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New Jersey’s Careful Approach to Cannabis: Part Two

By Abraham Finberg, Simon Menkes, Rachel Wright
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Click here to read Part One where we examined the state of the market, licensing, approvals and sales. Part Two delves into all things taxes.

A “Raft” of Taxes

Like New York, New Jersey cannabis companies will be dealing with a raft of taxes:

Federal Section 280E: Will It Apply in New Jersey? Well … Sometimes

Section 280E disallows deductions on federal returns for expenditures connected with the illegal sale of drugs, requiring retail cannabis businesses to add back such significant expenses as rent and wages for sales staff.

Much like New York, cannabis companies in New Jersey can expect a lot of taxes

Unlike New York, New Jersey’s recent cannabis legislation did not state that cannabis businesses were exempt from 280E. However, the state’s individual tax laws do not conform to the internal revenue code, and accountants are inferring that 280E won’t apply to sole proprietorships. Conversely, the state’s corporations must start their tax calculations using Federal taxable income, meaning 280E would apply.

Sales Tax

Retail sales of adult use cannabis are subject to a 7% sales tax. Beginning July 1, 2022, medical cannabis sales are exempt from sales tax.

Purchases by cultivators of farming equipment and related property, such as plants, fertilizer and drip irrigation, are exempt from sales tax. Purchases by all cannabis businesses of materials used to contain, protect, wrap and deliver adult use cannabis are exempt from sales tax.

Excise Tax

The CRC has been empowered to collect a “Social Equity Excise Fee”, to be adjusted annually. The fee is currently $1.10 per ounce, but the CRC is able, but not mandated, to amend the fees to between $10 and $60 an ounce after nine months of adult use sales. At least 70 percent of all cannabis tax revenue is earmarked for investing into impact zones.

The fee is imposed on any sale or transfer of cannabis from a cultivator (or alternative treatment center that also cultivates) to any other cannabis business. The fee is not imposed on transfers from one cultivator to another, or from a cultivator to an alternative treatment center. The facility that purchases the cannabis is responsible for collecting the fee and remitting it to the NJ Division of Taxation.

Local Cannabis Transfer and User Taxes

Each municipality is authorized to impose a Local Cannabis Transfer Tax on sales from one cannabis establishment to another (including from one cultivator to another), and on the sale of cannabis to retail consumers. The allowed rate is capped at 2% of receipts, with the exception of cannabis wholesaler sales, which are capped at 1%.

Atlantic City, which considers itself friendly toward cannabis, passed an ordinance in September 2021 authorizing the collection of a 2% tax on retail adult use cannabis sales and a 1% tax on wholesale sales. Many cities with alternative treatment centers already have a 2% tax on medical cannabis. It is assumed they’ll be enacting the 2% transfer tax on adult use sales if approved to operate.

Other Unique Points About New Jersey Cannabis

  1. Adult use sales are limited: adults may possess up to one ounce total of cannabis products and can only purchase one ounce at a time.
  2. New Jersey is the only state that has legalized cannabis, but kept it illegal for a cannabis consumer to grow their own weed. Growing even one cannabis plant can land the offender in prison for up to five years and incur a $25,000 fine.
  3. About 400 municipalities have opted not to have retail cannabis shops; 98 have said yes. The new law has caused battles between mayors and their city councils, including the city of Paramus. 60% of Paramus residents voted in favor of adult use sales, and the mayor has stressed the benefit of the 2% transfer tax. Paramus city council unanimously rejected adult use cannabis, however. Some council members are against any sales, while others want to wait and see how other towns fare. Says Council Member Maria Elena Bellinger, “Ultimately … I feel that getting more data will only help us come to the right solution.”

Time Will Tell

New Jersey believes its careful approach will create the best adult use cannabis environment for its citizens. Only time will tell if the Garden State ends up avoiding some or all of the problems faced by states like California and New York.

New Jersey’s Careful Approach to Cannabis: Part One

By Abraham Finberg, Simon Menkes, Rachel Wright
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This is Part One where we examine the state of the market, licensing, approvals and sales. Part Two will delve into all things taxes. Stay tuned for Part Two, coming next week!

On the surface, New Jersey’s new adult use cannabis program is similar to the program of its larger neighbor across the Hudson. Like New York, New Jersey is attempting to right generations of social wrongs by providing support for disadvantaged applicants and expunging people’s records for prior cannabis-related offenses.

However, the Garden State is in many ways a more cautious state. It is, after all, one of only two states where it’s still illegal to pump your own gas. Although the Cannabis Regulatory Enforcement Assistance and Marketplace Modernization Act (the CREAMM Act) became effective August 19, 2021, New Jersey has gotten off to a slow start. April 22, 2022 marked the first day of legal adult use cannabis sales, and only thirteen dispensaries participated, all of them Alternative Treatment Centers (medical cannabis dispensaries) who’d received a coveted “Authorization to Operate” from the state’s Cannabis Regulatory Commission (CRC).

Types of Licenses

In addition to the standard types of cannabis licenses: retailer, cultivator, manufacturer, wholesales, distributor and delivery, New Jersey has also approved a microbusiness license, which will be limited to 10 employees or less and 2,500 square feet or less of operation space. A cannabis business may apply for more than one type of license.

The State Capitol in Trenton, New Jersey

The CREAMM Act limits the issuance of cultivator licenses to 37 (not including cultivation licenses issued to microbusinesses). However, the state has decided to abolish that cap in order to boost the sagging cannabis market, and the cap will expire February 22, 2023.

The CREAMM Act also describes three special sub-types of licensees:

  1. Certified diversely-owned business – the state wants to issue 15% of licenses to minority-owned businesses and 15% of licenses to woman-owned and disabled veteran-owned businesses.
  2. Social Equity business – owned by people who have lived in an Economically Disadvantaged Area. Will receive special priority.
  3. Impact Zone business – located in an Impact Zone (towns with higher-than-average unemployment, crime and cannabis arrests), owned by people from an Impact Zone, or employing residents of Impact Zones. Will also receive special priority.

License Fees

Licensing fees vary widely, from $1,000 for a microbusiness, to $10,000 for a retailer and from $5,000 for a small cultivator to $50,000 for the largest cultivation operation. Alternative Treatment Centers applying for adult use licenses will pay $100,000 for a single dispensary, $400,000 for a single cultivation license and up to $1,000,000 if they’re a vertically integrated business with 3 adult use dispensaries.

“FINAL AGENCY DECISION: APPROVAL” Doesn’t Mean Approval To Operate

As of February 9, 2023, approximately 950 cultivators, dispensaries, and manufacturers had received CRC letters marked “FINAL AGENCY DECISION: APPROVAL OF CONDITIONAL LICENSE APPLICATION.” However, the letter stated recipients “shall not engage in purchasing, possessing, selling…cannabis or cannabis products.” Instead, it gave permission to 1) rent/purchase a site, 2) gain municipal approval and 3) apply to the CRC to for conversion to an annual license, which will allow them to actually operate. The conditional license phase is 120 days with an automatic 45-day extension.

On October 27, 2022, the first 18 annual adult-use licenses, which do allow the holder to open an adult use cannabis business, were issued, and as of January 13, 2023, only 46 annual adult-use licenses had been awarded.

Notoriety doesn’t seem to be moving the time table much faster. Famous rapper and actor Ice T and his ex-playboy bunny partner, Charris B, have been given conditional approval by the CRC and have obtained location approval from Jersey City. They are now waiting for conversion to an annual license, which as of mid-February 2023, they had still not been granted.

Current Sales

From April 22 to the end of June, New Jersey had collected $4,649,202 in tax revenue from sales of adult use cannabis. That amount included $219,482 in Social Equity Excise Fees and was based on $79,698,831 in total sales of adult use cannabis. The 3rd quarter of 2022, July through September, saw a jump in sales of adult use cannabis in New Jersey to $116,572,533. With medicinal cannabis sales included, the total went up to $177,710,764.

Stay tuned for Part 2, covering taxes in the Garden State, coming next week!

Rhode Island Embraces Adult Use Cannabis, But With A Bitter Tax Pill

By Abraham Finberg, Simon Menkes, Rachel Wright
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Although Rhode Island is the USA’s smallest state, it has traditionally taken an out-sized dislike for cannabis and its users. It first banned cannabis in 1918 and, up until recently, had some of the strictest mandatory minimum sentences for large-scale possession, sentencing those with more than 5 kg (11 lbs) to 20 years’ imprisonment and fines of between $25,000 and $100,000.

Rhode Island’s Change of Heart

These days, however, the Ocean State has turned over a new leaf. It legalized medical cannabis in 2006, and on May 25, 2022, legalized adult use sales as well. Starting in December 2022, Rhode Island residents could purchase cannabis from five of the six medical cannabis dispensaries across the state which have also been approved to sell to adults.

Over the course of 2023, the state is expected to issue licenses for an additional 28 dispensaries, including a portion reserved for social equity applicants and worker-owned cooperatives. At the same time, 33 cities and towns across Rhode Island voted to determine whether cannabis businesses would be allowed in their jurisdiction. 25 of these municipalities ended up approving these measures.

Social Equity

Like many retail-legal states, Rhode Island has enacted social equity support for cannabis licensees. The state is divided into six retail license zones, and within each zone, one retail license will be reserved for a social equity applicant and one for a worker-owned cooperative. In addition, the state’s cannabis legislation provides for a $1 million fund to help support the social equity license recipients. Funded by all fees collected from adult-use cannabis businesses, this assistance fund will provide grants, promote job training and workforce development, and administer programming for restorative justice. The legislation also establishes a process whereby individuals may have their misdemeanor or felony convictions for cannabis possession expunged.

How Tax-Friendly Toward Cannabis is Rhode Island?

The Ocean State still has a way to go to be considered a truly cannabis-friendly state. For one thing, the state is forcing both individuals and corporations to conform to Internal Revenue Code section 280E which disallows deductions and credits for expenditures connected with trafficking in controlled substances under the Controlled Substances Act, schedule 1 or 2. This means cannabis companies will only be permitted to reduce their sales by cost of goods sold when determining their taxable income on their state tax returns unless they decide to take more aggressive tax positions. For example, with a conservative IRC 280E tax position, a cannabis dispensary would only be allowed to deduct the cost of the product purchased and the cost to transport the product to the dispensary, while disallowing such significant expenses as rent and payroll. All cannabis businesses must forgo expense deductions related to selling, general and administrative expenses, as they are disallowed under the tax code under this traditional method. Rhode Island has also disallowed cannabis businesses from taking an R&D tax credit as a result of conformity with federal tax law.

In addition, Rhode Island is requiring retailers to collect 10% state cannabis excise tax plus 3% local cannabis excise tax from its customers, along with the standard 7% sales tax. Good news: sales tax is not calculated on the excise tax collected (unlike California, which does impose tax-on-tax). Medical sales are subject to sales tax but not to excise tax, and excise tax is not charged on cannabis accessories. Excise tax, like sales tax, must be remitted to the state by the dispensary on or before the 20th of the following month.

In Summary

Rhode Island has taken a big step forward from its anti-cannabis past by legalizing adult use sales and by supporting equity applicants as well as the expungement of past criminal convictions for many of those victimized by the war on cannabis. While Rhode Island’s excise taxes are not the worst we’ve seen, the state’s support of 280E will make it a lot harder for cannabis businesses to thrive.

ASTM Develops Two New Cannabis Standards

By Cannabis Industry Journal Staff
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According to a press release emailed this week, ASTM International’s subcommittee focused on cannabis, D37, is in the midst of developing two new standards surrounding cannabis safety and education.

One standard, WK84667, is designed to “help document engineering controls for air filtration and person protective equipment (PPE) in cannabis processing facilities,” says ASTM member Trevor Morones. The premise of this standard appears to be employee safety; with proper, standardized air filtration and PPE, the standard will help companies keep their workers safe and prevent inhalation of potentially harmful particles, like cannabis dust, stalk fiber, florescence and crystalized dust. “We are working to develop a robust community of cannabis professionals who can share their experiences in workplace and personnel safety,” says Morones.

The other proposed standard, WK84589, seeks to develop a uniform metric for “determining the intoxication level of a cannabinoid.” Initially focusing on delta9-THC, the standard will help raise awareness and promote public health and safety by informing consumers how intoxicating a cannabis product is for the average adult.

ASTM Pamela Epstein says this standard will hopefully develop a form of measurement akin to ABV in alcoholic drinks, allowing consumers to see how potent a certain cannabis product is. “Beyond providing consumers with a complete assessment of a product’s total intoxicating/impairing effects, the proposed standard may provide regulators with a methodology to meaningfully account for public health and safety,” says Epstein. “The specification can unify consumer awareness and can be used across all product types and jurisdictions.”

The ASTM D37 committee is working on a number of other standards related to these and they invite anyone interested to share their feedback.

From Seed to Storefront: Why Cannabis Retailers Should Know How to Cultivate

By Itali Heide
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There isn’t one simple formula that holds the secrets of success in cannabis branding, but there are some things that might give you an advantage. The possibilities of cannabis are endless and understanding the cultivation process can be incredibly advantageous to brands who want to become involved every step of the way and build a trustworthy brand from seed to storefront.

Some of the most successful brands in the cannabis industry have built their name on quality and the best way to ensure that is to know exactly where your bud is coming from.

The Advantages of Understanding the Cultivation Side of Cannabis

Understanding the cultivation side of the cannabis industry can be quite valuable for many reasons. If you’re in commercial cannabis, getting up close and personal with the cultivation process can lend cultivation expertise to your brand name and help connect you with the process from the very start so you can offer your customers a guarantee of high-quality products with a hands-on approach. Being close to the process allows you to develop the highest standards when it comes to better yields, stronger plants and more potent cannabis. In short, it gives you complete control of your brand and its reputation.

Radiant Huoang, CEO of Delta Munchies, shares how a deeper knowledge of the brand’s cultivation has affected and given Delta Munchies an advantage. “The years of experience on the cultivating side of cannabis, gave me an appreciation for the craftsmanship and the hard work that is essential to creating a great product,” says Huong. “In a crowded market, it’s impossible to build a lasting brand without a product of undoubtable quality, and that starts with the flower we use, thanks to our cultivators.”

Essentially, when you have control of the cultivation side of the business, you are able to craft strains, edibles and other products that are unique to your company. It gives you control over the quality of your product and gives you a consistent edge over the competition.

Being close to the process allows you to develop the highest standards when it comes to better yields, stronger plants and more potent cannabis.

“This level of craftsmanship bled over [to the retail side] when creating our brand and what we choose to offer to our consumers,” says Hoang. “Always trying to craft and improve the best products possible that deliver a similar effect to your traditional cannabis is our goal.”

Anyone buying a cannabis product wants to know that what they’re consuming is cultivated with passion and a careful eye for the details. As a retailer, cultivating their own crop allows Delta Munchies to ensure the integrity of the final product and deliver a true plant-centered experience to their clients.

Beyond retail, growing is an excellent place to start in the cannabis industry. It sets up a solid foundation for you to understand cannabis and allows you to bring the highest quality products to the market. Especially since a rise in the use of cannabis calls for more growers and cultivation-centered businesses.

Understanding the Headwinds of Cannabis Cultivation and Cannabis Retail

Not everything in the cannabis cultivation and retail world is perfect, as with any other industry. Making it can be challenging, especially as local regulations fluctuate while nationwide legalization remains in limbo.

The first challenge is legalization: as of now, hemp is federally legal and hemp-derived products containing less than 0.3% delta 9 THC are technically legal in all states. It can be difficult to keep up with new laws and constant changes. Right now, cannabis businesses can still struggle with access to banking services and insurance.

It’s important to follow general federal regulations for your product, such as the nutrition facts section

Growers are also faced with the bureaucracy and costs of regulations, testing conditions, label requirements and other additional investments that come with constant change. Still, change is a part of any budding industry, so it’s important to keep this in mind and remain adaptable.

Some states place a limit on the number of licenses they’re allowed to issue to cannabis businesses and growers, which can make it challenging for new players to join and results in the market being dominated by the top dogs, but this isn’t unlike any other industry. Making sure you can commit to a business of this type is another thing to consider deeply before endeavoring into the world of cannabis.

What About the Future of Cannabis Cultivation and Retail?

The future of cultivation and retail is bright, although not without speedbumps along the way. The good: we can expect more consistency and structure after regulation becomes the norm, advances in technology are being used to make exciting, creative products and growing interest and preferences make for a promising future of growth.

On the other hand, regulation could go a bit too far. When asked about the future of the industry Huong believes brands need to be given the freedom to innovate. “We think that cannabis cultivation will always be a beautiful art, but with so much saturation and over-regulation it makes it extremely difficult to operate,” says Hoang. This is an important factor to consider, although regulation can have its advantages, states need to consider whether their regulations are truly aimed at improving quality and safety, or just acting as barriers to entry.

Technology will surely play a role in the future of cannabis cultivation and retail. Advances in the agricultural sector grow exponentially, with systems that are developed and optimized to grow hemp and cannabis with a variety of top-of-the-line technologies that help ensure high-quality raw materials.

The future of the cannabis industry will be shaped by many things, but nothing can influence the market as much as its consumers. Customer preference, brand trustworthiness and effectiveness, and legality will ultimately lead the way for cannabis trends.

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Getting involved with the cultivation process can be important for overall quality.

One way to do this is to be in complete control of your product, from seed to storefront. Being able to cultivate the product you sell allows you to pivot more easily when the market demands it. Rather than seeking out new suppliers, a nimble cannabis brand will be set up to shift its cultivation operations as consumers switch from high THC strains to CBD or any other novel cannabinoid to hit the market.

Final Thoughts

Getting involved with the cultivation process can be important for overall quality. If you own a cannabis brand, having a close relationship with your grower or growing your own cannabis can lead to a product that’s higher in quality, as you can achieve a deeper understanding of the unique effects that you want your product to have and the quality necessary to achieve them. At the end of the day, what customers care for most is the product inside the packaging that you’ve designed to catch their eye. This is what will keep them coming back. It’s that quality that will imprint the packaging in their minds on their next trip to the dispensary.

Knowing more about cannabis from the ground up can be beneficial when it comes to innovation opportunities. Being able to apply your own knowledge or that of your trusted growers to a new product can help you grow your brand in a way that’s uniquely yours.

Hoang says harmony between the grower and the brand is important: “Seeing something you grew yourself come to life bleeds into the brand.” Becoming involved in the cultivation process of cannabis allows you to gain perspective that can be beneficial for your brand.

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FDA Punts on CBD Rules

By Cannabis Industry Journal Staff
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On December 20, 2018, Former President Trump signed the Farm Bill into law, which removed hemp-derived cannabidiol (CBD) from the Controlled Substances Act, stripped the DEA’s authority from hemp and gave states the ability to regulate hemp markets of their own, with approval from the USDA.

FDAlogoWhen that Farm Bill became law, it paved the way for state-sanctioned hemp and CBD product markets and it seemed as if the floodgates were opening for legal CBD, but some caveats and gray areas remained. The same day the Farm Bill became law, the FDA released a statement asserting their authority, threatening enforcement actions for things like unsubstantiated drug marketing claims.

Over the past four years, the FDA has dealt with dozens of enforcement actions involving CBD products. The agency said they were “working quickly to further clarify our regulatory approach,” but that seems categorically false given how long it took them to tell the public they don’t know what to do. Finally, after four years and change of comment periods, industry frustration, warning letters and state-sanctioned gray markets, the FDA announced they need help from Congress.

Janet Woodcock, M.D., principal deputy commissioner at the FDA

Last week, the FDA published a statement from Janet Woodcock, M.D., principal deputy commissioner, that says, to paraphrase, they’ve given up. Industry stakeholders have long agreed that the food and dietary supplements regulatory framework is adequate for CBD products, citing minimal public health risk and a pre-existing framework that CBD could fit into easily. “The FDA’s existing foods and dietary supplement authorities provide only limited tools for managing many of the risks associated with CBD products,” says Dr. Woodcock. “Under the law, any substance, including CBD, must meet specific safety standards to be lawfully marketed as a dietary supplement or food additive.”

The reasoning behind the agency’s unwillingness to regulate it as a dietary supplement is because of safety concerns, like potential liver damage, possible drug interactions and reproductive harm. Scientific data available to the FDA shows that they cannot say that CBD is generally recognized as safe (GRAS). “Today we are announcing that after careful review, the FDA has concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the regulatory oversight needed to manage risks,” says Dr. Woodcock. “The agency is prepared to work with Congress on this matter.”

Anticipating the Ebbs and Flows of Seasonal Retail Cannabis Sales

By Itali Heide
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Like any industry, cannabis can experience ups and downs, especially when it comes to a doors-open retail business. Dispensaries that operate in towns or cities that attract tourists experience this more than anyone, seeing sales spike during the busy months and reach lows during the off-season.

We spoke with the folks at Dragon Hemp, a hemp retailer based in Sag Harbor in the Hamptons. As a brand that has first-hand experience with seasonal spikes, they were able to provide more context when it comes to anticipating the ebbs and flows of seasonal retail cannabis sales.

What is the Best Way to Prepare for Post-Busy Season Retail Lulls?

In Sag Harbor, Dragon Hemp awaits a spike during the busy summer months, as well as lulls when the tourist season is down and visitors head back to New York City and beyond, many becoming loyal online customers year-round.

According to Kevin Menard, LAc, founder of Dragon Hemp, the best way to prepare for post-busy season retail lulls is to build a community of loyal customers that take your brand home with them.

“Post-busy season lulls can be very useful in setting strategies and goals for the coming year. In our case, we do a thorough inventory review and align what we have with what we need for the upcoming peak season,” says Menard. “As the season winds down, they prepare for online orders that come from the impression left on customers in the store. “We also focus on cultivating our owned channels where we can have more direct communication with our community.”

Advice on Preparing for Busy Retail Seasons

Kevin Menard, LAc, founder of Dragon Hemp

Before the busy season is even over, it’s important to start preparing for the lull in business that’s bound to set in. For Kevin Menard and his business, preparation starts with inventory. So, what’s their secret? “Make sure you have budgeted for an inventory of your most popular items and hire excellent storytellers in both your retail locations and e-commerce marketing teams.”

Keeping an eye out on inventory management can be a great way to spend the slow months. Give brands a chance to monitor sales trends and keep up with changes in consumer preferences, putting more time and effort into online retail and social media and implementing promotions and sales online and in-person. Grow the team behind the brand, keep up with all new regulations and focus on customer loyalty to maintain trustworthiness even from afar.

Turning a Seasonal Customer Into a Lifetime E-Commerce Customer

In order to turn a seasonal customer into a life-long client, it’s important to connect beyond just the sale and product. For Dragon Hemp, the most important part is personalizing the experience for their customers: “For us, it’s all about achieving personalization with each customer,” says Menard. “Typically, a seasonal retail buyer will be opportunistic about their purchase in-store, but that purchase is indicative of a longer-term need. We try to create customer profiles based on in-store buyers and craft recommendations that fit that customer’s health needs over the long term.”

In order to turn a one-time buyer from out of state or city into a lifelong loyal customer, there are a few things to consider that can make this connection happen. First and foremost, building a relationship by maintaining impeccable customer service and personalizing the experience.

Focusing on online retail is also important in order to maintain the connection with clients. Making sure the website is in perfect shape and offer loyalty programs, incentives, promotions, sales, discounts or rewards to returning customers.

Marketing and publicity are other essentials, as you want to target those who have a long-time need that needs to be filled. Allowing for a fuss-free online shopping experience, targeting people who fall in line with the brand’s products and values, being creative and innovative when promoting the website and keeping in touch with active social media and newsletters.

How to Project Goals In Places That Swell Seasonally

It can be difficult to project year-on-year retail goals when the geographic location has a tendency to swell seasonally and have off-seasons but preparing and knowing what to expect can help with reaching those goals (and even surpassing them).

According to Menard, the secret to projecting their goals starts with their first location: “Since our first retail location in Sag Harbor, NY has been open only a year, our projections are still a work in progress! We’re using 2022 data to budget for this year, accounting for marketing efforts, increased awareness, and seasonality. We have some sensitivities built into this model based on different growth scenarios.”

The instabilities and fluctuations that come with a business that works on a seasonal tempo can be challenging when it comes to reaching and achieving specific goals, but there are things that can be done to make the whole process more seamless, and hopefully, more successful.

Looking back at previous years can be helpful in pinpointing tendencies and habits that can be observed in the consumer, and the lower sales allow space for the time that can be used in innovating and creating new products that are based on what the client base wants.

Researching not only the immediate region, but the regions that people often visit is another handy trick. Knowing who is coming, why they’re coming, and what they’re looking for can help set objectives that can be brought to reality throughout the off-season and the busy season, even experiencing more foot traffic in town. Moreover, making the most of the local events, occasions, changes and circumstances like holidays and local events can keep the brand connected to its roots and primary clients.

The off-season is a great time to set up a budget or specific monetary goals to reach, and off-season fluctuations can be added in to give a more complete idea of what the year might look like. Keeping an eye on the market by monitoring it and using forecasting models to predict results can also help set the stage for changes in the year-to-year goals.

Expanding From a Cannabis Retailer to a National E-Commerce Brand

Dragon Hemp didn’t start off with a bang, but they sure have achieved it over time. Dragon Hemp products were conceived by renowned alternative health practitioner and founder, Kevin Menard. Using hemp oil, Chinese herbs and native botanicals, they have managed to create a variety of beneficial and natural products.

“Our apothecary in Sag Harbor has been a great success, but the most rewarding aspect of the location has been the ability to have direct conversations with customers and get a deep understanding of how we can support their journey to better health,” says Menard. “We’re excited to expand our mission of helping people feel like themselves again by using next-generation natural botanicals and time-honored herbal remedies.”

Final Thoughts

As the country continues toward legal and accessible cannabis, new businesses are learning the ropes and those that have been there all along have been leading the way.

Having ups and downs in any business is to be expected, but just like any industry, knowing what to expect and what to do can make these challenges seem like less of a hassle. Building an online presence that clients connect to, developing e-commerce strategies, expanding product lines, building a loyal customer base and staying up-to-date with the latest regulations are surefire ways to stay on top of the cannabis business.

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3 Benefits of Conducting Genetic Tests on Your Plants

By Angel Fernandez
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Many growers may wonder why it’s important to get their plants genetically tested, but the truth is that genetic testing can make growing a lot easier. Genetic analysis in plants can give a wide range of results that can help scientists solve everyday problems in plant cultivation, such as detecting diseases and identifying important traits in plant species.

Currently, three of the most important benefits that genetic testing can give growers are the ability to detect diseases, identify the gender of their plants and control the quality of their crops.

Pathogen detection

Pathogen infections can be difficult to detect and by the time symptoms are obvious, it may be too late and the rest of the crop is already contaminated. This is why DNA tests are a valuable tool for the early detection of diseases in plants. Even though plants reproduce through cloning, it’s crucial to make sure the mother plant is healthy before proceeding, as 100% of the genetic material will be transferred to the clone, including any diseases the mother plant may have, such as a virus.

There are a few ways to detect pathogens in plants, including detection and symptomatology, serological techniques for viruses and microbiological techniques for fungi and bacteria. However, another effective method is detection tests using genetic material, also known as molecular methods. These tests involve screening the plant’s genetic material for any alterations, such as the presence of the pathogen’s genetic material. These tests are particularly useful as they provide accurate results when at least part of the pathogen’s genome sequence is known. This is important as many of these genomes have yet to be fully studied and there may be new unknown variants.

Tobacco Mosaic Virus symptoms can include tip curling, blotching of leaf mosaic patterning, and stunting

The reliability and effectiveness of genetic and molecular tests are due to the use of DNA as the starting material for pathogen detection. DNA is a stable molecule that can withstand adverse conditions, such as high temperatures or low humidity. Additionally, this technique can still be effective even when the samples used are very damaged or necrotic. Due to these qualities, genetic testing is considered one of the best methods for pathogen detection.

In summary, genetic testing is the most effective technique for pathogen detection as it is highly specific, requires a small sample and provides accurate results in a short period of time.

Plant gender detection

In the case of the cannabis plant, it is naturally diploid and dioecious, meaning that it has separate male and female reproductive structures, and each one contributes a chromosome during reproduction. However, there may be mutations that result in hermaphrodite plants, which have both male and female reproductive structures.

Growers who propagate their crops through seeds must wait several weeks to identify the sex of their plants, as their dioecious nature makes it difficult to recognize the plant’s sex in the early stages of growth. This can be time-consuming and resource-intensive. However, thanks to genetic testing, it is possible to determine the sex of a plant long before it reaches the flowering stage.

The sex organs on a Cannabis plant identified.

The determination of the gender of a dioecious plant is influenced by a sex chromosome system. Male plants have an XY sex chromosome system, known as heterogametic, while female plants have the XX sex chromosome system, known as homogametic.

To identify the sex of a plant through genetic studies, DNA or RNA-based molecular markers are used with a tissue sample. These markers typically look for the male trait “Y” in the plant, as the trait “X” is present in both male and female plants. In this way, the presence of the Y chromosome can be used to confirm the plant is male, and its absence can be used to confirm that it is female.

Crop quality control

The same species can often present one or more varieties, and although they may have physical features that distinguish them, it is not always possible to identify them with the naked eye. Beyond physical characteristics, genetic traits can have considerable differences.

Molecular identification is a very accurate tool for identifying varieties

Different varieties of cannabis have been widely cultivated and crossbred, making it possible for plants to have very similar physical traits, making it difficult to identify the variety being cultivated. This is why molecular identification is a very accurate tool for identifying varieties in cases where there is uncertainty about their identity.

Additionally, some plants can produce lower or higher amounts of cannabinoids due to their genetic nature or small mutations that occurred during growth. This is how there are plants with the advantage of having genes that code for high production of THC or CBD. These outstanding traits can be detected through the selection of characteristics using analysis of molecular markers that indicate the presence of these genes in the plant, or that detect the genes responsible for synthesizing these substances and determine their respective quality.

These procedures are performed using a tissue sample from the plant and using DNA as a starting material for testing, which provides information on the genetic traits of interest and validates their function.

AOAC International Names New CSO

By Cannabis Industry Journal Staff
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AOAC International, an independent nonprofit standards development organization has announced the appointment of Dr. Katerina (Kate) Mastovska as their new deputy executive director and chief science officer.

Dr. Katerina Mastovska

Most recently, Dr. Mastovska served as chief science officer for the Eurofins US Food Division. She has been an active member of AOAC for almost twenty years, winning the Harvey W. Wiley Award in 2021, their highest scientific honor. “I’m delighted to join the AOAC staff and lead the team of dedicated scientists,” says Dr. Mastovska. “AOAC has a critical role in food safety, and I’m inspired to continue to be a part of this important work.”

AOAC International works actively in the cannabis industry through their Cannabis Analytical Science Program (CASP), a working group established in 2019 that is dedicated to developing standardized methods in cannabis testing. In the world of cannabis lab testing, AOAC International creates standards under the standard method performance requirements (SMPR®) moniker, which are detailed descriptions of what analytical methods should be able to do.

More recently, CASP launched their own proficiency testing program last year and launched their first round, shipping samples to labs across the country in the Fall.

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Attracting Investment: How Cannabis Companies Can Best Position Themselves

By Joe Madigan
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Remember those heady days of the Green Rush a decade ago, when markets were small and it seemed everyone had a chance? Now it’s more of a mad rush to get some green in the form of investment capital.

The majority of states in the country now have some type of legal cannabis market. Businesses in those states operate in spite of regulations that are restrictive, confusing and make it very difficult to make a profit. Meanwhile, heavy tax burdens, differences in enforcement techniques and varying degrees of oversight are other factors that influence bottom lines in the cannabis industry.

Saturated markets are giving businesses trouble when it comes to their bottom line

Inflation also continues to be a prominent force across world markets. Sales of cannabis products have fallen as consumers adjust to inflation and post-COVID supply chain issues that are causing higher prices on necessary staples like food and gas. An oversaturation of cannabis flower is becoming a perennial problem in some states and another factor causing industry distress.

When cash flow slows to a trickle, companies of all sizes seek out investment funding to keep their momentum. But catching the eye of an investor group requires more than just sticking your hand out.

What Attracts Potential Investors?

A company is best positioned to attract those interested in cannabis investment opportunities when it appears serious about its growth plans. That means being well positioned with a solid upper-management foundation and so much the better if there’s an advisory board in place too. A company built with a diverse group of talent—ideally from consumer packaged goods companies—presents an attractive opportunity for investors.

Talent from the CPG space can help attract investors

Top-quality and industry savvy finance employees who maintain sound financial books and establish a solid banking arrangement are also important. If the company’s financial scenario is robust enough to provide confidence in case of an audit and the books are in good shape with auditable METRC logs investors will be far more inclined to put money on the line.

A cannabis company with full inclusion (or seed to sale) is often a smart choice for investment. The vertical integration of cultivation, processing/manufacturing and retail allows them to sell their own products while also stocking other brands’ products on the floors of their dispensaries. If their products are respected and the brand is held in high regard, even better. Similarly, a cultivation enterprise that can grow crops for multiple brands can also be very attractive. The ability to pivot and adjust production to reflect the market and consumer demands indicates a strong business foundation.

Despite the current headwinds and saturated markets, other chances for growth exist. When a local municipality finally decides to “opt-in” to adult-use cannabis sales, there’s opportunity for both established brands and startups. It’s a matter of being ready for those opportunities and having a plan to leap in whenever new licenses become available.

What Businesses Will Struggle to Attract Investment?

Culture is key here. Poor employee relations and weak cohesion across departments are indicative of deeper problems. Do people actually want to work for the business? Do they feel supported by human resources? A company with underdeveloped or non-existent workers’ compensation policies and a management team that is not respected by its employees is not going to look good in the eyes of potential investors.

Non-diversified cannabis businesses are also at a major disadvantage when seeking investors. Cultivators of one type of product or service are locked into a single operation geared to do one thing. Any changes to market whims or problems with the supply chain can wreak havoc on a business based around a single product.

Stick to Business Basics

The cannabis industry is unique, but the basics of running a business well enough for success still apply. Strictly adhering to the traditional methods that any successful organization follows is extra important in cannabis. Businesses that are active in their community and make a real effort to be involved will be held in higher regard by investors. They want to see cannabis businesses that are not just setting up shop to make a quick buck, but are dedicated to bettering their community. That indicates a relationship with customers that involves mutual respect and promotes business longevity and financial stability.