the desire for more information that they can rely on to make better decisions. Is it time for patients to push the envelope and not purchase products from companies that are not willing to perform the clinical studies?  If companies suffered a loss in sales as a result, would they reconsider their stance on reinvesting capital into clinical trials with their products?

Equally as important as proper research is perpetual tele-monitoring. The value in perpetual tele-monitoring is the data. We can showcase miraculous, life-changing stories of how medical cannabis has helped people turn their lives around. However, when seeking greater buy-in from groups like the FDA, data is key. Qualitative data can go only go so far. It’s the quantitative data that will help move the medical cannabis community forward. The ability to be able to review data on an ongoing basis would enable medical cannabis companies to evaluate how products are working based on the electronic data capture, along with questions that a company may develop to ascertain individualized product feedback.

Imagine having the ability to see patients’ data based on real-time, daily, through something as convenient as a wearable device. Understanding test results and correspondence with doctors for patients would significantly improve.

Technological Evolution of the Cannabis Industry

By Serge Chistov
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Discussions about the evolution of the cannabis industry are often focused on the legalization of adult use and medical cannabis, the growth of the business models associated with the industry and so on. An interesting corollary to those discussions is how technology is impacting the evolution of this growth industry. 

It’s no longer just a question of growing some buds and offering up a high, with little thought as to product, packaging, marketing or the end consumer. Technology has changed the way cannabis is being commodified, and that’s a good thing. After all, with more and more states making adult use legal, creating products that appeal to a wider market and demographic is in part accomplished thanks to tech.

From the growth stage

Few growers are using outdoor facilities, where the elements cannot be controlled. Until recently, indoor growers ran into issues like simulating natural light to a level that would be of maximum benefit to the plants. The amount of lighting required to be effective was very expensive to maintain in terms of electricity consumption, but that is changing.

Then LEDs came on the scene: high quality, low heat light with a far larger and more natural spectrum, versus blue and red light frequencies that are available in standard bulbs. Using far less electricity and emitting less heat, therefore requiring less need for additional air cooling, as well as longer bulb life spans, LEDs have become an industry standard.

Beyond the plant

LED lights use less energy and omit less heat than other more traditional options

As with any agricultural product, the important work is in growing the plants but thanks to technology, producers and manufacturers can now offer their customers a much wider array of products than buds for smoking. Edibles, vapes, oils, capsules and even creams are all products of technology influencing change in the cannabis industry. For consumers who aren’t interested in smoking directly, these offer promising options. 

The issue consumers have often had with edibles has been the lag time from consumption to high, as the THC has to pass through the digestive system, which takes upwards of an hour, and reduces the effectiveness of the dosage as some just doesn’t make it to the bloodstream. Technology has led to the creation of a method for making non-smokable forms of cannabis just as effective as a direct to the lungs hit of a joint: nanoencapsulation.

The point of nanoencapsulation is to reduce the size of the cannabinoid to a nano size and protect it—the encapsulation part of the equation—so that it becomes soluble in water, or in the body which is 75% water. The ability to bypass the digestive system and the gastric fluids that impact the effectiveness of an edible, and get it through the stomach walls to the bloodstream, means that nanoencapsulated formulations can have the virtually the same “time to a high” effects as a joint, without the need to inhale smoke.

It’s now possible for consumers to quantify exactly how much THC they are consuming, allowing for new and different consumption styles, including micro-dosing. Finding the right “dosage” for each individual—as everyone responds differently to cannabinoids—isn’t a simple task but newer technology is setting up a path to personalization that will make it easier.

Personalization

Imagine being able to take a test that would allow you to determine the perfect balance of THC and CBD dosage, as well as the right strain of cannabis, to create the desired effect. Whether that’s a reduction of anxiety, improved sleep or the psychoactive high that cannabis is known for, technology is leading the path to ending the guessing games as to dosage and blending of different cannabinoids.

A perfect example of this is CannabisDNA, a saliva-based swab test that evaluates over 70 of an individual’s genetic markers to establish what strains and dosages are most compatible with that person’s physiology. It’s a matter of time before this technology becomes more readily available and consumers will be able to obtain a range of products created with their personalized profile in mind.

In addition to matching cannabis to an individual’s DNA, there are efforts to decode the DNA of the various strains of cannabis, to better clarify important elements like THC, CBD and other cannabinoids like CBC. This last and far more rare cannabinoid has been associated with very strong anti-inflammatory reactions. This kind of deconstruction of cannabinoids at the DNA level will make it easier for producers and manufacturers to create products that address specific needs, both medical and recreational.

Purchasing power

Boutique dispensaries are popping up to make the more mainstream consumer comfortable. And thanks in part to the recent pandemic, online purchasing has jumped, with apps and websites being developed for purchasing and shipping just the right product, any time. 

Ads for CBD products online regularly perform very well

As has occurred in other areas of agriculture, there is a push towards transparency on product provenance and growth methods, so that the end consumer can make choices about what they are putting into their bodies, with as much information as possible. Field to dispensary tracking is on the table as a method to keep consumers educated and informed, which ultimately improves the connection between producers and consumers. 

Add to these ideas the fact that there are serious improvements in packaging being developed, which allow buds to remain fresh and full of flavor by eliminating light, air and moisture, while still remaining child proof. This is all part of the evolution of the cannabis industry, with a view to keeping customers happy and interested in the product.

Technology within the cannabis industry isn’t an end in itself: after all, the most important part of the effort is the growth of the plants themselves. But technology can change the evolution of the industry in ways that make it more interesting for everyone, from the grower, to the manufacturer of products, the dispensary owner and the consumer as well.

Tissue Culture Cultivation Can Transform the Way We Grow Cannabis

By Max Jones, Dasya Petranova
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The cannabis industry is approaching a crossroads. While cultivators must ensure they are getting the greatest yield per square foot, an increasingly competitive landscape and sophisticated consumer means growers must also balance the need for volume with quality, consistent and award-winning cannabis strains.

Tissue culture propagation represents a significant leap forward in cannabis cultivation, ultimately benefiting both the grower and the consumer. The proprietary technology behind our sterilization and storage process results in the isolation of premium cannabis genetics in a clean, contaminant-free environment. Since our inception, we’ve been focused on setting a higher standard in medical (and one day adult use) cannabis by growing craft cannabis on a commercial scale through utilization of this cutting-edge cultivation technique. When taken in total, Maitri boasts access to a library of 243 unique cannabis strains, one of the largest collections in the U.S.

Trouble with Traditional Cultivation

Pathogens, insects and cross contamination all threaten the viability and value of cannabis plants. In many ways, current cannabis cultivation techniques compound these issues by promoting grams per square foot above all else and packing plants into warehouse sized grows where issues can quickly spread.

In these close quarters, pests can swiftly move from plant to plant, and even from generation to generation when propagating from clones or growing in close quarters. Similarly, pathogens can leap between susceptible plants, damaging or killing plants and cutting into a cultivator’s bottom line.

Hemp tissue culture samples

Of particular concern is hop latent viroid. Originally identified in hops, a genetic relative of cannabis, this infectious RNA virus has torn through the cannabis industry, endangering genetics, causing sickly plants and reducing yields. Plants cloned using traditional methods from an infected mother are vulnerable to the disease, making hop latent viroid a generational issue.

Minimizing or even eliminating these threats helps to protect the genetic integrity of cannabis strains and ensures they can be enjoyed for years to come. That is where the sterilization stage in tissue culture cultivation stands out.

Like cloning, tissue culture propagation offers faster time to maturity than growing from seed, allowing for a quicker turnaround to maximize utility of space, without overcrowding grow rooms. However, it also boasts a clean, disease-free environment that allows plants to thrive.

Tissue Culture Cultivation

Tissue culture cultivation allows for viable plant tissue to be isolated in a controlled, sterilized environment. Flowering plants can then be grown from these stored genetics, allowing for standardization of quality strains that are free of contamination and disease from the very beginning. Tissue culture cultivation also takes up less room than traditional cloning, freeing up valuable square footage.

A large tissue culture facility run in the Sacramento area that produces millions of nut and fruit trees clones a year.

This propagation process begins with plants grown to just before flowering and harvested for their branch tips. These branch tips undergo a sterilization process to remove any environmental contamination. This living plant material (known as explants) gets fully screened and tested for potential contaminants.

If it passes, the sample is stabilized and becomes part of the Maitri genetic library for future cultivation. If any contamination is discovered, the plant is selected for meristem isolation, an intensive isolation technique at the near cellular level.

Once sterilized and verified to be clean, the samples — often just an inch tall — are isolated into individual test tubes in our proprietary nutrient-rich medium for storage indefinitely. The cuttings are held in these ideal conditions until tapped for cultivation. This process allows Maitri to maintain an extensive library of clean, disease-free cannabis genetics ready to be grown.

Benefits for Medical Cannabis Patients

Tissue culture creates exact genetic replicas of the source plant

One of the chief benefits of tissue culture propagation is that it creates exact genetic replicas of the source plant. This allows growers like Maitri to standardize cannabis plants, and thus the cannabis experience. That means patients can expect the same characteristics from Maitri grown strains every time, including effects, potency and even taste and smell. Keeping reliable, top quality strains in steady rotation ensures patients have access to the medicine they need.

Preserving Plant Genetics

Beyond the benefits that tissue culture cultivation provides for the patient, this approach to testing, storing and growing cannabis plants also goes a long way towards protecting cannabis genetics into the future.

Cannabis strains are constantly under assault from pests and disease, potentially destroying the genetics that make these strains so special. Over-breeding and a dwindling demand for heirloom strains also threatens the loss of some individual plant genetics. Having a collection of genetics readily available means we can quickly cultivate strains to best meet consumer demand. Additionally, maintaining a rich seed bank that features both legacy and boutique strains allows us to have options for future tissue culture cultivation or for future new strain development.

Advancing Cannabis Research

Due to federal prohibition, researching cannabis, especially at the university level, can be extremely difficult. Additionally, the cannabis material that researchers have access to is largely considered to be subpar and wildly inconsistent, placing another barrier to researching the physiological effects of the plant. Clean, safe and uniform cannabis is a necessity to generate reliable research data. Utilizing tissue culture cultivation is a smart way to ensure researchers have access to the resources they need to drive our understanding of the cannabis plant.