Tag Archives: California

The Rise of a New Market… And a New Consumer

By Christiane Campbell
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The adult beverage industry, like any other category of consumer branded products, is driven by trends. If you’re old enough to remember Bartles & Jaymes wine coolers, you probably also remember Zima and Smirnoff Ice, and more recently “healthy” options like Skinny Girl and Michelob Ultra. The sensation that was craft beer saw many brands being acquired by Big Alcohol so that while the brands remain, ownership and production have changed significantly. Gin, tequila and vodka have had their moments in the sun and the current market is undeniably saturated with what is probably the largest current trend – hard seltzers. However, with the seltzer craze waning, many are wondering what’s next. And with the growing sober/California sober trends, some are betting it is cannabis-infused beverages.

Cannabis-infused beverages offer both an alternative method of consumption of cannabis and are also an attractive alternative to alcohol. Infused beverages are more appealing to the new demographic of casually curious cannabis consumers. i.e., consumers that may not be interested in smoking a joint or vaping, but are comfortable micro-dosing from a can or bottle, as they would a seltzer or beer. The same type of consumer may be moving away from alcohol consumption to eliminate hangovers or other negative health effects.

The emerging market and curious consumer group present an enormous opportunity right now for cannabis-infused beverage brands. Of course, with opportunity and growth come challenges. And while cannabis-infused beverages face a host of legal and regulatory challenges relative to sourcing, manufacturing, packaging, labeling, shipping, marketing, distribution and sale, one of the most critically important business assets to address at inception is the brand.

Lines are Blurring, Gaps are Being Bridged

The U.S. cannabis market is currently a geographic hamburger. Hear me out: Geographically, you have a relatively mature market out west and a relatively new and growing market along the east coast. These are the buns. You have a mixed bag in between, with some states coming online and allowing medical or adult use cannabis use and others that have not yet embraced any form of legalization. The landscape has lent itself to the development of regional brands, such that brands that are so similar they might otherwise confuse consumers, have been able to co-exist in different regions without issue, or because there is little to no trade channel or market overlap. Similarly, adult beverages and cannabis have historically been separate verticals, with an arguably low likelihood that a consumer would assume a particular cannabis product and adult beverage product emanate from the same source.

A drink additive, made by Splash Nano, that uses nano emulsion technology

However, lines are blurring and gaps are being bridged. Walls are breaking down. The increasing number of states coming online with legalized cannabis, and the proliferation of multi-state operators (MSOs), means that cannabis brands can grow to be more than siloed regional brands. This will inevitably lead to brands that previously co-existed bumping into one another and there’s bound to be some pushing and shoving. The advent of infused beverages likewise bridges the gap between cannabis products and alcoholic beverages. While the respective industries were not historically per se related, competing, or overlapping, now you’ve got infused beverages that bridge the gap between the two, and traditional alcohol brands (e.g., Boston Beer Company, Molson Coors, Lagunitas, Pabst.) entering the market (albeit under different brands). This makes a strong argument that cannabis and alcohol (or, more generally, adult beverages) are within each other’s logical zones of expansion, for purposes of a likelihood of confusion analysis.

The growing pains infused beverage brands will experience are analogous to those craft beers saw in the 2000 – 2010s. Many craft brewers had catchy, cheeky names and brands that contributed to their ability to engage consumers and develop a following, but failure to clear and protect the brands prior to launch detracted from the brands’ market values. Localized use prior to expansion also led to many brands bumping into one another and stepping on each other’s trademark toes. This was significant as the brands sought investment dollars or an exit strategy, making clear that the brand itself contributed heavily to valuation.

Mitigating Risks and Overcoming Challenges: Search and Protect 

The risks and challenges can be significantly mitigated and/or overcome with proper preliminary clearance searching and assessments, and by seeking and obtaining state or federal protection for the brand or brands, to the extent possible.

Quatreau CBD infused sparkling water

Of course, clearance searches and assessments come with their own challenges, as does federal protection. With respect to clearance searches, these typically look at U.S. federal and state trademark databases. These resources are not sufficient for purposes of clearing a proposed cannabis brand. Many brands are not recorded at the federal or state level and indeed may not even show up in a basic search engine. An appropriate search looks at social media resources like Instagram, Twitter, Facebook and known cannabis resources like Leafly and Weedmaps. Additionally, the scope of the search should exceed cannabis products and services and at least look at alcohol and merchandise. Adoption and use of a brand for a cannabis-infused beverage is high risk if that brand is similar to a prior existing alcohol brand. A current example is Cointreau’s taking aim at Canopy’s adoption and use of QUATREAU for an infused beverage.

A U.S. federal trademark registration presents its own unique challenges, but is incredibly valuable and beneficial to a brand since it provides the owner with a nationwide presumption of ownership and validity in a trademark, and can also secure priority for the owner with a constructive first use in commerce date that is years before actual use of a mark begins. The U.S. Trademark Office categorically denies protection of brands that violate its “lawful use” rule, and will treat as per se unlawful any applied for mark that covers marijuana, or that covers foods, beverages or pharmaceuticals that contain CBD. With respect to brands that cover products containing THC, since it is federally scheduled, use of the brand would violate the Controlled Substances Act (CSA). With respect to brands that cover CBD or products containing CBD, these may be lawful pursuant to the Farm Bill and the U.S. Trademark Office’s subsequent allowance of marks that claim CBD “solely derived from hemp with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis,” however under the Food Drug Cosmetics Act (FDCA) it is currently federally unlawful to introduce CBD – even if it fits the definition above – into foods or beverages.

Even if cannabis is not specifically claimed in a trademark application, cannabis brands have a natural gravitation toward names and logos that can do some of their marketing for them, and announce to the world they cover cannabis. This increases the chances that a trademark application for the brand will get push-back from the U.S. Trademark Office, and if not at the initial review stage, then at the point in time when the brand must submit to the U.S. Trademark Office a sample of (lawful) use of the applied-for mark. While this all sounds like bad news for cannabis-infused beverages, all is not lost.

There are typically ancillary and federally lawful products and services cannabis companies offer under their brands that can be covered in a U.S. federal trademark application, and arguments to be made that registered protection of a brand for the ancillary items should be sufficient to enforce against third parties using the same or confusingly similar brands in their space. Some cannabis brands’ lawful ancillary products are actually product lines (e.g., beverages) offered under the same brand that contain no cannabis. Others may be more causally related, like online forums and blogs. The former is closer to the actual product, and the latter would be more beneficial to a brand that is inherently stronger and more distinctive. One note of caution: A trademark application and eventual registration that expressly disclaim cannabis (THC or CBD) may be difficult to enforce against a third party using the same or a similar mark on and in connection with cannabis. So, while there is a natural inclination to follow a U.S. Trademark Office request to disclaim coverage of cannabis, there may be enforcement consequences down the road.

The cannabis-infused beverage market is poised for explosive growth. The brands that survive – and succeed – will be those that position themselves for growth by clearing and buttoning up their brands as early as possible. The market leaders will be those that select strong and distinctive brands, with geographic and market space around them for growth and expansion; and those that protect and enforce their brands, to the extent possible, at the federal and/or state levels.

labsphoto

SC Laboratories Partners with Agricor & Botanacor

By Cannabis Industry Journal Staff
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labsphoto

This week, three companies in the cannabis testing space announced a partnership: Agricor Laboratories, its sister company Botanacor Laboratories and SC Laboratories will join forces to work together on comprehensive cannabis and hemp testing throughout the United States. The press release says that this partnership creates the foundation for a national testing network, offering comprehensive cannabis and hemp lab testing.

Agricor and Botanacor laboratories, founded in 2014, are sister companies headquartered in Denver, Colorado. SC Labs, founded in 2010, is based out of Santa Cruz, California. They say the partnership will bring value to cannabis and hemp industry stakeholders by offering a broader range of testing resources, better data collection and delivery, instrument redundancy, increased testing capacity and improved turnaround times.

“Agricor, Botanacor, and SC Laboratories have well-earned reputations for delivering high-efficacy results, through a ‘science-first’ approach to product quality, safety, and compliance,” says Dr. Carl Craig, CEO of Agricor and Botanacor. “With operations in Colorado, California, and Oregon, the newly combined operation is uniquely positioned to support multi-state cannabis operators, as well as hemp producers within the U.S. and throughout the world.”

Each lab is ISO 17025 accredited and have become known as leaders in the hemp testing market, offering a wide range of tests to meet state regulations in every corner of the United States. Last year, SC Labs debuted their comprehensive hemp testing panel, claiming they could meet testing standards in every state in the country.

“This combination creates the largest specialized resource in North America that is committed to delivering exceptional testing results that empower smarter growing, manufacturing, and consumer decision making,” says Jeff Gray, CEO of SC Labs. “By combining these reputable science organizations, we’ve taken major steps toward creating a laboratory network that is dedicated to improving the safety of cannabis products for all consumers, globally.”

According to Gray and the press release, the team is setting their sights on the global market, beyond just the United States. “The organization is focused on continued expansion via acquisition and organic entry to new markets – all with the focus on best serving customers’ needs across North America and supporting a growth market where testing can help deliver confidence to consumers,” reads the press release.

Going Vertical: How Vertical Farming Is Revolutionizing the Cannabis Industry

By Jeffrey L Garber
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In the cannabis industry, it’s crucial to be able to predict the future, to adapt and survive in a competitive industry that is arguably regulated more closely than any other.

From licensing to buildout, there are a growing number of barriers to entering the cannabis industry as a cultivator. Those who are lucky to successfully establish a grow operation are well aware that one of the crucial hurdles is managing space to maximize facility efficiency and capacity.

To stay profitable, the more plants you can grow and harvest at a time in a continuous cycle, the better. From an economic and environmental perspective, managing cost, space and time comes down to automation and efficiencies. One of the most efficient ways we optimize is through the practice of vertical farming.

Vertical farming maximizes canopy square footage while minimizing Cost of Goods Sold (COGs) to produce high-quality cannabis at scale year-round, and the industry is slowly finding that this method is an incredibly efficient and profitable way to maximize cannabis output.

Yellow Dream Farm is our family-owned cannabis cultivation, manufacturing and distribution company based in San Bernardino County, California, often known as the Silicon Valley of cannabis. Our craft, boutique-style cannabis is grown from floor to ceiling in the 30,000-square-foot facility. We’re using cutting-edge technology that’s only come to market in the last five years and using a variety of sustainable practices. With environmental and feeding efficiencies, we’re able to harvest 300 pounds per week when compared to 150 pounds per week from a facility of the same size.

Vertical Farming for Space Optimization

Like any medical field, cannabis has seen large numbers of outside investments into the space, bringing ideologies and efficiencies from other time-tested industries. One such efficiency is vertical farming – a practice already seen in large-scale agriculture.

The Yellow Dream Farm vertical cultivation facility

We choose vertical farming to maximize our canopy square footage and minimize COGs to produce high-quality cannabis at scale. The barrier to entry into the cannabis industry is expensive, and you must utilize every square inch to stay profitable. We believe vertical farming is the most efficient and most profitable way to maximize output and our numbers can back that up; for example, we can produce double the amount of flower than the average single-tier room with the same square footage, without doubling the cost.

Our rooms contain double stacks to double room capacity by using ceiling heights instead of square footage. Even though vertical farming has larger start-up costs, we can maximize square footage and output, allowing us to get a better and faster ROI. Vertical farming can be done in many different ways but the way we built our facility was always with a sustainable outlook. We also look to improve and remove human error; with full irrigation control and crop steering technologies, we can recalibrate sensors, irrigation media and environmental sensors when needed based on successes, challenges or environmental constraints. Additionally, we have a few other sustainable practices that make a difference.

Water Conservation, Lighting and Automation

Being a California-based grower, water conservation is a key part of our operations. With San Bernardino County being located in the heart of the high desert, conserving water is not only a requirement but a competitive advantage. Our practices provide cost savings which we then pass along to our customers. Each cannabis plant on average requires between a half gallon and one gallon of water per day, which we then recirculate through condensate water from our A/C and dehumidifiers. All runoff nutrient water is re-filtered and reused to get the most out of our nutrients before discarding waste. Our freezer panel walls hold temperatures at consistent rates, and we have a fully automated system to dial in specific needs at any given time.

LED lights above a crop at Yellow Dream Farm

Lighting is another major environmental and capital cost. Our primary lighting system is LED technology, and we use LED spectrums to find which spectrum benefits the plant most. With LEDs, our energy consumption is 30 percent less.

Vertical Farming Is the Future of Cannabis and Agriculture

Vertical farming has been hailed as the future of many agricultural industries and cannabis is no different. We already see large vertical farms in most legal states, but surprisingly it’s still not a common style of growing. As the price per pound steadily declines in California, being able to keep COGs down will allow vertical farmers to sustain and thrive in this volatile industry.

In order to adapt, grow and leave a positive mark on the industry, we must pave the way for new styles of growing and utilizing new technology and science that was not available to growers in the past. We can use these advanced new technologies to make real-time changes to each sector of our facility and optimize both people power, and energy efficiency. And most importantly, we’ll be able to produce top-quality cannabis for adults to enjoy at affordable prices.

For more information, visit Yellow Dream Farm.

A Conversation with the Founders of Veda Scientific: Part Two

By Aaron G. Biros
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This is the second piece in a two-part conversation with the founders of Veda Scientific, CEO Leo Welder and CSO Aldwin M. Anterola, PhD. To read part one, click here.

In part one, we chatted about their backgrounds, their approach to cannabis testing, their role in the greater industry and how they came into the cannabis industry.

In part two, we’re going down a few cannabis chemistry rabbit holes and realizing that what we don’t know is a lot more than what we do know. Join us as we delve into the world of volatile compounds, winemaking, the tastes and smells of cannabis, chicken adobo and much more.

Aaron: Alright so you mentioned the GCxGC/MS and your more advanced terpene analysis. How do you envision that instrument and that data helping your customers and/or the industry? 

Leo: Some of the things that we envision will help is a better understanding of what compounds and what ratios will lead to desirable outcomes, things like better effects, aroma and flavor. By better understanding these things it’ll help the industry create better products.

I have a personal connection to this. My wife has some insomnia and she’s always had to take various forms of OTC pharmaceuticals to help with sleep. She tried using a 1:1 vape pen and it was a miracle worker for her for several months. The local dispensary had a sale on it, and she bought some extra. Unfortunately, even though she used it the same way as before, she got very serious anxiety, which obviously didn’t help her sleep. Every time she used the vapes from this same batch, she felt the same extreme anxiety. Sadly, she now had a lot of this product that she couldn’t use because it kept her awake rather than helping her sleep, so she went back to trying other OTC solutions. That’s a problem for both consumers and the industry at large. If people find something that works and provides a desired effect, they need to be able to rely on that consistency every time they purchase the product, leading to similar outcomes and not exaggerating the problem. That’s why I think consistency is so important. We’re taking two steps forward and one back when we have inconsistent products. How do we really grow and expand the availability of cannabis if we lose trust from our consumer base? What a lab can do and what we can do is provide data to cultivators and manufacturers to create that consistency and ultimately allow the market to expand into other demographics that are currently wary and less tolerant of that variance.

Vials of cannabis samples being prepped for collaborative research with the CESC

On a similar note, we have been having a lot of discussions with the CESC [Clinical Endocannabinoid System Consortium] down in San Diego. They are an advanced cannabis research group that we have been working with for over a year. We’ve started looking at the idea of varietals. To be more specific, because I’m not a wine connoisseur, varietals are the pinot noirs, the cabernets and sauvignon blancs of the industry. In the cannabis industry, consumers have indica and sativa, though we still argue over what that concept really means, if anything. But for the sake of argument, let’s say we have this dichotomy to use as a foundational decision tool for consumers- call it the red and white wine of the cannabis industry. How inaccessible would wine be if we just had red or white? Imagine if you went to a dinner party, really liked the wine you were drinking, and the host could only tell you that it was a red wine. You can’t go to a wine store and expect to find something similar to that wine if the only information you have is “red.” At a minimum, you need a category. So that’s what varietals are, the categories. The data that we can produce could help people in the industry who identify and establish the varietals based on their expertise as connoisseurs and product experts to find what those differences are chemically. Similarly, we’re also looking at appellation designations in California. So, we want to help provide tools for farmers to identify unique characteristics in their flower that would give them ability to claim and prove appellation designation.

Aldwin: The GCxGC/MS allows us to find more things besides the typical terpene profile with 20 or 40 terpenes. It allows us to go beyond those terpenes. The issue sometimes is that with a typical one-dimensional GC method, sure you could probably separate and find more terpenes, but the one dimension is not enough to separate everything that coelutes. And it’s not just terpenes. Some terpenes coelute with one another and that’s why people can see this inconsistency. Especially if you use a detector like an FID, we can see the compound limonene on the chromatogram, but there’s another terpene in there that is unknown that coelutes with limonene. So, this instrument is helping us get past the coeluting issue and solve it so that we know what peaks represent what terpenes.

The other bonus with our GCxGC/MS is that the coeluting compounds that were masked behind other terpenes are now revealed. There is a second dimension in the chromatogram where we can now detect some compounds in cannabis that would be hiding behind these large peaks if it were just a one-dimensional GC. Besides terpenes, we’ve found esters, alkanes, fatty acids, ketones, alcohols and aldehydes, as well as thiols. The terpenes are so plentiful in cannabis that these other compounds present at lower levels cannot be seen with just one-dimensional GC. There are just so many compounds in cannabis that the ones in small amounts are often masked. My analogy to highlight the importance of these minor compounds is like a dish; I am from the Philippines and I like chicken adobo. My father does it differently from my mom and someone else will do it differently in a different region. The base of the sauce is vinegar and soy sauce, but some people will do it differently and maybe add some bay leaf, garlic, pepper, or a touch of another spice. It’s still chicken adobo, but it tastes differently. Just like in cannabis, where yes, you have the same amount of THC in two different plants, but it’s still giving you a different experience. Some people say it’s because of terpenes, which is true in a lot of cases, but there are a lot of other volatile compounds that would explain better why certain dishes taste different.

2-D chromatogram showing four peaks separated by the GCxGC. With a traditional 1-D chromatogram, these peaks would coelute and not separate.

Leo: There’s been some recent developments too here that show it’s very significant. It’s like the difference between bland and spicy. And it could be the thiol. We identified a thiol in cannabis at the same time as other scientists reported an article that just came out on this subject.

Aldwin: Thiols are sulfur containing compounds that produce very powerful odors, giving cannabis the skunky smell. Skunks also produce thiols. It is very potent; you only need a little bit. It turns out that yes, that paper described thiols and we also saw them in our GCxGC/MS. These are the kinds of things that the GCxGC can show you. Those very tiny amounts of compounds that can have a very powerful impact. That’s one that we know for sure is important because it’s not just us that’s finding out that GCxGC can detect this.

Not everything is about THC or the high amount of the compounds in the flower. This paper and our concurrent findings indicated that the skunkier smelling strains contained very small amounts of thiols and you can recognize their presence quite readily. It’s not a terpene, but it’s producing a distinct flavor and a powerful smell.

Aaron: Okay, so why is this useful? Why is it so important?

Leo: I would say two things in particular that we know of that are issues currently, both related to scents. We mentioned this earlier. We do know that farmers with breeding programs are trying to target particularly popular or attractive scent profiles, whether it be a gas or fruity aroma. Right now, when they get the flower tested and review the terpene profile, it isn’t enough information to help them identify what makes them chemically distinct. We hear time and again that farmers will say their terpene profile is not helpful in identifying specific scents and characteristics. They are looking for a fingerprint. They want to be able to identify a group of plants that have a similar smell and they want a fingerprint of that plant to test for. Otherwise, you have to sniff every plant and smell the ones that are most characteristic of what they’re targeting. For larger operations, walking through and smelling thousands of plants isn’t feasible.

Once we can identify that fingerprint, and we know which compounds in which ratios are creating the targeted aroma, we can run tests to help them find the best plants for breeding purposes. It’s about reproducibility and scalability.

Another value is helping people who are trying to categorize oils and strains into particular odor categories, similar to the varietals concept we’ve been talking about. Currently, we know that when manufacturers send multiple samples of oils with the same or similar scent to be tested, the results are coming back with significantly different terpene profiles. There is not enough data for them to chemically categorize products. It’s not that their categories are wrong, it’s just that the data is not available to help them find those boundaries.

Those are two issues that we know from conversations with customers that this particular piece of equipment can address.

Aldwin: Let’s start from what we find, meaning if you are using the GCxGC/MS, we are finding more terpenes that nobody else would be looking at. We have data that shows, for example, that certain standards are accounting for 60% or so of total terpene content. So a large percent is accounted for, but there is still quite a bit missing. For some strains there are terpenes that are not in common reference standards. Being able to know that and identify the reason why we have different terpenes in here unaccounted for is big. There are other things there beyond the standard terpenes.

Dr. Anterola working with the GCxGC/MS

What excites me sometimes is that I see some terpenes that are known to have some properties, either medical or antibacterial, etc. If you find that terpene looking beyond the list, you’ll find terpenes that are found in things like hardwood or perfumes, things that we don’t necessarily associate with the common cannabis terpenes. If you’re just looking for the limited number of terpenes, you are missing some things that you might discover or some things that might help explain results.

Leo: It’s also absolutely necessary for the medical side of things. Because of the federal limitations, cannabis hasn’t been researched nearly enough. We’re missing a lot of data on all of the active compounds in cannabis. We are finally starting to move into an era where that will soon be addressed. In order for certain medical studies to be successful, we need to have data showing what compounds are in what plants.

Drs. John Abrams and Jean Talleyrand of the CESC launched the Dosing Project in 2016. They have been studying the impact of cannabis flower for indications such as pain mitigation and sleep improvement, and now more recently mood, and appetite modulation. They categorize the THC & CBD content as well as flower aroma into 3 cannabinoid and 3 odor profiles. They are able to acquire quite a bit of data about how odor correlates with the outcomes. Because they were initially limited in terms of underlying natural product content data, they contacted us when they found out we acquired this equipment in 2020, and have stated that they are certain the data we will now be producing will take their research to the next level of understanding.

Aldwin: For quality control you are looking at specific things that would reflect properties in cannabis. There should be a 1:1 correspondence between properties observed and what we are measuring. The current assumption is that the terpenes we are looking at will tell us everything about how people would like it, with regards to flavor and smell preference. But we know for a fact that the limited terpenes most labs are measuring do not encapsulate everything. So, it is important for QC purposes to know for this particular strain or product, which everyone liked, what is it in there that makes everybody like it? If you just look at the typical terpene profile, you’ll find something close, but not exact. The GCxGC/MS shows us that maybe there’s something else that gives it a preferred property or a particular smell that we can explain and track. In one batch of flower, the consumer experiences it a certain way, and for another batch people experience it another way. We’d like to be able to understand what those differences are batch to batch so we can replicate the experience and figure out what’s in it that people like. That’s what I mean by consistency and quality control; the more you can measure, the more you can see.

Aldwin: Speaking to authenticity as well, in a breeding example, some growers will have this strain that they grew, or at least this is what they claim it to be, but what are the components that make those strains unique? The more analytes you can detect, the more you can authenticate the plant. Is this really OG Kush? Is this the same OG Kush that I’ve had before? Using the GCxGC/MS and comparing analytes, we can find authenticity in strains by finding all of the metabolites and analytes and comparing two strains. Of course, there is also adulteration- Some people will claim they have one strain that smells like blueberries, but we find a compound in it that comes from outside of cannabis, such as added terpenes. Proving that your cannabis is actually pure cannabis or proving that something has added terpenes is possible because we can see things in there that don’t come from cannabis. The GCxGC/MS can be used as a tool for proving authenticity or proving adulteration as well.  If you want to trademark a particular strain, we can help with claiming intellectual property. For example, if you want to trademark, register or patent a new product, it will be good to have more data. More data allows for better description of your product and the ability to prove that it is yours.

Leo: One thing that I think is a very interesting use case is proving the appellations. It is our understanding that California rolled out a procedure for growers to claim an appellation, but with strict rules around it. Within those rules, they need to prove uniqueness of growing products in specific regions. The GCxGC/MS can help in proving uniqueness by growing two different strains in two different regions, mapping out the differences and seeing what makes a region’s cannabis unique. It’s valuable for growers in California, Oregon, Colorado to be able to prove how unique their products are. To prove the differences between cannabis grown in Northern California versus plants grown along the Central Coast. And of course, for people across the world to be able to really tell a story and prove what makes their cannabis different and special. To be able to authenticate and understand, we need to have more comprehensive data about properties in those strains. It could be terpenes, it could be esters or thiols. That’s what we’re excited about.

Aaron: From your perspective, what are some of the biggest challenges and opportunities ahead for the cannabis industry?

Aldwin: Getting ready for federal legalization is both a challenge and opportunity. A challenge because when it is federally legal, there will be more regulations and more regulators. It is also a challenge because there will be more businesses, more competition, that might get into the industry. It is opening up to other players, much bigger players. Big tobacco, mega labs and massive diagnostic testing companies might participate, which will be a challenge for us.

But it’s also an opportunity for us to serve more customers, to be more established at the federal level, to move to interstate commerce. The opportunity is to be ready here and now while other people are not here yet.

Another challenge and opportunity is education. Educating consumers and non-consumers. We have to realize and accept that cannabis is not for everybody, but everyone is a stakeholder, because they are our neighbors, parents or part of the medical establishment. It would be a disservice not to educate the non-consumers.

The medical establishment, they don’t have to be consumers but they need to know about cannabis. They don’t know as much as they should about cannabis and they need to know more, like how it could affect their patients for better or for worse, so they know how to help their patients better. There could be drug interactions that could affect the potency of other drugs. They need to know these things. Educating them about cannabis is a challenge. It’s also an opportunity for us to now come in and say that cannabis is here to stay and be consumed by more and more people, so we better know how to deal with it from a medical perspective.“This bucking bronco of a growth style will throw a lot of people off. We need to figure out what we can grab on to and ride out these waves.”

Law enforcement needs to be educated too. What THC level in the blood indicates impairment? It is still a challenge because we’re not there yet, we don’t have that answer quite yet. And it’s an opportunity to help educate and to find more answers for these stakeholders, so we can have regulations that make sense.

Leo: To Aldwin’s point, the biggest opportunity comes along with federal legalization as well as expanding the customer base beyond the traditional market. Since adult use was legalized in CA, we haven’t yet seen the significant expansion of the consumer population. We’re primarily seeing a legal serving of the market that already existed before legalization.

The reality is cannabis can be used in different ways than what we think of. We know it has medical benefits and we know it is enjoyed recreationally by people looking for high THC content and the highest high. But there is also this middle ground, much like the difference between drinking moonshine and having a glass of wine at dinner. The wine at dinner industry is much bigger than the mason jar moonshine industry. That’s really where the opportunity is. What’s the appeal to the broader market? That will be a big challenge, but it’s inevitable. It comes from everything we’ve talked about today, consistency in products, educating people about cannabis, normalizing it to a certain degree, varietals and appellations.

As an entrepreneur, I’m looking at this from a business perspective. Everyone talks about the hockey stick growth chart, but it is a very wavy hockey stick. I expect to see very significant growth in the industry for a while, but it will have a lot of peaks and valleys. It’ll essentially be whiplash. We are seeing this in California right now, with sky high prices in flower last year down to bottom of the barrel prices this year. We have to all figure out how to hang on. This bucking bronco of a growth style will throw a lot of people off. We need to figure out what we can grab on to and ride out these waves. The good ones will be fun and the bad ones will be painful and we know they are coming again and again and again. That’s the biggest challenge. People say ‘expect tomorrow to look a lot like today,’ but you really can’t expect tomorrow to look anything like today in the cannabis industry. Tomorrow will be totally different from today. We need to figure out, within all this chaos, what can we hang on to and keep riding the upward trajectory without getting thrown off the bronco.

Leaders in Cannabis Formulations: Part 5

By Aaron Green
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Natural cannabinoid distillates and isolates are hydrophobic oils and solids, meaning that they do not mix well with water and are poorly absorbed in the human body after consumption. Cannabinoid oils can be formulated into emulsions to form a fine suspension in water to modulate bioavailability, stability and flavor.

Happy Chance is a cannabis infused products company offering better-for-you products to their customers. Happy Chance recently launched a low-glycemic index fruit bite line made from fresh ingredients, distinguishing them from traditional gummies. Splash Nano is a cannabis infused products ingredients company specializing in nano emulsions. Happy Chance utilizes Splash Nano technology in their fruit bites formulations.

We spoke with Katherine Knowlton, founder of Happy Chance, and Kalon Baird, co-founder and CTO of Splash Nano to learn more about their products and how they came to do business together. Prior to Happy Chance, Knowlton worked as a chef. Prior to Splash Nano, Baird was a consultant to the cannabis industry.

Aaron Green: Katherine, how did you get involved in the cannabis industry?

Katherine Knowlton, Founder of Happy Chance

Katherine Knowlton: I am a chef by trade. I went to culinary school in 2015. My partner also got into the cannabis space in 2017, which was right around the time when adult use cannabis became legal in California. As a chef, I am very passionate about cooking for optimal health and well-being. I noticed right away the abundance of candy- and sugar-laden products on the market. I set out to create a wellness driven product blending healthy, whole foods with a better value proposition, better-for-you and better-for-the-planet.

Green: Okay, great. Kalon, same question: how did you get involved in the cannabis industry?

Kalon Baird: I left a corporate job in 2011 and started cultivating in Southern California. I started to develop techniques for horticulture and developed a connection with the plant. I was a consultant for many years, and then decided to take a different path when legalization happened and got into the regulated manufacturing space. My goal was to bring new products to market to help satiate the demand for the infused category, the non-smokeable categories and to pursue niche product development.

Green: Tell me about your recent product development interests?

Kalon Baird, Co-Founder and CTO of Splash Nano

Baird: We’re interested in the research that comes out regarding cannabis minor constituents. We work with other research labs doing two-dimensional chromatography. We’re trying to figure out what compounds exist in the plant that aren’t just the major cannabinoids, and how to work with them in a pharmacological context so that they can be standardized and replicated at scale.

So, it’s not just about making a sugary THC gummy, it’s about seeing what minor cannabinoids, what minor terpenoids and what other unknown compounds can we explore, and then put back into products.

Green: That’s 2D GC-mass spec?

Baird: Yeah, it’s GC-by-GC and tandem mass spec. There are only a couple people that make that piece of equipment. The lab that we work with on that project is called Veda scientific. They’re one of the only people in the cannabis space that uses that machine. And they’re right in our backyard. The tech enables us to further quantify terpene profiles and helps to differentiate our products.

Green: I’d like to focus first on the Splash Nano technology and then we’ll dig into how you got to know each other, and then we’ll finish off with learning more about Happy Chance. So Kalon, tell me more about Splash Nano.

Baird: We employ nano emulsion technology. It’s essentially the science of making oil and water compatible and suspended in a way that reduces droplet size. With nano emulsions, you create an interfacial layer that enhances absorption and solves technical problems like being able to make cannabis oil compatible in water-based matrices, and sometimes in non-water-based matrices. The idea is that as we spread out the particles and as we change attributes of how they’re coated, they’re more bioavailable, and you get a more consistent and faster onset experience like you would in the pharmaceutical or alcohol industry. It’s bringing the industry standard up to the consumer package level and the pharmaceutical level, so that people aren’t waiting the typical hour-long timeframe to absorb that first dose.

Green: Tell me about your business model.

Baird: When we started out in 2018, we were going for a manufacturing license. In the meantime, we saw the drink category evolving and we wanted to be a part of that conversation in that ecosystem. We started developing our own nano emulsions that we knew would be useful when we got our license. We knew that we would sell the base material to co-packers who would put them into beverages. We didn’t want to co-pack the beverages ourselves. So, we developed a drink additive that was our proof of concept that had legs for the technology so that we could show people how to use it. That proof of concept spun off and became its own product and now it’s in the market under the brand name Splash Nano and comes in four distinct product SKUS using minor cannabinoids as differentiators.

The Splash Nano drink additive

Meanwhile, our bread-and-butter business was working with smaller brands, like Happy Chance that needed a path to market but couldn’t get the license or couldn’t go through that whole rigmarole of a two-year waiting period and a half a million dollars and all the other stuff. So, we started taking on all these smaller brands effectively licensing their brand IP and their ideas. In the process, we ended up learning a ton about product development and it became kind of a passion.

We have three core revenue streams. One of them is contract manufacturing, or private labeling. The other one is our own product Splash Nano which is a drink additive. And then the last is we open sourced the technology and sell that as a business-to-business platform so that people can infuse their own products with our fast-acting emulsions. We’re working on a licensing model that will allow other states to create that same consistency, where we send a black box model out to them, and then they infuse the cannabis and then turn that into a product.

Green: Moving on to Katherine here. Tell me about Happy Chance, and how you came up with the brand concept and the product idea.

Knowlton: Going back to what I touched on earlier, many traditional edibles in the space are brownies, cookies and candy type of products that do not contribute to wellness. I wanted to give the wellness driven consumer an option in cannabis. I wanted to create a powerhouse edible that was not only functional and complete but that elevated the consumer’s experience as a whole because of the ingredients we choose and the whole cannabis we source.

Some of the Happy Chance fruit bites

I’m someone who values better-for-you products that contribute to optimal health and well-being. So, I set out to make something. I didn’t really know what I wanted to make in the beginning. I bought a dehydrator and a food processor, and I started messing around with different applications in my kitchen. Over 100 variations later, the fruit bite was born.

The fruit bite is made with dates – a natural sugar that delivers nutritional power: a low glycemic index and high in vitamins, minerals and antioxidants. A sweet you can feel great about. And we use pumpkin seeds which have a lot of great protein. We are working with a company in California that takes imperfect fruits and vegetables and upcycles that back into the food supply chain. We utilize the whole fruits and vegetables as a dried intermediate, capturing all the flavor of nutrients. No added natural flavors and nothing from concentrate.

Green: How does the consistency differ from a gummy?

Knowlton: The consistency is similar to a Lara bar or an Rx bar. Essentially, it’s that same consistency in a bite form and so it’s very different than a gummy. It’s a low dose, low sugar alternative to the modern-day gummy.

Green: So, you’ve got this healthy concept for the fruit bite. You’re looking at suppliers and technologies to infuse the product. How did you finally decide on Splash Nano?

Knowlton: I watched my partner lose his company a few years ago to a larger vertically integrated company. The MSO promised the moon and the stars, and they got lost in the weeds of their eco-system, ultimately losing their company. That said, I was very sensitive when I first started on this journey. I even took on my own partners who didn’t work out either. I spoke with a lot of manufacturers in the selection process. Splash Nano was the tenth manufacturer I spoke with.

It was a very organic way of meeting. I am also based in Santa Barbara where Splash Nano is located. My partner’s brother shared an office space with Kalon, so we met through that connection. I learned right away that Splash was founded on wellness, much like Happy Chance. It was important to source clean cannabis, an aspect that Kalon and his team take pride in. We quickly discovered that Kalon’s Splash Nano technology was going to work in my product. Happy Chance immediately found a home, and it has been an organic evolution of realistic business and friendship.

Green: Kalon, I’d love to get your perspective as well. How do you think about partnering with brands?

Baird: Because of our contract manufacturing experience, we’ve been able to touch approximately 50 brands over our three-year tenure in this space. We’ve seen kind of everything from the multi-state operator to the owner-operator and everything in between. I developed a passion for working with these smaller brands for a lot of different reasons. This industry is built on the success of small mom and pops. Yes, the multi-state operators do have a place and they absolutely add a lot of value. But at the same time, they have their own natural challenges. You have essentially a culture of employees versus a business owner that’s making a lot of their own decisions.

There are advantages to somebody like Katherine, who’s in the trenches of business, and understands the ebbs and flows and ups and downs of this industry and be able to get through some of those challenges a lot more organically and a lot more sustainably. Katherine has such a deep pulse on her business and on her customer and on her own money. She tends to make a lot more calculated decisions, and I really appreciate that.

There’s a lot of waste that gets accumulated in this industry through packaging, through bad decisions, and over extensions of capital. It’s sad to watch and you see these people that have great potential, but it’s kind of lost in this sort of the framework of a large organization. Again, I like multi-state operators, they’re great. There’s nothing wrong with them, but it’s just a different flavor. I’m trying to highlight the fact that working with somebody that has a pulse on her business, and the passion for what she’s doing is wonderful. It’s not just about making money; it’s about adding value.

Green: Katherine, talk to me about sustainability and how you’ve woven that into your product.

Knowlton: We’re dedicated to supporting Product, People and Planet. That’s the whole mission and ethos of Happy Chance. As a chef, I wanted to be intentional about where our ingredients come from. We only source organic and upcycled ingredients – an essential recipe in sustaining a healthy, eco-friendly plant. Intention and integrity are always at the forefront of our products. We prioritize partnering with more transparent supply chains. We want to show the world how cannabis can promote positive lifestyle changes that support living more actively and consciously.

To reiterate, we are also not using anything from concentrate. We are using the entire strawberry, the entire blueberry and so it encapsulates all the flavor and all the nutrition that you would have from a fresh fruit into our products.

Green: How do you think about sustainability in product packaging?

Knowlton: As far as packaging goes in this industry, we’re very limited in what we can do. Compostable packaging isn’t really available, but we have partnered with a packaging company that definitely has mindfulness at the core of their mission. They have established their entire supply chain to ensure they are focusing on green practices and reducing waste each step of the way. Their energy efficient machinery creates a zero-waste manufacturing process to reduce their carbon footprint and they utilize soy and vegan inks to help reduce air pollution by minimizing toxic emissions in the air. My hope for the industry is that as it continues to evolve, we can become less wasteful as far as packaging goes.

Green: Rapid fire questions for both of you: What trends are you following in the industry right now?

Knowlton: As a chef and coming from the CPG world, I’m passionate about health and wellness. I think that it’s important to stay on trend with what we’re seeing in CPG. There’s definitely a market as far as people wanting these better-for-you products. I want to bring that into the cannabis space.

Baird: We’re seeing the inclusion of minor cannabinoids, terpenoids, standardized recipes and faster- or slower-acting delivery systems. So, I’m following trends in advanced drug delivery systems paired with minor cannabinoids.

Green: What are you most interested in learning about?

Knowlton: I’m most interested in how I can take what I’ve learned in the food space and help bring that into the world of cannabis through Happy Chance. Ultimately cannabis is plant medicine. So, how can we educate people that the ingredients we choose to make products should be good for us too. I think that there’s a lot that can be done with it from a from a health and wellness standpoint.

Baird: I’m interested in learning more about the analytical overlay between quantifying and standardizing entheogens and plant medicines like cannabis into the product development process in CPG. I’m thinking of ways to blend the two worlds of traditional science and New Age medicine.

Green: Awesome, that concludes the interview. Thank you both, Katherine and Kalon.

A Conversation with the Founders of Veda Scientific: Part One

By Aaron G. Biros
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Leo Welder, CEO of Veda Scientific, founded the business with Aldwin M. Anterola, PhD in July of 2019. A serial entrepreneur with experience in a variety of markets, he came to the industry with an intrigue for cannabis testing and analysis. After teaming up with Dr. Anterola, co-founder and chief science officer at Veda Scientific, they came together with the purpose of unlocking possibilities in cannabis. From the beginning, they set out with a heavy scientific interest in furthering the industry from a perspective of innovation and research.

Through discussing their clients’ needs and understanding their complex problems, the two realized they wanted to start a lab that goes well beyond the normal regulatory compliance testing. Innovation in cannabis looks like a lot of things: new formulations for infused products, better designs for vaping technology or new blends of genetics creating unique strains, to name a few. For the folks at Veda Scientific, innovation is about rigorous and concentrated research and development testing.

With the help of some very sophisticated analytical chemistry instruments, their team is working on better understanding how volatile compounds play a part in the chemometrics of cannabis. From varietals and appellations to skunky smells, their research in the chemistry of cannabis is astounding – and they’ve only begun to scratch the surface.

In this two-part series, we discuss their approach to cannabis testing, their role in the greater industry as a whole and we go down a few cannabis chemistry rabbit holes and find out that what we don’t know is a lot more than what we do know. In part one, we get into their backgrounds, how they came into the cannabis industry and how they are carving out their niche. Stay tuned for part two next week where we delve deep into the world of volatile compounds, winemaking, the tastes and smells of cannabis and chicken adobo.

Aaron G. Biros: Tell me about how you and your team came to launch Veda, how you entered the cannabis space and what Veda’s approach is to the role of testing labs in the broader cannabis industry. 

Leo Welder, CEO of Veda Scientific

Leo Welder: I’m an entrepreneur. This is my third significant venture in the last fifteen years or so. So, I was intrigued by cannabis legalization broadly, because it is such a unique time in our history. I was always interested in participating in the industry in some way, but I didn’t see where would be a good fit for me. I used to meet monthly with a group of friends and fellow entrepreneurs for dinner and discussions and one member started working on the software side of the industry. He mentioned the testing element of cannabis in one of our meetings. I latched on to that and was intrigued by the concept of testing cannabis. I began to research it and found the role that testing plays in the cannabis industry is really significant. I found out that regulators rely pretty heavily on labs to make sure that products are safe, labels are accurate and that consumers have some protections. So, I thought that this is a space that I thought I could really find a calling in.

So, from that point I knew I needed to find a subject matter expert, because I am not one. I have business skills and experience in some technical fields but I am not a cannabis testing expert by any means. So, with that I started to look at a few different markets that I thought may have opportunity for a new lab, and I came across Aldwin’s business; he had a cannabis testing lab in Illinois at that time. I reached out to him, talked to him about my vision for the space and his thoughts and his vision and we really started to come together. From there, we researched various markets and ultimately chose to approach Santa Barbara County as our first foray together into the cannabis testing market.

Aldwin M. Anterola: As Leo mentioned, he was looking for a subject matter expert and I am very much interested in plant biochemistry. Which means I like to study how plants make these compounds that are very useful to us. For my PhD [in plant physiology], I was studying how cell cultures of loblolly pine produce lignin. Our lab was interested in how pine trees produce lignin, which is what makes up wood. Wood comes from phenolic compounds. You’ve probably heard of antioxidants and flavonoids – those are phenolic compounds. After my PhD, I wanted to do something different so I decided to work with terpenes.

I picked a very important terpene in our field, an anti-cancer compound called Taxol, produced from the bark of the yew tree. You have to cut trees to harvest it. We have ways of synthesizing it now. But at that time, we were trying to figure out how the tree produces that terpene. Of course, I’m interested in any compound that plants make. My interest in terpenes led me to cannabinoids which turn out to be terpenophenolics, thus combining the two interests in my professional field.

Aldwin M. Anterola, PhD, Co-Founder and Chief Science Officer at Veda Scientific,

So that’s the scientific and intellectual side of why I became interested in cannabis, but practically speaking I got into cannabis because of a consulting offer. A company was applying for a cultivation license, wanted to have a laboratory component of their business in their application, and hired me to write that part of their application. I was very familiar with HPLC, and had a GC/MS in the lab. I also have a background in microbiology and molecular biology so I can cover every test required at that time, and I knew I could research the other analytical techniques if necessary.

So, they did not get the license, but I figured I’d take what I wrote, once I received permission, and set up an independent laboratory together. But it’s hard to run a lab and be a professor at the same time. Also, the busines side of running a lab is something that I am not an expert in. Fortunately, Leo found me. Before that, I really got excited about this new industry. The concept of cannabis being now accessible to more people is so interesting to me because of how new everything is. I wanted to be involved in an industry like this and help in making it safe while satisfying my curiosity in this new field of research. As a scientist, those are the things that excite us: the things we didn’t have access to, we can now do. It opens up a whole new room that we want to unlock. It was my intellectual curiosity that really drove me. This opened up new research avenues for me as well as other ventures if you will. How can I be more involved? I thought to myself.

SIU boasts an impressive cannabis program, thanks largely to Dr. Anterola’s work there.

Back in 2014, I introduced cannabis research to our university [Southern Illinois University] and set up an industrial hemp program, which was DEA-licensed I gathered faculty that would be interested in studying hemp and cannabis and we now have a whole cannabis science center at the university. I teach a course in cannabis biology and because I also teach medical botany to undergraduate students, I was able to introduce [premed] students to the endocannabinoid system. Anyway, I can go on and on.

Outside of that I became involved with the AOAC and ASTM, and became a qualified assessor for ISO 17025:2017. I have been a member of the American Chemical Society since 2000 but there were no cannabis related activities there yet until relatively recently. But when they had the new cannabis chemistry subdivision, I am happy to participate in there as well . There are many avenues that I took to begin dabbling with cannabis, be it research, nonprofits, teaching, testing and more. Cannabis has basically infiltrated all areas of what I do as an academic.

Leo: I read his resume and I was like this is the guy! So back to your question, what’s Veda’s role as a testing lab in this space? What are we trying to build? We spent a lot of time trying to figure out what we wanted to be in this space. We came to understand that labs are not the tip of the spear for the market; that would be the growers, the retailers and the processors. We are a support, a service. We see ourselves as a humble, but competent guide. We provide the data for the tip of the spear, the people pushing the industry forward with support, data and the services to make sure they have the tools they need to build these great companies and great products with good cultivation practices and more, leading everyone to the next level of the cannabis industry. Our job is to support innovation, to provide quality compliance testing, to of course ensure safety, while also providing great R&D to these innovative companies.

Aldwin: I’d like to add a bit to that thought. Okay so that’s who we are, but what are we not? Because as Leo said I had a testing lab before we met [Advanced Herbal Analytics]. From there, I approach it as safety testing, making sure that before it gets to the end consumer, we are sort of like gate keepers keeping consumers safe. That’s one side to it, but we are not the people who are trying to make sure that none of the products get to the market. For some, that’s how we’re treated as.

People often look at testing labs like the police. We are not the people trying to limit products to market. Our approach is not to find faults. There is another way of being a testing lab that is less about finding faults in products and more about finding uniqueness. What makes your product different? With this new approach, we are much more focused on helping the best products make it to the shelves.

Aaron: Given that all state licensed labs have to provide the same tests as the other labs in that state, how does Veda differentiate itself?

Leo: Location was the first thing. We picked Santa Barbara County intentionally. We knew that some of the biggest operators, some of the most forward-thinking innovators were setting up shop here. Looking down the road, not just this year or next year but very long term, we wanted to start building a great, sustainable company. We wanted to build a brand that those kinds of companies would be receptive to. Building better and greater products. There’s one other lab in the county and that’s it. Whereas there are clusters of labs in other parts of the state. Part of the draw to Santa Barbara for us was that it is such a small, tight-knit community. We have worked very hard to build relationships in our community and to understand their challenges, helping them however we can.

Location and relationships. Getting to know the challenges that different size customers face, be it our greenhouse customers versus outdoor customers, or large-scale operations versus smaller manufacturing operations, the challenges are all different. Some people care about turnaround times, some more about R&D. If we understand our client’s problems, then we can provide better service. We see ourselves as problem solvers. We lean heavily on our technical team members like Aldwin, who not only have tremendous amounts of experience and education, but also great networks to utilize when a customer needs help, even when it falls outside of our local expertise.

The GCxGC/MS instrument, used for Veda’s advanced R&D testing

Last but certainly not least is the advanced R&D testing that we do. When we first started, we started talking to farmers and manufacturers trying to understand their challenges. What data were they not getting? How would a testing lab better serve them? So, we started investing strategically in certain instruments that would allow us to better serve them. We’ll get into this later as well, but we invested in a GCxGC/MS, which allows us to get more visibility into things beyond the typical panels, like more terpenes and other volatile compounds including thiols and esters. We did that because we knew there is value in that. The data our customers were getting prior just wasn’t enough to put together really great breeding programs or to manufacture really consistent products, you know, to move toward that next level of innovation in the industry.

Aldwin: Leo mentioned advanced R&D and it’s basically the same approach that I mentioned before. It’s not just telling you what you can and cannot do. It’s about asking them what do you want to do and what do you want from a lab? If we have a problem, let’s see if we can solve it. That’s how the GCxGC/MS came into play because we knew there was a need to test for many terpenes and other volatile compounds. The common complaint we received was why two terpene profiles differ so much from each other, even from the same genetics.

This is something that would actually give the customer, the cultivator or the manufacturer: data about their product that they can actually use. For consistency, for better marketing and other reasons. We are trying to help them answer the questions of ‘how can I make my product better?’

You know, for example, clients would tell us they want something that has a specific taste or smells a certain way. Nobody is telling them what makes the flavor or smell. There is a need there that we can fill. We are trying to provide data that they, the customers, need so that they can improve their breeding programs or their formulations. Data they can use, not just data they need in order to comply with regulations. They would ask us what we can do. We listen to our customers and we try and help as best we can. We don’t know every answer. We are discovering there is a lot more to terpenes than what you can find on a traditional one dimensional gas chromatogram. Some of the terpene data that our clients had previously is not really actionable data, which is where the GCxGC/MS is helping us.


In part two, we delve deep into the world of volatile compounds, winemaking, the tastes and smells of cannabis and chicken adobo. Click here to read part two. 

2022 Cannabis Industry Outlook: Your Business’ Future Depends on its Risk Management

Cannabis risks have always outpaced the availability of insurance, in large part because of its status as a federally illegal substance and the dangers in extraction and production. But it now shares many of the same risks as other industries — catastrophic crop damage, cyber risk and a shortage of skilled workers.

With legalization becoming more common, the industry is positioned for enormous growth despite these challenges. However, enterprises that will benefit the most are those best positioned to manage risk.

Here are four obstacles to growth in the industry in 2022 and how enterprises can combat them:

Cybercrime will be the top manufacturing risk

Both cybercrime and cannabis have experienced major booms since the start of the COVID-19 pandemic. Cannabis companies watched as healthcare and pharmaceutical organizations were hit hard by cybercriminals in 2020, and now the threat could be headed their way.

For retailers, the vulnerability often lies in their POS tech

For cannabis retailers, the vulnerability lies in their dependence on point-of-sale tech, while the threat for cultivators exists within their strong use of intelligent automation to manage the grow environment. Across the industry, the lack of sophisticated IT security systems is like a beacon for bad actors.

Nearly 60% of cannabis businesses say they haven’t taken the necessary steps to prevent cyberattack, but the winds are changing. Due to these concerns and the growing attention on cybercrime in the industry, cyber coverage is expected to rise 30% or more in 2022, which puts the onus on risk management practices that will help prevent cyberattacks and ensure coverage from insurers concerned about risk.

Barriers to business growth may result in more M&A

As of summer 2021, 18 U.S. states have legalized adult use and 37 states have legalized medical cannabis.

While this is opening opportunities for many cannabis businesses, the U.S. remains a complicated market. Federal regulations continue to hinder even more cannabis industry growth by restricting lending to the industry from traditional banking and financial institutions. While it’s not illegal to do service with the cannabis industry, many institutions stay away due to its high risk.

Smaller cannabis companies are impacted most heavily by this barrier and await passage of the Secure and Fair Enforcement (SAFE) Banking and Clarifying Law Around Insurance of Marijuana (CLAIM) Acts to allow easier access to capital. Together, these two acts of legislation will provide guidelines on how to work lawfully with legal cannabis businesses and prohibit penalizing or discouraging institutions from working with them.

In the meantime, M&A activity is expected to increase in 2022 as large cannabis businesses have the means to access capital and acquire these small companies. This includes Canadian cannabis companies, unburdened by federal restrictions, who are expected to increase their cross-border mergers and acquisitions.

Severe weather isn’t easing up

Extreme natural catastrophes are no longer rare, and they have only added greater uncertainty to the industry which has always had difficulties securing crop insurance.

NASA’s Aqua satellite took this picture of the smoke over California in 2017
Photo: NASA

For example, policies that transfer wind and hurricane damage risk in Florida or wildfire and smoke taint in California are virtually non-existent for cannabis — and for outdoor growers, a single weather event can wipe out an entire crop with no recourse.

One possible solution for cannabis companies that cannot secure traditional crop insurance is parametric insurance, which pays out in full when a weather element reaches a threshold, regardless of the actual damage.

Growers with indoor operations, or those considering moving that way, must cope with energy conservation initiatives. Measures like the one in California that would require indoor growers to use LED lighting by 2023 could cost the industry millions and present a direct threat to small operations’ viability. This makes it important for cannabis producers to institute conservation measures and undertake risk mitigation measures like improved safety measures at indoor growth facilities ahead of 2022 renewals.

As a continually emerging market, cannabis risks are great. Adding to these pressures is the growing impacts of climate change and cybercrime raising the bar even further. Growth for the cannabis industry in 2022 will depend upon strong risk management solutions and the ability for cannabis companies to implement them.

Social Consumption: The Time is Now

By Dede Perkins
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Social consumption lounges are becoming increasingly popular in legal cannabis markets. Just what are social consumption lounges? They’re a safe, enclosed space where cannabis consumers of legal age can come together and enjoy cannabis products, much like a bar environment for consuming alcoholic beverages.

Social consumption lounges are particularly attractive for their potential to bring in cannabis tourists. Although adult use cannabis can help promote tourism, tourists typically can’t smoke in most places indoors (including their hotel accommodations) nor consume on the street or in public, due to strict public consumption rules set by state regulations. This leaves the perfect set-up for consumption lounges, which provide the appropriate and legal environment for tourists to consume cannabis.

What do social consumption lounges look like in practice? What are the rules and regulations that social consumption lounges must adhere to? How and where are social consumption lounges currently legal in the United States? Here’s what you need to know.

What are social consumption lounges?

Social consumption lounges—also known as consumption lounges, cannabis lounges, cannabis consumption area and cannabis consumption lounges—are retail lounges that permit on-site cannabis consumption, such as smoking and vaping cannabis flower as well as ingesting cannabis infused products like edibles and tinctures. Similar to a bar that serves alcoholic beverages, all consumers in a cannabis lounge must be at least 21 years of age. While smoking typically isn’t permitted in retail businesses, smoking is permitted in lounges.

Mellow Yellow in Amsterdam

While state-specific regulatory bodies are responsible for developing, implementing and enforcing the rules surrounding U.S. social consumption lounges, Dutch “coffee shops” may have served as the inspiration and model for U.S. industry. Contrary to the name “coffee shops”, patrons don’t go to Dutch coffee shops for coffee. Rather, they go because the sale and consumption (including smoking) of cannabis is permitted and socially accepted. According to travel resource Amsterdam.info, Dutch coffee shop culture emerged in the 1970s when the federal government made a clear legal distinction between “hard” and “soft” drugs. Soon after in 1972, the first coffee shop named Mellow Yellow opened. Although cannabis wasn’t clearly legal or illegal, Dutch law enforcement tolerated the growing number of cannabis coffee shops, focusing instead on prosecuting heroin and lethal illicit substances. Today, the Amsterdam City Council permits coffee shops to operate after they obtain a non-transferable license, which must be displayed in shop windows, thanks to an agreement with the coffee shop union Bond van Cannabis Detaillisten (BCD).

Unlike Dutch coffee shops, U.S. social consumption lounges must adhere to numerous rules and regulations specific to their state and municipality. One major difference is who is permitted to own and operate a lounge. In some U.S. states, consumption lounges are operated by existing cannabis businesses, such as adult use and medical dispensaries. In these cases, the lounge may be required to be on the cannabis business’s existing premises. In New Jersey, this must be an “indoor structurally enclosed area of the cannabis retailer or medical cannabis dispensary that is separate from the retail sales or medical dispensary area” or “an exterior structure on the same premises as the cannabis retailer or medical dispensary, either separate from or connected to the cannabis retailer or medical dispensary,” according to the National Law Review. In many places within the U.S., “stand alone” lounges that aren’t attached to an existing cannabis business aren’t permitted.

In the Netherlands, coffee shops operate in a legal grey area with their products being supplied by an entirely underground cultivation market. Cannabis being consumed in coffee shops isn’t regulated or checked. Per regulations in the U.S. states that allow them, however, only legal cannabis may be consumed in these lounges. While consumers might be able to bring their own cannabis or cannabis products, consuming any cannabis or cannabis products obtained through the underground market is strictly prohibited.

Where are social consumption lounges legal?

The Barbary Coast lounge in San Francisco

Not all U.S. states with legal recreational, adult-, or personal-use cannabis programs permit social consumption lounges. Although it’s been a decade since Colorado and Washington voted in favor of legalization, consumption lounges are a fairly recent trend, likely because states without legal consumption spaces found out the hard way that they couldn’t accommodate tourists or anyone who wished to consume cannabis outside of their home. Here’s where social consumption lounges are legal in the U.S.:

  • Nevada: After the Governor signed a bill in June 2021, a new cannabis law permitting social consumption lounges went into effect in October 2021 and lounges are anticipated to open in early 2022, according to Nevada public radio station KNPR. Additionally, efforts are being made to prioritize minority-owned business owners of consumption lounges, reports local news station Fox5 KVVU-TV.
  • New Jersey: Although consumption lounges weren’t initially permitted in the recent regulatory framework, individual municipalities now decide whether or not to permit lounges within their communities. Atlantic City and Jersey City have approved social consumption lounges, reports Hudson County View.
  • New York: The state’s recently passed adult use cannabis law allows social consumption lounges, but the recreational market isn’t  expected to take off until mid-2023, according to Business Insider. Lawmakers still need to adopt a regulatory framework to how lounges (along with other cannabis businesses) will operate.
  • Illinois: Currently, two social consumption lounges have opened, and two others are planned to open across the state,” says the Chicago Tribune.
  • Colorado: Similar to New Jersey, individual municipalities decide whether to permit lounges in their communities. Denver and Aurora have approved consumption lounges.
  • California: Given the state’s rich history of an underground market, informal social consumption lounges aren’t particularly new. However, a recently approved law officially allows social consumption lounges, reports Marijuana Moment.

The number of states considering and/or permitting social consumption lounges is growing. Which states will likely legalize them next? As noted below, it looks like Michigan, Massachusetts and Maine will be next.

  • Michigan: The state doesn’t allow for them now, but they could come in the future, reports WZZM13.
  • Massachusetts: The state is considering them, reports Boston.com.
  • Maine: The state delayed them until 2023, according to MJ Biz Daily.

Why are social consumption lounges becoming increasingly popular?

Consumption lounges are becoming increasingly popular for many reasons. First and foremost, they’re a win for the cannabis industry because they provide consumers with a physical place to consume safely and legally.

The Original Cannabis Cafe by Lowell Farms in West Hollywood

Second, the tourism sector benefits from social consumption lounges. “The problem is people can buy marijuana products in states that have legalized adult-use cannabis, but they have limited options when they want to consume the cannabis that they purchase legally,” explains Cannabiz Media. For instance, Las Vegas has promoted itself as a cannabis travel destination since 2017, despite lack of adequate space for visitors to consume. Meanwhile, those who don’t consume cannabis have criticized the city for its growing public consumption, complaining especially about the odor of smoked cannabis. Social consumption lounges can potentially help fix these growing pains in the state’s cannabis market.

Additionally, lounges are a win for harm reduction. Lounges provide beginner cannabis consumers the opportunity to consume alongside experts, to be shown the ropes with professionals present. Being in a community with experienced consumers provides opportunities for novices to understand how to smoke, dose and overall consume properly and safely.

Lastly, MG Magazine emphasizes other benefits including de-stigmatization, social connection, industry partnerships and product innovation.

Regulation and compliance differences between states

Without federal cannabis legalization, states are tasked with regulating their own cannabis markets. Likewise, state regulatory agencies are responsible for drafting regulations for social consumption lounges.

California and Colorado have fewer limitations, likely because both states have more experience and overall comfort with the plant. In states with more lenient regulations, 420-friendly cafes, hotels, bus tours, paint nights and other businesses are tolerated.

New Jersey has notably strict regulations for social consumption lounges. For example, the current state law doesn’t permit any stand-alone consumption spaces independent of existing permitted cannabis businesses. Therefore, a cannabis cafe or bud and breakfast isn’t permitted.

There is, however, one legal loophole in New Jersey for stand-alone consumption space. The microbusiness license model allows for temporary licenses, permitting a temporary social consumption lounge, such as for an event at a private venue. New Jersey permits them in Newark, Hoboken, Highland Park, Jersey City,Elizabeth, Long Branch Atlantic City and Trenton.

In closing, it is likely that social consumption lounges will become increasingly common especially in major U.S. cities with legal adult-use cannabis programs. While Dutch coffee shops may have inspired the emerging U.S. social consumption lounge model, their U.S. counterparts must comply with much stricter rules and regulations. Since regulations vary from state to state, it’s important to be on top of your state’s policies in order to stay compliant.

2021 Cannabis Labs Virtual Conference: December Program

By Cannabis Industry Journal Staff
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2021 Cannabis Labs Virtual Conference: December Program

Sponsored by ANAB, Hardy Diagnostics and MilliporeSigma.

Click here to watch the recording

Agenda

Cannabis Laboratory Accreditation Panel

  • Tracy Szerszen, President & Operations Manager, PJLA
  • Mohan Sabaratnam, Vice President, IAS
  • Kathy Nucifora, COO, COLA
  • Chris Gunning, General Manager for Accreditation Services, A2LA
  • Aaron Biros, Editor, CannabisIndustryJournal.com

In this session, the panel answers attendee questions related to ISO 17025:2017 accreditation for cannabis testing labs. Learn some of the common challenges labs face when seeking accreditation and learn about sampling protocols, security issues, statements of conformance, calibration and much more.

TechTalk: ANAB

  • Melanie Ross, Technical Products Developer, ANSI National Accreditation Board

R & D Lab Testing: Ensuring Success with Results

  • Mark Carter, president of MC Squared Enterprises

Learn how R&D lab testing can help you, prepare for compliance batches, successfully launch new products and amp up your quality control.

TechTalk: MilliporeSigma

 

USDA’s Hemp Testing Rules Have Changed: Accelerate Your Lab’s Preparedness

  • Arun Apte, CEO, CloudLIMS

This presentation takes a deep dive into understanding the requirements for USDA hemp testing, the operational changes hemp testing laboratories need to make to comply with the new hemp testing rules and the regulatory compliance framework and quality standards the testing labs need to meet.

TechTalk: Hardy Diagnostics

  • Jessa Youngblood, Food & Beverage Market Coordinator, Hardy Diagnostics

Bringing a National Hemp Testing Panel to Market

  • Josh Wurzer, Co-Founder & President, SC Laboratories

Without clear direction from the FDA, states are filling the void by developing their own quality standards and testing requirements for hemp derived CBD products. Unlike their THC based counterparts, hemp derived CBD products are being sold across state lines raising the demand for a single testing panel that will be compliant in every state. Attendees will learn:

  • The current state of regulations nationally
  • The issues that hemp product manufacturers need to be educated on to ensure compliance,
  • The challenges labs face in offering customers a truly comprehensive panel.

Click here to watch the recording

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Steep Hill Expands to Illinois with New Lab

By Cannabis Industry Journal Staff
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steep-hill-labs-logo

Last week, Steep Hill announced their expansion into Illinois with a new cannabis testing lab partner licensed in Ottawa, IL. Illinois became the eleventh state to legalize adult use cannabis back in 2019. It’s also the eleventh market that Steep Hill has opened a laboratory in.

Co-founders Nick Etten, John Tinsley and Matt Grabowski will lead the new Steep Hill venture. Etten will lead the team as SVP of external affairs, who comes from Acreage holdings and the Veterans Cannabis Project. Tinsley comes from a consulting background at EY-Parthenon and Grabowski comes from a background in finance.

According to the press release, the new Steep Hill location in Ottawa is “within a 90-minute drive of the largest MSOs in Illinois.” The lab will provide full regulatory compliance testing panels in addition to R&D testing, according to Tinsley. “We are currently building out the lab,” says Tinsley. “We will also provide research and development testing services for cultivators and processors; supporting our partners in the development of new products and supporting their growth.”

Steep Hill is often touted as the first cannabis testing lab in the United States, with its headquarters in Berkeley, California. The company has been testing cannabis for thirteen years now.