HUB International, a leading insurance brokerage serving the cannabis industry, just announced today their new U.S. cannabis specialty leader. Bradley Rutt, senior vice president at HUB and Cannabis Industry Journal contributor, will now take the lead on cannabis insurance for the brokerage.
Bradley Rutt, senior vice president and U.S. cannabis specialty leader at HUB International
Rutt will work alongside Jay Virdi, another frequent CIJ contributor and chief sales officer of cannabis specialty at HUB to support the practice strategy on a national level. Rutt’s role will put him in charge of expanding HUB’s growth in the cannabis space as well as “enhancing cannabis insurance solutions and risk services, further developing cutting-edge resources for clients to support their needs, and attracting and retaining talent to deepen knowledge and expertise to help cannabis clients thrive.”
Rutt’s role as senior vice president has been to specialize in cannabis executive liability, working with public and private management services organizations to develop insurance and risk management programs. “Brad is an industry leader, and his diverse experience and deep understanding of the cannabis industry to insure its unique risks will play a critical role in continuing to strengthen our practice,” says Jay Virdi. “More importantly, we continue our commitment as trusted advisors to our clients to provide them with relevant support and solutions to help them continue to grow.”
There are many factors that can lead to the challenges people face when scaling up their processes. These challenges are not unique to the cannabis/hemp industry, but they are exacerbated by the consequences generated from decades of Reefer Madness. In my time operating in the cannabis/hemp space, 15+ years, I have seen established equipment vendors and sellers of laboratory supplies, like Sigma-Aldrich (now Millipore-Sigma), Fisher-Scientific, Cerilliant, Agilent, and others, go from reporting individuals inquiring about certified reference materials to setting up entire divisions of their companies to service the needs of the industry. Progress. But we are still a fledgling marketplace facing many challenges. Let’s look at a few specific to process scale up.
Darwin Millard will deliver a presentation on this topic during the Cannabis Extraction Virtual Conference on June 29. Click here to learn more.Equipment Availability: Lack of available equipment at larger and larger process scales can severely impact project timelines. Making not only equipment acquisition difficult, but also limiting the number of reputable equipment manufacturers you can work with.
Non-Linear Expansion: NEVER assume your process scales linearly. Perhaps one of the most avoidable mistakes during process scale up. You will quickly find that for many processes you cannot just put in a larger unit and expect a proportional increase in output. This is because as process equipment increases so to must utilities and other supporting infrastructure, but not only that, process vessel geometry, proportions, and design are contributing factors to process efficiency as your scale of operations increases.
Hazardous Material Quantities: Just as important to the process as the equipment are the solvents and reagents used. As your scale of operations increases so does your demand and production of hazardous materials; solvents including carbon dioxide (CO2), ethanol, and liquid petroleum gases (LPG) like Butane and Propane are obvious hazards, but so too are the refrigerants used in the chillers, fuels used to power generators, steam created to heat critical systems, and effluents and wastewater discharged from the process and supporting systems. Not every municipality wants thousands of gallons of flammable substances and hazardous waste being generated in their backyard…
Contractor/Vendor Misrepresentation: Finding out in the middle of you project that your contractor or equipment vendor has never set up a system at this scale before is never a good feeling. Unfortunately, contractor and vendor misrepresentation of qualifications is a common occurrence in the cannabis/hemp space.
If all this was not bad enough, all too often the consequences of improper planning and execution are not felt until your project is delayed or jeopardized due to misallocation of funds or undercapitalization. This is especially true when scaling up your production capacity. Now let’s look at some ways to avoid these mistakes.
The Rule of 10
Construction drawings for a piece of process equipment.
When scaling up your process, NEVER assume that a simple linear expansion of your process train will be sufficient. It is often the case that process scale up is non-linear. Using the Rule of 10 is one way of scaling up your process through a stepwise iterative approach. The Rule of 10 is best explained through an example: Say you are performing a bench-top extraction of a few grams and want to scale that up to a few thousand kilograms. Before jumping all the way to your final process scale, start by taking a smaller jump and only increase your bench-top process by a factor of 10 at a time. So, if you were happy and confident with your results at the tens of grams scale, perform the same process at the hundreds of grams scale, then the thousands of grams scale, tens of kilograms scale, and so forth until you have validated your process at the scale of operations you want to achieve. By using the Rule of 10 you can be assured that your process will achieve the same yields/results at larger and larger scales of operation.
Scaling up your process through an iterative approach allows you to identify process issues that otherwise would not have been identified. These can include (but by no means should be considered an exhaustive list) improper heat transfer as process vessels increase in size, the inability to maintain process parameters due to inadequately sized utilities and/or supporting infrastructure, and lower yields than expected even though previous iterations were successful. However, this type of approach can be expensive, especially when considering custom process equipment, and not every processor in the cannabis/hemp space is going to be in the position to use tools like the Rule of 10 and instead must rely on claims made by the equipment vendor or manufacture when scaling up their process.
The Cannabis/Hemp Specific Process Equipment Trap
How many times have you heard this one before: “We have a piece of process equipment tailor-made to perform X,Y,Z task.”? If you have been around as long as I have in the cannabis/hemp space, probably quite a few times. A huge red flag when considering equipment for your expansion project!
Unless the equipment manufacturer is directly working with cannabis/hemp raw materials, or with partners who process these items, during product development, there is no way they could have verified the equipment will work for its purported use.
A good example of this are ethanol evaporation systems. Most manufacturers of evaporators do not work with the volumes of ethanol they claim their systems can recover. So how did they come up with the evaporation rate? Short answer – Thermodynamics, Heat Transfer, and Fluid Mechanics. They modeled it. This much surface area, plus this much heat/energy, with this much pressure (or lack thereof), using this type of fluid, moving through this type of material, at this rate of speed, gets you a 1000-gal/hr evaporator or some other theoretical value. But what is the real rate once an ethanol and cannabis/hemp solution is running through the system?
For a straight ethanol system, the theoretical models and experimental models are pretty similar – namely because humans like alcohol – extensive real-world data for ethanol systems exist for reference in designing ethanol evaporators (more accurately described as distillation systems, i.e. stills). The same cannot be said for ethanol and cannabis/hemp extract systems. While it is true that many botanical and ethanol systems have been modeled, both theoretically and experimentally, due to prohibition, data for cannabis/hemp and ethanol systems are lacking and the data that do exist are primarily limited to bench-top and laboratory scale scenarios.
So, will that 1000-gal/hr evaporator hit 1000-gal/hr once it is running under load? That’s the real question and why utilizing equipment with established performance qualifications is critical to a successful process scale up when having to rely on the claims of a vendor or equipment manufacturer. Except this is yet another “catch 22”, since the installation, operational, and performance qualification process is an expensive endeavor only a few equipment manufacturers servicing the cannabis/hemp market have done. I am not saying there aren’t any reputable equipment vendors out there; there are, but always ask for data validating their claims and perform a vendor qualification before you drop seven figures on a piece of process equipment on the word of a salesperson.
Important Takeaways
Improper design and insufficient data regarding process efficiencies on larger and larger scales of manufacturing can lead to costly mistakes which can prevent projects from ever getting off the ground.
Each aspect of the manufacturing process must be considered individually when scaling your process train because each element will contribute to the system’s output, either in a limiting or expansive capacity.
I go further into this topic in my presentation: Challenges with Process Scale Up in the Cannabis/Hemp Industry, later this month during Cannabis Industry Journal’s Extraction Virtual Conference on June 29th, 2021. Here I will provide real-world examples of the consequences of improper process scale up and the significance of equipment specifications, certifications, and inspections, and the importance of vendor qualifications and the true cost of improper design specifications. I hope to see you all there.
According to a press release published earlier this month, the Bio-Rad iQ-Check Aspergilllus Real-Time PCR Detection Kit has received AOAC International approval. The test covers detection for four different Aspergillus species: A. flavus, A. fumigatus, A. niger, and A. terreus.
The detection kit covers those Aspergillus species for testing in cannabis flower and cannabis concentrates, produced with our without solvents. The PCR detection kit was validated through the AOAC Research Institute’s Performance Tested Method Program. They conducted a study that resulted in “no significant difference” between the PCR detection kit and the reference method.
The iQ-Check Aspergillus Real-Time PCR Kit detects Aspergillus flavus, fumigatus, niger, and terreus in cannabis flower and cannabis concentrates.
The kit was evaluated on “robustness, product consistency, stability, inclusivity and exclusivity, and matrix studies,” the press release says. Bio-Rad also received approval and validation on the iQ-Check Free DNA Removal Solution, part of the workflow for testing cannabis flower.
The test kit uses gene amplification and real-time PCR detection. Following enrichment and DNA extraction, the test runs their PCR technology, then runs the CFX Manager IDE software to automatically generate and analyze results.
Bio’Rad has also recently received AOAC approval for other microbial testing methods in cannabis, including their iQ-Check Salmonella II, iQ-Check STEC VirX, and iQ-Check STEC SerO II PCR Detection Kits.
Regardless of their size, all consumer package brands spend a significant amount of money and resources on packaging to attract consumers’ attention. We are all very visually oriented and gravitate to items that pique our interests. Cannabis brands are no exception when it comes to branding their products. Packaging plays a big part in carrying their brand forward and standing out on the dispensary shelves. When I was in Las Vegas at a CBD tradeshow in early 2020, I visited a dispensary, and it was beautiful. I remember commenting to a colleague that was with me how spectacular the product packaging was in the glass cases. One had unique artwork on each different product they offered, and it was indeed art. Yes, I did purchase this one that pulled me in.
The cannabis industry in the United States presents a challenge to brands because there is no overall federal guidance for packaging. Each state is controlling the cannabis legislation and, with it, the packaging guidelines. So multi-state operators (MSOs) have to manage each state as a separate entity and abide by the packaging regulations, which is not very efficient and adds a cost burden. As the industry matures and becomes federally legal across the country, packaging regulations will be easier to implement.
Louis Vuitton bags are one of the many goods that are commonly counterfeited Image: UK Home Office, Flickr
Let’s take a look at counterfeit products across all product categories. There is a significant global problem with counterfeits, as articulated by the below statistics.
Fake luxury merchandise accounts for 60% to 70% of that amount, ahead of pharmaceuticals, entertainment products and representing perhaps a quarter of the estimated $1.2 trillion total trade in luxury goods.
Customs and Border Patrol confiscated $1.3 billion worth of counterfeit goods in the U.S. for Fiscal Year 2020. (The value of 2020’s seizures are actually down compared to the $1.5 billion worth of counterfeit goods seized by CBP in 2019).
Unfortunately, the figures above are concerning, and the cannabis industry will face the same counterfeit issues that will add to these stats in the future. What can be done to help fight the problem and alleviate the pain for cannabis brands? Smart technology.
The trend towards “smart technology” varies by sector, but the underlying concept involves building levels of technology systems designed to impede or limit the highly sophisticated counterfeiter from replicating or replacing products. These levels typically include a forensic level control on the product, digital systems to track the material and customer facing systems to articulate the underlying value to the consumer.
Building these levels of smart technology into cannabis-products and packaging allows consumers to authenticate real versus fake, and in the case often in cannabis, legal versus illegal. Molecular technology is one forensic level of control option that can be used as a unique identifier for product authentication. Each brand would get its unique identifier to apply to the raw materials that make up its product, such as oil or an isolate. Then a sample can be tested at the origin point and subsequent nodes in the supply chain using a remote testing device. All the digital data is captured in a secure cloud database for traceability and transparency to the end consumer, to show them the authenticity of the product they are consuming. The same molecular technology can be applied to the ink or varnish for packaging and labels. A great application to help combat counterfeits and product diversion across the globe.
Counterfeiters can create near duplicate versions of the original
Another engaging platform is called StrainSecure by TruTrace Technologies. Their SAAS platform allows cannabis manufacturers to track all their product batches and SKUs tied to a blockchain. It also facilitates the interaction between the manufacturer and third-party testing facilities to conduct product testing and reporting. The data is captured within the platform, and with easy access dashboard views, it provides the insights to authenticate products at any time.
A company out of Australia called Laava is producing a product called Smart Fingerprints. It’s the next evolution of QR codes. The Smart Fingerprints can be applied to each package, providing a unique identifier that consumers can read with a mobile phone application. The consumer is provided with information concerning the product’s authenticity and any additional information the brand wants to share with the user. Smart Fingerprints are a great example of customer engagement at the point of activity that is secure.
The above three solutions show the availability of advanced technologies the cannabis industry can implement on its packaging and products to ensure authentic and safe products are sold to consumers. It provides consumers with vital information and insights about products so they can make informed buying decisions. There is no one silver bullet solution that provides all the answers. As with every high value product, counterfeiters will work to create near duplicate versions of the original until it becomes unsustainable to do so. It will take a technology ecosystem to seamlessly connect and provide actuate and timely information between supply chain partners and ultimately the end consumer. As the US works to separate the legal from illegal production for both the adult use and medical supply of cannabis, the looming challenge will be on protecting and communicating authenticity, packaging will be the first step in this.
Anyone in the cannabis industry is well aware that theft of crops can economically devastate a grower. Security is critical, and thankfully, growers and dispensaries have many tools available to protect their investment. There is simply no excuse for not having a solid security posture to keep your business in compliance, from public-private partnerships to advanced security tools – in fact, it’s required in most jurisdictions.
In 2020, nationwide cannabis sales increased 67%, and support for legal marijuana reached an all-time high of 68%. New Frontier Data found that U.S. legal cannabis market is projected to double to $41.5 billion by 2025.
The industry’s advancement impacts numerous areas such as job and tax revenue creation and providing a wide variety of valuable opportunities. For cannabis facilities to keep up with the market expansion and experience success, they must face two significant challenges: achieving adequate security and efficient business operations. Though both can be seen as separate concerns, growers and producers must merge processes and solutions to tackle the issue as a whole.
Dispensaries are prime targets for burglary. Defending your storefront requires a comprehensive security plan
Along with rapid growth, dispensaries face traditional security risks, such as workplace violence and retail theft, while cybersecurity risks have also become more prevalent. These potential issues make it clear that the stakes are high, and as the potential impact on a business rises, the need for real-time, predictive response increases. Insider threats are another issue plaguing the industry when you look at the rate of theft, diversion and burglary that is attributable to employees.
The cannabis market is complex: it’s expanding rapidly, has to meet essential regulatory requirements and faces high-security risks. Therefore, security needs to be looked at holistically since it can be challenging to determine where a potential threat may originate.
With security top of mind, it is critical to move away from responsive behaviors and seek ways to manage security in a manner that gets ahead of threats, prevent them before they happen and respond to them in real-time. But does a grower or retailer have the time and expertise to manage all this while keeping an eye on how security affects the business?
Remote Security Operations
The ability to comply with government regulations and protect a valuable cannabis crop at all stages of its journey from seed to sale makes security systems a mission-critical asset for cannabis growers. Security operations centers create a safer and more productive environment and provide state-of-the-art tools to protect employees, retail locations and grow facilities. But some businesses in the cannabis market may not have the resources or space to have their centralized security operations, leading them to piece-meal security together or do the best with what they can afford at the time. Running these facilities can also be prohibitively expensive.
Security operations centers create a safer and more productive environment and provide state-of-the-art tools to protect employees, retail locations and grow facilities.
But new options take the process of security off the table. The business can focus on the growth of its core functions. Remote security operations services allow companies to take advantage of advanced security services typically only possible in larger enterprise environments. These services are offered on a subscription basis, delivered through the cloud, and are entirely customizable to detect risks unique to your business operations while saving each company significant expense.
Centralized security operations centers leverage intelligent tools, standard operating procedures and proven analytic methods to provide cannabis facilities with the information and guidance necessary to mitigate issues like retail or grow theft before they can have a significant impact.
The integrated, holistic response center staffed by experienced operators and security experts delivers a comprehensive security and regulatory compliance method. This approach is designed to provide complete data about what is happening across a cannabis business, from seed to sale, and how individual events can impact the company as a whole. As a result, stakeholders get the security intelligence they need, without the high overhead, personnel investments and complex daily management.
For those businesses in the cannabis market looking to supplement their security operations with other workforce but may not have the budget or infrastructure to do so, remote security operations services are something you should consider. With the experts handling all the heavy lifting, leaders can focus on growth. And, right now, in the cannabis industry, the sky is the limit in terms of opportunity.
Environmentally conscious manufacturing has never been more important; for the survival of both the planet and your business. The internet makes CBD product comparisons quick and efficient, so consumers can interrogate every aspect of your product and processes before deciding to make a purchase. Sustainability credentials are now a primary decision making factor for your customers.
Water jacketed vessels are a cost-effective way of achieving more consistent blends than is possible manually
For business of all sizes, improving resource use and efficiency is a great place to start. This will reduce waste and improve your environmental impact, and has the added benefit of improving your return on investment!
I always recommend investing in stainless steel equipment for manufacturing and distributing CBD oils. Stainless steel is one of the most environmentally efficient raw materials, because of its durability and ability to be recycled. Vessels last an extremely long time, and even once their service life is over, they should never enter the waste stream. Many of our US customers transport their CBD products around the world in stainless steel vessels, which can then either be shipped back for re-use, or re-used at the recipient site.
In terms of finding your ideal equipment supplier, those who have won awards for their environmental initiatives are the cream of the crop; they can be a real asset to your business and will often collaborate on sustainability-themed social content, which is really valuable to get in front of your customers.
Once you’ve investigated the credentials of suitable suppliers, how do you make sure their blending equipment will perfectly meet your needs?
Here are my recommended four points for consideration:
Adding Toggle Clamps keeps your products airtight and reduces the chance of contamination in transit
Vessel Capacity: Vessel capacity must be considered in two ways; maximum and minimum working capacity. Standard vessels have their capacity listed as ‘brim full’ – suppliers tell you the total overall volume of space in the vessel. However, maximum capacity must allow for 10-20% free space below ‘brim full’, so that if product is being mixed and stirred, there is no overspill. For example; to blend 75L batches of CBD oil, it’s generally recommended to purchase a 100L mixing vessel.
Vessel Bottom Shape: Standard vessels have flat bottoms, which makes it difficult to drain them to completely empty. An experienced supplier such as Pharma Hygiene Products has the capability to modify standard vessels, to include a sloped bottom at 3 degrees, which reduces leftover product pooling when draining your oils. Vessels can also be custom-made with a cone or dish shaped bottom, whereby a valve can be positioned in the centre of the base to allow full draining, to reduce waste and increase profitability.
Stainless Steel Grade: Stainless steel blending vessels for CBD oils are generally offered in 304 or 316L pharmaceutical-grade material. A simple description of the difference is that 316L grade contains an extra 2% molybdenum, for additional corrosion-resistance. Increased regional and international legislation concerning CBD products has come hand-in-hand with tighter interrogation of hygiene practices. Contaminant-free materials such as stainless steel are ideal to ensure international pharma-quality compliance for your business’ blending processes. Critically, at Pharma Hygiene Products a comprehensive range of compliance certification is available to confirm the grade of material, to prove surface smoothness, and to guarantee that no cross-contamination from BSE or CJD diseases occurs.
Lastly, don’t forget to let your supplier know in advance if you have any special requirements for your product or vessel. Some common examples include:
Temperature control – Adding a water jacket to your vessel is a simple solution for heating, cooling or maintaining the temperature of your product as it blends.
Toggles and seals – For airtight, contaminant-free transportation.
Viewing holes – For easy visual inspection whilst blending.
Your equipment supplier can be a real financial and reputational asset, so be sure to do your homework before making an investment!
According to a press release published last week, Medicinal Genomics has hired Sherman Hom, Ph.D. to be their first director of regulatory affairs. Dr. Hom is coming from a position at New Jersey’s Division of Public Health and Environmental Laboratories (PHEL) where he was the leading research scientist for the state’s cannabis testing lab as well as coordinating their pre-analytical activities for SARS-CoV-2 testing.
Sherman Hom, Director of Regulatory Affairs at Medicinal Genomics
As project manager for the state’s cannabis testing lab, he was responsible for validating microbial testing in cannabis. He has also been a professor of microbiology, a lab manager, a senior research scientist, a writer and an inventor, according to the press release.
“My passion is regulatory affairs,” says Dr. Hom. “For the last 4 years, we’ve been building a facts and comparison database of required state medical cannabis testing. It’s formidable. Of course, the states will all have the same regulations eventually. In the meantime, it’s my job to help them craft the safest, most efficient and effective set of regulations possible. I’m here because I know Medicinal Genomics shares that passion.”
Delta 8 THC (delta-8-tetrahydrocannabinol) sprung onto the scene late last year in a big way. While similar to the much more widely-known delta-9-tetrahydrocannabinol that produces a lot of the psychoactive effects associated with ingesting cannabis, delta 8 THC can be derived from hemp with less than 0.3% delta 9 THC. Given the legality of hemp-derived products following the 2018 Farm Bill, delta 8 THC can be produced in some states where delta 9 THC still remains illegal.
While delta 8 is considerably different in its psychoactive effects from its cousin, it does overlap in some ways. It can still produce some more manageable, less “heady” versions of delta 9’s effects like euphoria and relief found in the many medical applications of cannabis. DeltaVera, a company that launched less than six months ago, aims to share that more manageable THC experience with the masses.
The sharp rise of the delta 8 market means that DeltaVera is poised for growth. With distribution contracts inked, exciting partnerships in the works and a large surge in consumer demand, the founders of DeltaVera are at the ready to capitalize on this lesser-known molecule and bring it to the forefront of the nascent hemp industry. Starting out as a small family business, Sam and Craig Andrus launched DeltaVera with their third founder, PK Isacs.
We sat down with Sam Andrus and PK Isacs, two of the founders of DeltaVera, an award-winning brand, to ask them about their plans for expanding, how they became entrepreneurs and why they think delta 8 is the next big thing in cannabis.
Cannabis Industry Journal: Tell me about your company. How did you get started in the cannabis space?
Sam Andrus, cofounder of DeltaVera
Sam Andrus: I had an early start in the Delta 8 THC industry on the sales side. We knew we wanted to get into the market, but observed a number of aspects in the space that needed to be addressed: the most important being quality control, transparency and brand trust. With this as a backdrop we launched DeltaVera. Highly curated, approachable, transparent and value-oriented with a strong focus on reliability and trust. The DeltaVera family is made up of three operating managers and the sales team. We are three founders with complementary skill sets: Craig, who has domain expertise in finance, governance and startups, PK who has experience in business and marketing and my sales experience round out the management team.
We have yet to solicit outside capital and have funded ourselves internally as we create our brand and refine our product offering. That said, we are seeing numerous opportunities in strategic partnerships and expansion, which will require additional capital. And we are excited to start this expansion process.
CIJ: What makes the Delta 8 space so remarkable? Why are your SKUs primarily formulated with Delta 8?
Sam Andrus & PK Isacs: Delta 8 THC is an alternative/complement to delta 9 THC, CBD and other cannabinoids. Its status as non-federally scheduled and its less potent psychoactive effects make it appealing in its own right. Delta 8 THC can help with healthier sleep patterns and with pain management in a way that CBD can’t, without a strong “head high” that many of our customers like to avoid. Additionally, it’s shorter lived and doesn’t give you any negative residual effects, which makes it beneficial for people on tighter schedules. These factors make it easier for us to approach markets that are inaccessible to both delta 9 THC and CBD, such as older demographics. In a world where delta 9 is legal, there will still be a place for delta 8.
PK Isacs, cofounder of DeltaVera
While we are very proud of our suite of smokable products, we are currently focusing our efforts on edibles: our Delta Discs are our mainstay, though we are expanding our product line to include nano-emulsion products such as liquid shots and nano gummies. They strongly appeal to our target demographics; additionally, the edible market is growing very quickly in states that allow the sale of hemp-derived consumables.
CIJ: Continuing on the delta 8 front – right now it is considered a cannabinoid legal for interstate commerce, much like CBD, correct? Do you think that will change?
Sam & PK: That is currently the case. Delta 8 THC is newer, and as such, it has even more ambiguity in regards to its legal future. But what’s most exciting (and our most challenging task right now), is informing consumers about the benefits of delta 8. We are one of a few companies solely focused on the consumption of delta 8, because of its similar benefits to delta 9 and CBD – our products are the perfect happy medium: a high with less psychoactive effects and all the health benefits of both, making it a desirable alternative to all consumers.
In addition, we are looking at some combinations of delta 8/CBDA, delta 8/CBN, delta 8/THCV and are very excited to begin test marketing these combinations. These proprietary blends of minor/major cannabinoids can cater to a niche target demographic as they can be curated to have very specific and unique effects when combined in the right quantities with the right delivery system. They will also be able to serve a larger customer base as these cannabinoids can all be derived from hemp.
CIJ: How do you think the FDA would regulate your product? Do you welcome federal oversight?
DeltaVera gummy products
Sam & PK: Regardless of whether or not we are regulated we are committed to a high level of transparency and trust. As noted in unregulated markets, like the supplement market, you don’t always know what you are getting in terms of purity and potency. We are changing that paradigm by adding unique QR codes to our sustainable containers which reference COAs [certificates of analyses] specific to the contents of the case. A lot of the space is naturally trying to avoid that kind of regulatory interference, but we are currently doing our best to self-regulate and make sure that our consumers are fully informed about what they’re receiving.
We will be the first to say that there aren’t as many laws governing delta 8 THC as there could be, and that’s why we’ve spent so much time and money on self-regulation. All of our products have very clear nutritional information in addition to test results down to one hundredth of one percent. As for what category these products should fall under: we have a wide range of products, and each one has its place under a different umbrella of regulation. We hope that the federal government will take advantage of the vast array of studies that have been conducted on delta 8 THC since it was first extracted in 1942 to step up to this product that is, in our experience, helping so many people.
CIJ: Tell me about how your business has grown so far.
Sam & PK: When we sell to a retailer, we try to provide them with as much material as possible on what delta 8 THC is and what differentiates DeltaVera’s products. Still, we’ve had some difficulty in places with limited delta 8 THC exposure. That being said, when someone tries our product, there is a high likelihood that they become a repeat customer (and they tell their friends). Given our newness to the market (Our brand launched in January 2021) initial indications are – we have a good rate of repeat orders, and we’ve heard the same from our brick-and-mortar partners.
The DeltaVera Delta Discs
Our distribution network has grown tremendously; we’ve taken a three-pronged approach to distribution: partnerships with like-minded companies in compatible spaces, an e-commerce market on our website, and a commission-based sales structure to reach brick-and-mortar establishments. To date, most of our distribution takes place in the latter two spaces, due to the added time and commitment involved in forming partnerships. As a company we are taking a more creative approach on how we present our product and alternative ways to consume it. We have some exciting collaborations in the works; follow us on social media to stay up to date with everything on the horizon. We are very enthusiastic about our partnerships however, with our first collaboration with WaxNax, a Denver-based company revolutionizing the cannabis dabbing experience, hitting the shelves this week.
CIJ: What is your marketing plan?
Sam & PK: We are working on building a social media presence. Natalie, who is leading the charge on social media, recommended we take an organic approach to build our base. We want to avoid falling into the “paid ad”, “spam” vibe as long as we can. We are currently focused on building a community through delta 8. Our mission is making DeltaVera a brand for all lifestyles, athletes, creatives, travelers or business professionals. We’re confident in our product, and have faith that it can speak for itself.
CIJ: How do you ensure quality in your products?
Sam & PK: Our products are of guaranteed quality with our licensed growers and manufacturers. We provide COAs, informing the retailer & consumer about each product, displaying full panel tests on cannabinoids and heavy metals. These preliminary and secondary lab tests ensure our product is below 0.3% delta 9 THC in all our products. Through third-party labs, we run full panel tests which pick up a variety of cannabinoids; for most of our products we focus on the level/purity of delta 8. Our products are screened for both contaminants and heavy metals.
All this information is housed conveniently on our website that can be reached through our QR codes.
CIJ: What are your plans to grow the business in the future?
Sam & PK: We feel very confident in our three methods of distribution: partnerships, e-commerce and a commission-based sales structure. We’ve made tremendous ground on partnerships, and are very excited about numerous partnerships we have in the pipeline. We’ve reached out to some incredible groups in the CBD space, the THC space and a few groups that you wouldn’t normally associate with cannabinoids, but with whom we’ve workshopped some really creative ideas that we’re really looking forward to bringing to market.
Readers can use promo code “CIJ” to get 15% off their first order here.
Things are about to change for cannabis and cannabis-related businesses, as landmark legislation to reform federal cannabis banking and insurance laws is just around the corner with the SAFE and CLAIM Acts now making their way through Congress.
The Secure and Fair Enforcement (SAFE) Banking Act, which already passed in the House, would allow financial institutions to do business with cannabis companies without facing federal penalties. There are high expectations the proposal will make its way through the Senate and onto President Biden’s desk.
The Clarifying Law Around Insurance of Marijuana (CLAIM) Act was introduced in Congress in March and is in the first stage of the legislative process. If it passed, it would allow insurance companies to service cannabis businesses without the threat of federal penalties.
For years, fear of sanctions kept banks and credit unions from working with the cannabis industry, forcing cannabis businesses to operate on a cash basis which made them targets of crime and created complications for financial regulators. This is a significant first step for cannabis businesses toward conducting more legitimate and safe operations.
The SAFE Banking Act: Providing a Legitimate Avenue to Banking and Loans
With 37 states and D.C. having taken action to legalize cannabis in some way, it is clear the federal cannabis regulatory model has shifted and the path forward for the SAFE Banking Act shows promise.
The bill creates a safe harbor for banks and credit unions to the extent they would not be liable or subject to federal forfeiture action for providing financial services to a cannabis-related business.More competition means greater capacity and lower premiums for all.
The bill would prohibit a federal banking regulator from:
Recommending, incentivizing or encouraging a depository institution not to offer financial services to an account holder affiliated with a cannabis-related business or prohibit or otherwise discouraging a depository institution from offering services to such a business
Terminating or limiting the deposit insurance or share insurance of a depository institution solely because the institution provides services to a cannabis-related business
Taking any adverse or corrective supervisory action on a loan made to a person solely because the person either owns such a business or owns real estate or equipment leased to such a business.
The CLAIM Act: Backing Cannabis Businesses with the Right Insurance Coverage
Should the CLAIM Act pass, it will protect insurance companies that provide coverage to a state-sanctioned and regulated cannabis business. It would also prohibit the federal government from terminating an insurance policy issued to a cannabis business and protect employees of an insurer from liability due to backing a cannabis-related business.
The CLAIM Act will be a boost for the insurance market and drive more underwriters to write cannabis policies. More competition means greater capacity and lower premiums for all. The act would also have a notable impact on currently hard-to-source policies like Cyber coverage, Directors & Officers (D&O) insurance, Errors & Omissions (E&O) and other management liability policies that have been extremely limited to cannabis businesses.
Cannabis Sales Still Growing Strong Globally
The cannabis market is not slowing down in the United States or globally. Recent forecasts have U.S. sales reaching $28 billion in 2022.
As was the case in Canada where cannabis was made federally legal in 2018, there’s going to be a steep learning curve industry-wide for financial services and insurance vendors who don’t yet understand the risks and liabilities of cannabis operations, even if the SAFE and CLAIM Acts pass this year. And yet this is one giant step in the right direction toward the safe and equitable sales of cannabis country-wide.
In this “Flower-Side Chats” series of articles, Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses integrate innovative practices in order to navigate a rapidly changing landscape of regulatory, supply chain and consumer demand.
Multi-state operators (MSOs) are on the rise in the United States, navigating complex regulatory frameworks to drive profitability through economies of scale and scope. As an MSO and an early mover in the space, a significant part of MariMed’s current strategy is to complete the acquisition and consolidation of the licensed state cannabis businesses it has developed. It takes seasoned leadership to make that happen, and MariMed’s is led by one of the most experienced and successful MSO management teams in the industry. Over the last eight years, Bob Fireman and his colleagues have won 17 licenses in 6 states, and designed and developed over 300,000 square feet of cannabis cultivation, production and dispensing facilities.
MariMed has also developed a portfolio of award-winning cannabis brands and infused products which are licensed, manufactured and distributed in Delaware, Illinois, Maine, Maryland, Nevada, Rhode Island and Puerto Rico. A recently announced $46 million financing for a facility with Hadron Healthcare Fund will help repay all MariMed debt other than mortgage-backed bank loans and one convertible note, as well as help upgrade and expand the company’s owned and managed cannabis facilities.
We spoke with Bob Fireman, CEO of MariMed. Bob started the foundations of MariMed in 2008 after getting into large-scale hydroponics for urban sustainable agriculture. Prior to MariMed, Bob served as a startup lawyer focused on tech and emerging industries.
Aaron Green: Bob, tell me about how you got started in the cannabis industry.
Bob Fireman: I practiced law for decades. Part of my practice was to help startups in all sorts of industries, particularly technology and new emerging markets. At one point, I was introduced to a fascinating sustainable food business opportunity – to build hydroponic farms on rooftops in cities across the country.
Bob Fireman, CEO of MariMed, Inc.
When one of our projects in San Francisco hit some roadblocks, our team there pivoted to what was becoming the Wild West of California cannabis. My friend and current MariMed CFO, Jon Levine, and I began investing and managing a cultivation site there. That’s where we built our early foundation of industry knowledge.
Fast forward a few years, and I was afforded the opportunity to be involved in the drafting of the proposed Massachusetts medical cannabis legislation.
Through that work, we met a team that had won one of three cannabis licenses in Rhode Island. We formed a real estate LLC and raised the capital to develop a seed to sale cannabis facility in Providence, which was later leased to the Slater Center, a not-for-profit medical cannabis licensed business. Today, the Slater Center is a nationally acclaimed operation that services over 10,000 medical patients.
From there, we took our know-how and formed a new entity that was the formal beginning of the company we now know as MariMed. Initially, we helped win licenses for clients in Massachusetts, Delaware, Maryland, Illinois and Nevada. We also provided management services, working capital and other necessities. Under our management, we organically built these businesses from the ground up, advancing best practices and somewhat quietly creating a network of best-in-class operations throughout the industry.
That led to the consolidation of those businesses that we’re focused on today as a core strategic pillar.
I’m incredibly proud of our team, the core of which has been at this for 10 years. We’ve watched other MSOs try different models of success, with varying degrees of success. For us, focusing on growth markets, building at a reasonable and scalable clip, attracting incredible talent at all levels of the company, and developing fantastic brands that customers love, are the ingredients that have translated to where we are now – strong performance and an exceptionally bright future. “Slow and steady wins the race” has become a mantra.
Green: What trends are you looking at right now? What’s on your radar?
Fireman: My radar has a singular focus, and that’s to create shareholder value. That’s why completing the consolidation of the cannabis licensed businesses we’ve developed and manage into our public company is so critical. Back in the day, the initial available licenses were in medical-only state programs where applicants were required to be not-for-profit state companies. Accordingly, we raised the capital in the real estate entity which leased facilities to the licensees. Our revenue was from rents, management services and licensing fees.
Panacea Wellness in Middleborough, MA is one of MariMed’s adult use cannabis dispensaries
In 2019, we implemented a new strategic plan to consolidate these businesses. While that translates to our being structured similarly to other MSOs in that we are a vertically integrated seed to sale company, we are distinct in our operational excellence, quality product portfolio, and strong balance sheet. Other MSOs have raised large amounts of capital to pay large sums to acquire licensed state cannabis businesses and have found themselves over-leveraged and challenged to assimilate other companies’ methodologies and cultures. By consolidating the businesses and talented people we developed and managed from day one and utilizing our best practices and processes system-wide, we realize enormous capital efficiencies.
Our strategy is paying off. Our core cannabis revenue in 2020 increased 207% to $50.9 million, and our 10k reported EBITDA of $16.3 million. And now we’re on track to double our revenue in 2021.
The last piece of the puzzle is to let the world know what we’ve been doing. Slow and steady has worked for us but gone are the days of doing so quietly. We’re proud of what we’ve accomplished and exceedingly bullish on what’s to come.
Green: What do you look for in an M&A target?
Fireman: When M&A makes sense for us, we first look for single operators and entrepreneurs in states where we are not active and look to partner with business leaders that had the vision and the courage to get into this industry and build solid cannabis businesses from the ground up. I’m looking for businesses that could benefit from being part of a larger, more experienced and well-capitalized company like MariMed. Obviously, as an MSO with a solid platform, MariMed is approached regularly by other MSOs and banks suggesting candidates for M&A opportunities. Lining up with a company that has complementary cannabis licenses in other states and who shares our vision and ethics could be a win-win situation. They must embrace our commitment to diversity, the environment and proper corporate governance. We have been somewhat reticent to do this until we see some increase in our share price and market capitalization.
Green: Are there any new products, or product trends that you’re looking at?
Fireman: Marimed looks to be the most trusted source of high-quality cannabis products that consistently delivers innovative health and wellness solutions to our patients and customers. Our lab scientists are constantly creating and testing new and innovative formulations of cannabinoid compounds including CBD, THCa, CBG, CBN and others that will improve the health and wellness of our customers.
Our brand portfolio is ever-expanding with new and better product offerings. Our award-winning Betty’s Eddies Fruit Chews brand is adding new SKUs of varieties and flavors for both medical and adult use programs. Our Nature’s Heritage flower and concentrates brand is adding a line of solventless concentrates, live rosin, as well as new formulations for RSO, an oil popular with medical patients. Kalm Fusion is expanding its successful line of powdered drink mixes as we see more movement in the cannabis beverage category.
Microdosing is hugely popular right now, and we’re rolling out products in the 2-5mg dosage range. Health and dietary concerns are top of mind as well, and we offer products that are vegan, sugar-free and gluten-free. Ultimately, we want to be sure that we have something on the shelves for every single consumer. The financial hardship created by the pandemic has made consumers more attracted to value added products such as popcorn buds.
Green: You recently announced an equity financing from Hadron. I’m curious to learn more about it from a nuts-and-bolts perspective if you can share any of that information.
Fireman: Over the last year, access to the capital markets for equity raises in cannabis public companies was difficult. The cost of debt was and is still high, and we were looking for a long-term financial partner that understood the industry and could assist us. Hadron Capital has been successful for several years investing in some of the most successful MSOs and they saw the value and potential in MariMed’s experienced management and great assets.
Hadron invested $46 million in equity in MariMed this March. Approximately $16 million was utilized to retire all our short- and long-term debt but for bank secured debt and one convertible note. $7 million is committed to funding our capex and expanding the capabilities of our facilities, enabling us to grow more flower and automate production. The balance of funding will support our consolidation strategy to fund two more roll ups of state licensed cannabis businesses into the public company.
Going forward, it is comforting to have a capital partner to assist us in future acquisitions and M&A opportunities.
Green: I’d love to learn more about your Nature’s Heritage brand, particularly as it relates to the cultivation and the flower products.
Fireman: Our COO Tim Shaw has assembled a cultivation and production team with expertise in all aspects of genetics, growing methodologies, extraction techniques, and packaging innovation. That’s provided us a rich collection of quality genetics that make up Nature’s Heritage, our top-selling flower, oil and concentrate brand in Massachusetts and Maryland. We’ve recently expanded the line to include Rick Simpson Oil (RSO) and solventless concentrates (including live rosin) and have been receiving stellar feedback.
Green: What are you interested in learning more about?
Fireman: Over the last decade, the MariMed core team has seen the emergence and amazing growth of the cannabis industry. The initial medical programs in California and Colorado have now led to some form of legal medical or adult use cannabis programs in over 33 states and districts.
We are most interested in learning and following the federal, state, and international laws and regulations. It is vital to know how these laws will affect our company and the industry as a whole. When might full federal legalization become a reality? What might different versions of the law be? Will state legal programs be protected as well as the companies that took the risk in investing in the industry at its nascent state and how? What will FDA requirements and regulations look like? What medical claims will companies be allowed to make, and what kind of research or trials will be required to put a product on the shelf? What are the ramifications of the MORE Act or the SAFE Banking Act?
Responsible MSOs need to be prepared to rise to or above the standards of care of other industries. A lot of this was impossible in the past because of federal prohibition laws. Soon, if not already, labs and manufacturing processes will need to be GMP certified and more. Consumer data will need to be HIPAA compliant. Cannabis companies have to be good corporate citizens: diversity and equal opportunity should be embedded in business decisions, and commitment to ESG and sound environmental and social policies with good corporate governance need to be in planning and implemented.
Following the laws and holding ourselves to the highest possible safety and business standards will allow the cannabis industry to finally become “mainstream.”
Green: Alright, great. Thank you, Bob. That concludes the interview!
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