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2020 Financial Trends for the Cannabis Industry

By Melissa Diaz
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The past year has been another strong year in cannabis. Investors continued to pour money into the burgeoning industry — surpassing 2018 investment totals in just 40 weeks — and new markets opened up for recreational and medical cannabis. And following the passage of the 2018 Farm Bill, CBD has proliferated and become one of the hottest health supplements in the country.

But as the year winds down, the industry appears to be poised for a more challenging shift in the new year, as once-heady expectations for some big companies don’t pan out and some states clamp down, rather than loosen up, certain regulatory hurdles.

Here are some financial trends to keep an eye on in cannabis over the next year:

Finding New Capital Investment Will Be Tougher

After an initial investment boom in recent years, cannabis investors are realizing not everything colored green turns to gold. With public cannabis companies not performing as well as hoped and restrictive tax laws still plaguing the industry, investors are growing more cautious when it comes to cannabis. Add in other macroeconomic trends that are pointing to a global economic slowdown, and 2020 is shaping up to be a tough year to find cannabis capital.

Image: Flickr

That’s not to say funding will completely dry up, but operators and business owners must be aware that investment deals that perhaps closed in a matter of days in previous years, likely will take weeks or months while investors dig deeper into books and perform higher levels of due diligence before inking a deal. This means cannabis businesses must carefully plan and watch their cashflow and pursue fresh capital or investment earlier rather than later.

Expect More M&A and Consolidation

With the green rush reaching a crest of sorts, reality is setting in for some smaller cannabis operators. Expect to see more consolidation with smaller dispensaries and cultivators being bought up and absorbed by the big kids. More limited capital and investment options coupled with continued regulatory and legal uncertainties mean unsustainable operating costs for independent and smaller operators, which means the only way to survive may be to sell to a larger player.

New Markets & Regulations

The new year brings new states opening up to recreational or medical cannabis sales, as well as newer or altered regulations in existing markets. Cannabis firms must keep an eye on these new markets and regulations to best determine whether they plan to expand or not.

How stringent or lenient regulations are written and executed will determine the size and viability of the market. One state may severely limit the number of licenses it issues, while others may not put any limit. For example, Oklahoma issues unlimited licenses to grow hemp at $1,500 a piece. While that sounds promising for smaller hemp producers, it also could potentially lead to an oversaturation in the market. On the flip side, a more restrictive (and costly) licensure structure could lead to a far more limited market where only the industry’s largest players will be able to compete.

Image: Cafecredit, Flickr

Cannabis businesses also should keep an eye out for new regulatory hurdles in existing cannabis markets. For instance, California is raising its excise tax on cannabis beginning Jan. 1. That will result in higher costs for both consumers and cannabis companies. High state and local taxes have been a challenge industrywide because they make legal operators less competitive with the illicit market. Also, a proposed rule in Missouri could ban medical cannabis operators from paying taxes in cash. Such a rule would prove problematic for an industry that has had to rely on cash because of federal banking regulations. 

Credit Card Payments

While cannabis businesses may face several new and recurring hurdles in 2020 on the financial front, at least one looming change should make business easier: credit card payment processing. Because of cannabis’ continued banking woes, dispensaries and other plant-touching operations have not been able to accept credit cards. Though federal banking limitations remain in place, in 2020 we will see payment processors introduce new, creative and less expensive ways to navigate current banking limitations that will allow cannabis sellers to take credit cards. Opening up payments in this way will not only make transactions and record keeping easier for customers and businesses alike, it also will attract consumers who don’t use cash.

While some of these trends may prove challenging, in many ways they are signs that the cannabis industry is shifting and maturing as we enter a new decade. Many hurdles remain, but the size and momentum of the industry will only continue to grow in 2020 and beyond.

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Hemp in the United States: An Opinion

By Dr. Anthony Macherone
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The Agriculture Improvement Act, also known as the Farm Bill, was signed into law in December 2018. A major provision in the law legalizes hemp as an industrial crop. In August of 2016, USDA, DEA, and FDA published a Statement of Principles in the Federal Register (FR 53365) that defined industrial hemp as any part or derivative (including seeds) of the plant Cannabis sativa L. with a dry weight concentration of tetrahydrocannabinols not greater than 0.3% (wt/wt).

USDA LogoGlobally, the hemp market was estimated at $3.9 billion in 2017 and the hemp seed segment is predicted to grow “at a CAGR of 17.1%” through 2025. Some of the markets affected by hemp production include nutraceuticals, food, textiles, construction materials, and personal care products. It is also anticipated that cannabidiol (a non-psychoactive cannabinoid extracted from hemp) production will grow to support the burgeoning recreational and medicinal cannabis markets in the U.S., Canada and other countries around the world.

In U.S. states and Canada where recreational or medicinal marijuana programs have been legalized, regulations have been defined to assure the safety and quality of the products sold to consumers. These regulations include analytical chemistry and biological assays to identify and quantify pesticides, mycotoxins, heavy metals, residual manufacturing solvents, terpenes, and microbial contaminates. With regards to hemp, the USDA recently released guidelines for testing of hemp. To date, the only required test from the Federal perspective is total ∆9-tetrahydrocannabinol (THC) content < 0.3% by weight. Total THC is essentially the sum of tetrahydrocannabinolic acid (THCA) and THC (Total THC = 0.877(THCA) + THC) but this may be eventually expanded to include all salts and isomers of cannabinols as noted above. Another complication: what constitutes “dry”? The CFR does not answer this.

Agilent Technologies has invested in the development and implementation of the analytical protocol, the services needed to support these assays, the required consumables, reagents, and supplies, and the training of sales and support personnel to comprehensively ensure compliance of hemp with USDA regulations.

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Is the Green Rush Over?

By Brian Mitchell
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Ever since California legalized medical use of cannabis in 1996, entrepreneurial people and people with money have been looking to turn the cannabis trade into a bonafide industry. The cannabis Green Rush has been a fast and chaotic ride as growing legalization opened myriad opportunities. It seemed for a while that pot was too big to fail.

Yet the second quarter of this year saw the majority of publicly traded cannabis companies recording double-digit losses (with 10 top cannabis stocks with a combined value of $55 billion losing an estimated $21 billion in collective value). Meanwhile, some of the industry’s most recognizable brands are under pressure to cut costs in favor of demonstrable profitability. It is clear that investors have become leery of inflated and unsustainable valuations.

But pot is still too big to fail.

New York Stock Exchange
Image: Rolf Kleef, Flickr

Polls show an ever-growing majority of Americans believe cannabis should be legal, and the number of states with legal weed continues to grow. The state-sanctioned market will reach nearly $13 billion in sales this year, according to BDS Analytics, with about a quarter in California, the largest, most mature legal market in the world. Total U.S. sales are on track to reach $30 billion by 2024. Legal cannabis remains the biggest investment opportunity of our times, but the Green Rush may be over. And that’s a good thing.

Get over the “green rush” mentality

From the Gold Rush to the Dot Com Boom, great opportunities have tended to create irrational mobs. Have you ever watched a group of Black Friday shoppers? In a frenzy, you often do not stop to evaluate if something is a bargain or if you even need the item. In the investment world, that type of frenzy leads to bubbles. When the Dot Com bubble burst in 2000, almost half the industry’s rising tech companies shuttered their doors, and an estimated $4-6 trillion in shareholder wealth vanished.

A similar thing is happening in cannabis.

The end of the Green Rush means we can now focus on safeguarding cannabis’ future, and not pillaging it for a quick profit.Growing legalization has created an influx of capital, but much of the early institutional money and retail investors went to Canada, where the absence of a federal prohibition allowed for a robust financial market to flourish. Canopy Growth Corp. was the first large-cap cannabis company to go public in 2016, followed by other large licensed producers or LPs. Because they are not violating U.S. laws, Canadian cannabis companies were able to uplist to the NASDAQ and NYSE as well.

American cannabis companies on the other hand – unable to freely tap capital markets at home, flooded Bay Street looking to go public on the Canadian Securities Exchange, and the rush went on hyperdrive. Soon market caps became grossly inflated, and too many cannabis companies that were barely showing profit took big gambles with other people’s money. Now, those investors are paying the price.

But a burst bubble is a good thing. It is a correction that forces companies to focus on priorities and fundamentals, and cannabis is no different. The end of the Green Rush is the start of a real industry with surviving operators becoming even stronger, less reliant on speculation and more focused on performance.

There will always be companies going public to create liquidity, and there will always be venture funding at the ready for any promising new startup. But cannabis will only survive if companies focus less on raising money and more on actually running their businesses.

Cannabis is creating unprecedented cultural and lifestyle shifts. It’s helping shape how people assess, diagnose and treat a broad span of health and wellness issues. Cannabis is helping to break the barriers of opioid addiction, and it’s even beginning to rival the alcohol industry. One out of every five beer drinkers in a Nielsen Market Insights report said they will spend less on store-bought beer due to consuming cannabis. Among the 65 percent of people who purchased over-the-counter drugs for pain relief, 35 percent said they will consider cannabis as a substitute.

The end of the Green Rush means we can now focus on safeguarding cannabis’ future, and not pillaging it for a quick profit.

Is Australian Cannabis Going Corporate?

By Marguerite Arnold
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Patient numbers in Australia are going in only one way – up. As of last month, the Australian government reported that it had approved a record 3,594 cannabis prescriptions in October 2019 – or about twice as many as it had approved in only July.

As patient numbers have grown, plans have proceeded afoot Down Under to capitalize on the growing willingness in Australia to accept that cannabis is not only medicine – but can now be prescribed by regular GPs – as opposed to specialists. Not to mention exported to a global medical market suddenly looking for high quality product at affordable prices in far afield places.

Leafcann is one of the companies in that elite territory right now. The new approval by the government for the expansion of facilities to both produce and research cannabis will double the company’s facility somewhere in Adelaide (the location is not being disclosed for security reasons). The new facility will also be the first in the world to produce oil from plant genes and distribute the same to patients.

But they are not the only ones. According to the latest market report by Aussie-based Fresh Leaf Analytics, the numbers of patients domestically are set to jump dramatically again next year.

And as the Australian market mushrooms (indeed European farmers are fielding interest from distributors from the region lately), will the Aussies, rather than any EU-based rival, become the first real global competition to the Canadians first in the race on the flower front?

Don’t count on that. There are too many contenders now for quality cannabis all over Europe for low priced medical cannabis from Down Under to be able to do any more than secure a few early harvests. See the activities of Aphria in the UK for example. Or the proclivities of Lexamed and a few other distributors in Germany.

However, what this development clearly shows is that the Aussie market for oil is not only driving large and well-funded production at home, but also having a knock-on effect internationally.

Whatever else is going on, in other words, the Australians are not only gearing up to go big on the weed front domestically, but driving the market for oil just about everywhere. Starting with CBD.

Don’t Bet The Farm On Aussie Production

Looking at what is going on, in fact, by the numbers, it appears that the Australian market is getting going in ways impossible for their northern brethren. In part that has to do with both Australian federal and state legislation.

It also, when you look at the numbers, is still a market dominated by less than THC medical grade product – the vast majority of patients are still only receiving CBD and most of them in oil form. Australian cannabis bound for pharmacies is also so far clocking in far closer to European prices than Canadian – in part because Canadian companies can ship directly to patients. Australia is also following a European distribution model. And recreational is off the table for now (at least until New Zealand does it). In the meantime, the medical business is proceeding apace.

This means two things: CBD oil is going nowhere either in or outside Australia unless it is either GMP or Novel Food certified – and that takes cash up front. Regardless, will the Aussie market look financially like the salad days of Canada’s medical market? Do not count on it. The flameouts of public companies if not volatility of the public sector, not to mention the growing longevity of the legal biz is creating other paths to financing. Including the fact that most savvy investors at any rate understand that price sensitivity is in the room from the beginning.

So yes, there certainly have been and will continue to be large, well-funded, corporate Aussies – indeed that is the shape of the future just about everywhere. But don’t expect the corporate playbook to be the same as the ones played by the Canadians so far.

What’s Going Down In The Danish Cannabis Market?

By Marguerite Arnold
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Despite the fact that the Danes are going to do something that is still verboten in Germany and many other European locales (namely allow a recreational trial), the overall bloom is off the first heady days of the cannabis rose here in Denmark.

Medical sales have stalled of late because of both supply (and in part CannTrust problems) and of course price in a market with a lot of cultivation enthusiasm, but also one which still imports its medical cannabis (although domestic production is coming online soon).

This is even more interesting of course given some ideas floating in the current Euro cannosphere – namely that Canadian funded, Danish based cultivators are or were planning on importing to both Germany and Poland this fall. In other words, low sales at home for expensive product that can be bought for less at the revived Christiana marketplace are not a market entry strategy that brings ballast to balance sheets. And while the rec market is coming (obviously), the trial is in early days yet.

Further, while the German market certainly presents an opportunity for higher priced cannabis coming out of Denmark (for now), that also will not last. And is certainly not the case in Poland.

For that reason, it is clear there is at least temporary trouble brewing in what some initially thought was going to be a European-based cannabis paradise. But that too, is so 2018.

A Few Numbers

The medical trial in Denmark is now entering the beginning of its third year as of 2020. There are, according to official estimates just over 4,000 legal patients. 34 companies have permits to cultivate cannabis, including all the usual suspects – starting with Canopy Growth, Aurora, Aphria, ICC (Wayland) and The Green Organic Dutchman, plus of course all the indie locals.

Put this in perspective and is it really any wonder why Aurora also just recently announced the halting of partly built construction in both Denmark and Canada this month?

aurora logoEspecially with problems in Poland, slower than expected legal sales in Germany and of course the disaster that is still the UK, this newest setback for the company is also not exactly unexpected. The only cannabis company, European or not, who benefitted from the recent NHS pivot on medical cannabinoids was the home-based GW Pharmaceuticals, albeit at lower negotiated prices as the total pool of patients is now increased with the new NICE guidelines.

Given all of these headwinds, even with a few export possibilities, the Danish market that supposedly offered a promised respite from the problems of the German one (certainly on the cultivation front), has run into a similar problem at point of prescription and sales.

Even Danish patient number growth is anaemic compared to Deutschland – which is, by all reports, not even close to considering a recreational trial in Berlin, Bremen or any other jurisdiction which has suggested the same.

With bulk, high-grade production coming online, there is clearly going to be a regulated cannabis market in Denmark. How the decisions about who will qualify for medical will be made in the future is another question. And one that certainly the larger producers at least, are responding to in kind.

The Winds of Change

Given the amount of compliant cannabis now in the pipeline for the continent (and not just domestically) it will be interesting to see how 2020 shapes up. However, no matter how still sluggish the numbers, another domestic cannabis market has begun to come into its own as the continent moves forward on the issue generally.

Second Canadian Cannabis Company Admits To Illegal Grows

By Marguerite Arnold
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For the second time this year, a Canadian public cannabis company with interests far outside the country, has fessed up to unlicensed growing.

This time it is Hexo, a company with many issues floating since this summer’s bombshell disclosures about CannTrust.

Interestingly, of course, the company claims that it also only discovered the area on July 30 – after the acquisition of Newstrike Brands closed. And while cultivation was also immediately stopped in so-called “Block B”, this also raises many other questions – including about the level of due diligence – no matter the cannabis – in the room leading up to the purchase in the first place. That includes not just both companies on each side of the deal, but, as the Canadian press has also been quick to point out – the regulators themselves.

Beyond a similar window of timing with the sorry events of the summer on the CannTrust front, this decision also comes at a time when the beleaguered Hexo is closing the facility in question in an effort to contain costs. Nonetheless, the convenient timing and slap-on-the-wrist attitude from the regulators for this kind of “self-reporting,” is one thing. That this lenient response from regulators (CA$77 million in destroyed CannTrust product notwithstanding) has now happened twice in a row since summer, has led many to wonder what the regulators are doing when not being tipped off by whistle-blowers and company accountants about the inevitable.

In truth, coming as it does more or less on the anniversary of the first year of recreational reform and massive changes afoot in Europe, such realities should not be surprising.

Planes that are built as they are hurtling down the runway, to paraphrase a frustrated Canadian regulator last summer, tend to have a few bits that clank down to the tarmac upon wheels up. Assuming of course, that things do not just come completely unbolted at point of airborne lift.

There is no chance that this craft however, will be allowed to return to the barn, let alone land. There is too much at stake – economically, politically and medically, truth be told.

This cannabis horse has now left this territory.

And in its wake? The inevitable aftermath of a market that, while certainly deserving kudos in managing to create itself in the first place, needs time to iron out the kinks.

What Does This Mean For The Canadian Market Going Global?

With higher standards in Europe, none of this news about Hexo flies particularly well abroad. Why fight for the market entry rights of foreigners, in other words, who don’t even seem to care, much less respect domestic regulations in their own country?

So in truth, even though it is far too early to count some of the largest companies in the room out (see Canopy’s recent canna coups in Luxembourg), many of “The Canadians” – as Hexo is of course inevitably also tagged, who made the first enters since 2017, and “have all the money,” may in truth be struggling to maintain market share, if not control of their brands.

As many on the ground in Europe are indeed asking now, if large Canadian companies who are also public, cannot even meet Canadian standards, and lightly slapped on the wrist when caught, why trust the product?

The good news? The cannabis industry has proved it is resilient, if not exactly made of Teflon.

Hexo has gotten its issues out of the way for now – escaping censure apparently on a technicality and self-reporting.

However, as Canada now enters its second year of the recreational market and the seeds of not only deeper medical reform but recreational too are playing increasingly loudly in Europe, there are clearly new “shoots” in the room. And as the world prepares to say good bye to 2019, it is also clear that, especially given recent rumbles about the readiness of the Canadian market for international prime time, the dawning of 2020 will certainly begin to answer the many questions now certainly on the cannabis table abroad.

There may be heads who roll, in other words, but the show is rolling on.

Luxembourg’s Government Triples Medical Cannabis Budget for 2020

By Marguerite Arnold
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While Luxembourg is a tiny country in the middle of Europe, it is beginning to play an outsized role in pushing all aspects of the cannabis discussion forward in the EU.

The country has steadily moved forward on integrating cannabis into the medical system. In 2018, medical cannabis was tested in a pilot project and is now available, on prescription, from a limited number of hospital pharmacies since February of this year. The program, at least from the Department of Health’s perspective, has been “very successful” so far in the words of Health Minister Etienne Schneier.

So, as a result, the next phase of the transition is going into effect. The budget for doctor training and medical cannabis purchases will be increased from €350,000 to €1.37 million next year. The drug will also be available from all pharmacies. Overall, the government has allocated a budget of €228 million for its cannabis “pilot” next year – an increase of €22m in 2019.

Canopy Growth Moves Into A Prime Position

Canopy_Growth_Corporation_logoCanopy Growth also announced last month that it has now become the exclusive supplier of medical cannabis to the country in a deal that extends through the end of 2021 (in other words presumably until recreational reform becomes legal). This is an interesting twist of events, given that Aurora announced it was the first company to import the drug into the country last year.

This is certainly a new chapter in the ongoing competition between the two Canadian companies who have, since 2017, essentially split Europe’s “first entries” between them (with the exception of Tilray in Portugal).

It also comes at a time when Aurora has just lost its third license in Italy to cultivate.

The clash of the cannatitans continues.

Why Is Luxembourg’s Cannabis Experiment So Interesting?

The increasingly strategic position of this tiny country on the cannabis discussion cannot be discounted.

aurora logoIn the summer of 2018, it was the government’s decision to change the law on medical cannabis use that preserved the ability of Germans to continue to buy cannabis stocks. Confused? The Deutsche Börse, in Frankfurt, the third largest stock exchange in the world, claimed that it could not “clear” stock purchases last summer because their clearing company, based in Luxembourg, could not close the transactions in a country where even medical cannabis was still off the table. When Luxembourg changed their law, in other words, the Deutsche Börse had to reverse course.

Since then, this tiny country has continued to challenge the cannabis discussion in the EU – also announcing that a full-boat recreational program will be enacted within the next two years (almost certainly by 2021). This aggressive timetable will also move the discussion in almost every EU regulation still on the table, and probably position the country as the only one in Europe where a fully integrated medical and recreational policy is in place. Even Holland does not cover medical cannabis these days. Dutch insurers stopped covering the drug in early 2017 – just as the German government changed its own laws.

Luxembourg, in other words, has now effectively pulled at least on par with Denmark and Germany in the cannabis discussion, with recreational now the agenda. And appears to be willing to preserve its medical program after recreational comes.

Who says size matters?

The “Colorado” Of Europe?

One of the reasons Colorado was such a strategic state in the cannabis discussion in the U.S. was undoubtedly its “purple” status – i.e. a state which politically swung both ways on a range of policy issues.

Luxembourg in fact, as the seat of the European Courts of Justice, may end up playing the same role in Europe – but on a national level.

In fact, the battle here increasingly resembles not Canada, but the U.S., as individual countries begin to tackle the cannabis question in their own way – both within and beyond the EU rubrics on the drug.

Will the United States legalize federally before the EU changes its tune? That is unknowable.

However, for the moment, the market leader in the EU to watch is undoubtedly Luxembourg, no matter its geographical size and population count.

As usual, cannabis reform enters through a crack, and widens from there. Luxembourg appears to be, if not the only crack, then certainly one of them that is turning into a decently sized crevice in the unyielding wall of blanket prohibition.

The Great European Cannabis Cosmetics Confusion

By Marguerite Arnold
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If the “recreational” discussion is off the table for now except in a few local sovereign experiments (Luxembourg, Switzerland, Denmark, Holland), and the medical discussion is mired in “efficacy” and payments (Germany, UK), where does that leave this third area of cannabis products?

Namely cosmetics.

The answer? Because this conversation involves cannabis, as usual, the discussion is getting bogged down in confusion even as industry groups press for clarification and guidelines.

The Problem

Cosmetics, including externally applied creams, lotions and potions, are of course subject to regulation and testing beyond cannabinoids. Think of your favourite cosmetic product and the notices about no animal testing (et al). Yet when the conversation comes to cannabis, of course, even of the hemp kind, the current discussion in the EU is mired in confusion, and of course ongoing stigma. Not science. Or even logic.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

According to the EU Working Group on Cosmetic Products earlier this year, ingredients containing CBD (even derived from hemp) should be banned from cosmetics production because of the ban on cannabis as an illicit substance under the 1961 Single Convention on Narcotic Drugs. Guidance under the Cosing Catalogue (a database of allowed and banned ingredients)  gives individual EU member states a framework to set national rules for cosmetics.

To add to the confusion, the EU also added new entries to the EU inventory of cosmetic ingredients which outlaw CBD derived from extracts, tincture or resin. But – in a bizarre bureaucratic swerve, they did approve “synthetically produced CBD.”

Opponents of the ruling – including the European Industrial Hemp Association (EIHA) have of course opposed the newest guidelines on regs. CBD, as the EIHA has mentioned repeatedly, is not referenced specifically in the 1961 Convention.

The EIHA wants the EU to treat cosmetics like other CBD products – namely requiring that they have less than 0.2% THC.

The EIHA Proposal

The EIHA has its own proposal for setting guidelines under Cosing. Namely that extracts from industrial hemp and pure CBD should only be prohibited from use in cosmetic products if they are not manufactured in compliance with laws in the country of origin.

Further, the EIHA has also pointed out that the seeds and leaves of industrial hemp and any products derived from the same are also clearly excluded from the 1961 Convention.

However, and herein lies the rub – even within the EU, there is not yet harmonization on these standards between countries. So, what may pass for “legal” in the country of production may also not pass for products that are then exported – even within the EU and or in Europe.

EIHA also has proposed new wording for the definition of Cannabidiol based on the International Nomenclature of Cosmetics Ingredients (INCI), the most comprehensive and widely recognized international list of ingredients used in cosmetics and personal care products.

Where Does This Cross With Novel Food?

Of course there is also the confusion in the room about cannabis extracts as “novel food.” Cosmetics of course are designed for external application, but cannabis tinctures and extracts containing “CBD” are being put in that category right now by regulators in the EU. The fact that novel food is also in the room may in fact be the reason that regulators are apparently sanguine about synthetic CBD in cosmetics, but not that derived from the actual plant.

The cannabis discussion is going to be in the room for many years to come and on all fronts – from medication to food to cosmetics.Bottom line? There are, at present, no easy answers. This leaves the CBD industry in the EU, at all levels, as the planet barrels into the third decade of this century, in basically a state of limbo. If not absolute confusion.

What Is The Outlook?

While it may not be “pretty” right now, the industry is clearly moving through channels to pressure and challenge regulators at key international points and places.

What is increasingly obvious however, is that the problem with cannabis – at all levels – will not be solved soon, or easily. Even calls for “recreational reform” or even “descheduling” will not cure them.

Cannabis as a plant, if not a substance used in everyday living has been so stigmatized over the last 100 years that a few years of reform – less than a decade if one counts the organization of the industry since 2013 globally – will not come close to fixing if not ironing out the bugs.

The cannabis discussion, in other words, is going to be in the room for many years to come and on all fronts – from medication to food to cosmetics.

Steven Burton

Standardization: A Guide Through the Minefield

By Steven Burton
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Steven Burton

Now that cannabis edibles have been legalized nationally in Canada, many existing and aspiring license holders have been surprised to discover that they must comply with food safety regulations. This became crystal clear when Health Canada published their Good Production Practices Guide For Cannabis in August 2019.

With this development, it should be obvious to everyone that Good Manufacturing Practices (GMP) certifications are simply not enough.

Hazard Analysis and Critical Control Point (HACCP) based preventative control programs are now the absolute minimum and higher levels of certification (GFSI) should be on everyone’s wish list.

HACCP is a methodology that is all about identifying biological, chemical and physical hazards and determining how they will be controlled to mitigate the risk of injury to humans. Recently, bio-terrorism and food fraud hazards have been added to the list and it is a good idea to address quality hazards as well.

The process of developing a HACCP program involves identifying these hazards with respect to ingredients, materials, packaging, processes and cross-contamination points (explicitly required in Canada only). However, it is a specific ingredient hazard that I’d like to talk about here.

HACCPAs this market has emerged, I’ve met with many cannabis companies as the onerous levels of knowledge and effort required to build and maintain an effective HACCP program manually has dawned upon the industry. Many are looking for technological solutions to quickly solve this problem. During these discussions, a curious fact has emerged that set off the food safety alarm klaxons around here.

Most people alive today are too young to remember this but, with few exceptions, the standardization of ingredients is a relatively modern phenomenon. It used to be that the fat content of your milk varied from season to season and cow to cow. Over time, the food industry standardized so that, amazingly, you can now choose between milks with either 1% or 2% fat, a level of precision that would border on miraculous to someone born in the early 20th century.

The standardization of ingredients is important in terms of both quality and safety. Take alcohol for example. We know that a shot of spirits generally contains 40% alcohol. Different products may vary from this standard but, if I pour a shot of my favourite Bowmore No.1 single malt in Canada or Tasmania, this year or 10 years from now, I can expect a consistent effect from the 40% alcohol content of the quantity I’ve imbibed.

Imagine a world in which this was not the case, where one shot would be 40% but the next might be 80%. Things could get out of control quite easily at the 80% level so, to avoid this, distillers monitor and blend their product to ensure they achieve the 40% target, which is called the “standardization marker”.

With respect to cannabis, the obvious standardization marker is THC. During the manufacturing process, edibles manufacturers do not normally add cannabis flower directly into their products but instead add a THC concentrate produced during previous production steps. However, we’ve found that the wisdom of standardizing these concentrates has not yet dawned upon many in the industry, which is alarming at best and dangerous at worst.

The reason for this is that, since cannabis is inherently a heterogeneous plant, one cannot precisely achieve a particular marker value so the outcome of the concentration process is variable. The food industry long ago overcame this problem by blending or diluting to achieve a consistent marker concentration, but the cannabis industry has not yet adopted this advance.

The cannabis edibles industry is still immature and it will take time to bring all the necessary risk mitigation processes into place but one excellent place to start is to seriously consider standardizing concentrates to a THC marker.Instead, manufacturers simply keep track of the strength of each batch of concentrate and then adjust the quantity added to their recipes to achieve the desired THC content. This seems logical on the surface but presents a serious risk from the HACCP perspective, namely a chemical hazard, “Excessive psychoactive compound concentrations due to human error at levels that may be injurious to human health”.

The reality is that workers make mistakes, which is why it is imperative to mitigate the risk of human error insomuch as possible. One of the best ways to do this is to standardize to avoid the scenario where a worker, faced with a row of identical containers that are differentiated only by a tiny bit of text, accidentally grabs the wrong bottle. The error isn’t caught until the product has been shipped, consumed, and reports of hospital visits start coming in after the authorities trace the problem back to you. You must bear the costs of the recall, your reputation has been decimated and your company is floundering on the financial rocks.

US-based Drip More, LP recently found this out the hard way after consumers complained that their product tasted bad, bitter and/or harsh. An investigation determined that excessive nicotine content was the source of the problem and a voluntary recall was initiated. Affected product that had already been sold in 26 states. The costs of this recall have not been tallied but they will be staggering.

The cannabis edibles industry is still immature and it will take time to bring all the necessary risk mitigation processes into place but one excellent place to start is to seriously consider standardizing concentrates to a THC marker. This strategy is cheap, easy and you’ll never be sorry.

The Women in Cannabis Study: A Q&A with Jennifer Whetzel

By Aaron G. Biros
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Ladyjane Branding and Wolfe Research & Consulting are leading an ambitious study to explore and document the experiences of women working in the cannabis market. Women in Cannabis: A Living History officially kicks off on December 10th at the National Women of Cannabis Conference.

Jennifer Whetzel, founder of LadyJane Branding and founder of the Women in Cannabis Study

Jennifer Whetzel, founder of Ladyjane Branding, says this is an opportunity for women to tell their stories about their experience working in the cannabis industry. Women can participate in the study by going to womenincannabis.study and sign up to take the survey. You can also sign up to be a sponsor or partner of the study at that website. Sponsors will get access to content like press releases and the opportunity to incorporate the study’s findings in their messaging. We invite our readers to participate, sponsor, partner, share and encourage friends to take the survey.

With beta testing starting the week of November 18th, we caught up with Jennifer Whetzel to talk about why she decided to start this project, what they expect to learn from it and what the future may hold for professional women in the cannabis industry.

Cannabis Industry Journal: Can you tell us a bit about your background and how you came into the cannabis industry? 

Jennifer Whetzel: My entrance into the cannabis industry was certainly a culmination of my personal experience and professional journey.

After moving to Maine, I became a medical user to ease symptoms of an immune and an auto-immune disorder. When I sought out treatment for PTSD, I found that a combination of cannabis, therapy, meditation and brain retraining was the most helpful and healthy solution.

This course of treatment for PTSD was life-changing as it allowed me to resolve symptoms from all of my medical issues, and I wanted to find a way to give back to the community that supported me. I had been working in marketing for over 25 years and realized I had quite the diverse professional background. My experience included retail merchandising and operations, public relations on a military base, research design and strategy for ad agencies, new product development and launch for animal health companies, and experiential marketing strategy and design. I’ve been lucky enough to work with small companies and Fortune 500’s which has led to finding solutions in unexpected places.

When pairing my knowledge and skills with the cannabis community, I realized I could make an impact by advising new entrepreneurs who needed help making their brands stand out. That’s how Ladyjane Branding was born.

CIJ: Can you give us an overview of the Women in Cannabis Study?

Jennifer: The Women in Cannabis study aims to understand how women are faring in the cannabis industry and whether we are doing enough to support women, their careers and their professional goals. It’s well documented that women in corporate America do not have the same opportunities for career advancement as men, holding fewer executive or board positions, having fewer opportunities for mentorship, sponsorship and career progression.

The study is comprehensive, with more than 80 quantitative questions along with qualitative telephone and video interviews of female-identifying professionals working in the cannabis industry – whether they are involved with cannabis, CBD or hemp. Through monthly infographics, video summaries, quarterly in-depth themed reports and a comprehensive year-end report, we will be telling the stories of women’s professional experiences in cannabis with the goal of transforming the industry into one where women can succeed and thrive.

Painting a picture of the women in cannabis, and understanding them as a group, we look at demographics to explore their diversity and reveal whether personality differences may affect their experiences, as well as experience with stigmas regarding cannabis use and working in the industry.

To understand professional trajectories and roadblocks on a path to success, we dive into work history, reasons for entering the cannabis space and the barriers they have faced on their journey. We explore opportunities for mentorship, support and leadership, the types of harassment, discrimination and disrespect they’ve experienced and how that may have impeded their careers.

We’d like to understand how (or whether) women find balance in their personal and professional lives, what sacrifices they’ve had to make for a career in cannabis, as well as best practices for women to foster success.

CIJ: Why did you decide to take on this endeavor and lead the work on this study? 

Jennifer: While there are numerous studies looking at how women fare in corporate America, we found that there’s a lack of a recent and comprehensive deep dive into this topic specifically for cannabis. As an emerging industry, we have a unique opportunity to make valuable recommendations to potentially increase inclusivity for women in this early stage of industry culture before it becomes too entrenched. Our goal is to ensure we have the hard numbers to document a baseline now, then follow-up over time to understand how the industry changes.

By surveying and speaking to women in the industry, and understanding where strengths and weaknesses in the industry lie, we can make recommendations to improve the lived experience for women working in this industry.

The only way to make improvements to a system is to understand it.

CIJ: How do you think we can create a more inclusive industry?

Jennifer: I think it begins with an understanding of where we are starting – we don’t know what we don’t know. Being in the cannabis industry, we often hear the argument that anecdotes are not data. Just like we need the scientific data to prove efficacy for medicine, we need the data that shows the hard numbers about diversity and inclusion, the stigma and shame of cannabis use or working in this industry, about sexual harassment, disrespect and bullying.

This study is about generating information and creating knowledge on this issue so we can determine the education, policies, procedures and actionable recommendations that can help make the industry a welcoming space for everyone.

One of the best ways to create a more inclusive industry is through education.

CIJ: What hurdles do women face in the cannabis industry? How is that different from other, more established industries?

Jennifer: As we review research results from more established industries, it seems clear that women face similar hurdles in cannabis. Various studies have shown that working women are faced with unequal pay, fewer opportunities for mentorship or sponsorship, as well as discrimination and disrespect. The issues for female entrepreneurs are even greater as women are significantly less likely to receive venture capital funding, which certainly speaks to experience in the cannabis industry.

Because there’s little data specifically focused on the cannabis industry, we are just guessing. This study will provide us those answers.

CIJ: Looking ahead, how do you think women will fare in the evolution of the cannabis market?

Jennifer: I’d like to think that if we are all purposeful and intentional about creating an equitable, inclusive, and representational industry, that women will fare significantly better than they have in other industries typically dominated by men. If that can happen, everyone will feel welcome and respected, and it will no longer be surprising news when a woman is promoted to CEO or becomes a successful founder.