In September of 2019, Charles Wilcoxen fell seriously ill after vaping cannabis oil from a cartridge. Just days after he began experiencing symptoms he was hospitalized and later diagnosed with lipoid pneumonia, the mysterious lung illness now known as EVALI associated with the 2019 vape crisis.
Wilcoxen spent three days in the hospital and ever since he was diagnosed, he has been unable to exercise, return to work full time or even play with his daughter. Attorneys for Herrmann Law Group representing Wilcoxen filed a product liability lawsuit, Wilcoxen v. Canna Brand Solutions, LLC, et al., in Washington State Court, naming six cannabis companies as defendants: Canna Brand Solutions, Conscious Cannabis, Rainbow’s Aloft, Leafwerx, MFused and Janes Garden.
This image came from the complaint filed, alleging that Mr. Wilcoxen believes this was a CCELL product.
Canna Brand Solutions, the primary defendant named in the complaint, is a packaging supplier and distributor for CCELL vaping products (heating elements, pens and batteries) in the state of Washington. The complaint alleges that Wilcoxen believes he used a CCELL vape. CCELL is a Chinese company, which makes it notoriously difficult to pursue legal action against them, hence why Canna Brand Solutions was listed as a defendant instead.
On August 31, 2020, Judge Michael Schwartz dismissed all claims against Canna Brand Solutions. “All claims asserted by Plaintiff against Canna Brand in the above-mentioned matter shall be voluntarily dismissed without prejudice and without costs or fees to any of the parties to this litigation,” Judge Schwartz says in the dismissal. Judge Schwartz dismissed the case without prejudice, meaning it could be brought to the court again should the plaintiff’s attorneys decide to do so.
With the allegations against Canna Brand Solutions focusing on CCELL products, it seems that the case was dismissed largely due to a lack of evidence connecting exactly which product resulted in the illness, as well as the lack of culpability for a distributor of products they did not manufacture.
These are the vape cartridges that Mr. Wilcoxen purchased
Daniel Allen, founder and president of Canna Brands Solutions, claims that the product mentioned in the complaint did not come from his company. “We stand by our high quality and customizable CCELL vaporization products,” says Allen. “We feel vindicated in this case by the judge’s decision, which shows the claims against our company and products were completely unfounded from the beginning.”
He also added that the quality and safety of the products they distribute is their highest priority. “The product in question involved in this case did not come from Canna Brand Solutions,” says Allen.
Wilcoxen’s illness and subsequent long-term lung injury is extremely unfortunate. Thousands of people have been hospitalized and 68 deaths have been confirmed by the CDC. The CDC is still calling the illness EVALI (e-cigarette, or vaping, product use-associated lung injury). According to the CDC, there is no real known cause of EVALI, but they have found that vitamin E acetate is “strongly linked” to the outbreak. Knowing that, it is entirely possible that Mr. Wilcoxen’s illness was a result of one of the cannabis products he consumed, just most likely not anything that came from Canna Brand Solutions. A closer look at the contents with an independent lab test of the THC oil he consumed could shed some more light on what exactly caused the illness.
I would venture to guess that one of the products he consumed did have vitamin E acetate. Because the case was dismissed without prejudice, it could be brought to the court again if, say, Mr. Wilcoxen’s attorneys were to obtain more evidence, such as an independent lab report showing vitamin E acetate in the contents of one of the products he consumed. If Mr. Wilcoxen’s attorneys can figure out which product actually contained vitamin E acetate, perhaps the lawsuit could get a second shot and Mr. Wilcoxen could have a greater chance at getting some long-overdue and much-deserved restitution.
All major industries took a hit during the COVID-19 pandemic, but in many states, cannabis dispensaries were labeled as essential, which has allowed the industry to continue with some alterations. The impact now will come from what innovations and improvements the industry can leverage going forward.
From changes to protocols and buyer behaviors to supply chain disruptions, there were many new hurdles for the industry in addition to the ones cannabis businesses already faced, such as funding. But the silver lining could be that businesses within the cannabis industry become less of a specialty and more ‘every day’ than ever before.
The effects of the pandemic on the cannabis industry
Overall, the industry has fared well, in part thanks to its distinction as an essential service in states where cannabis is legal. It’s possible states made this decision for the same reason that alcohol businesses were deemed essential in most places: hospitals are not equipped during pandemic times to take care of people who are being forced to detox or those suffering from anxiety because they don’t have access to their legal drug of choice.
In a multitude of ways, cannabis businesses have adapted to bring calm in a storm while at the same time making manufacturing adjustments to meet the CDC guidelines. For example, there is more attention placed on individually pre-packaged products for single use; something that is less sharable as an experience but eminently practical.
Another area that has shifted a little is in the limiting of the exchange and interaction between business owners and staff relative to the customers. It’s all in the aim of mitigating the risk of exposure, but it has changed the dynamic in many cannabis businesses. This is the new normal for the time being and the industry has adapted well.
Ultimately, retail cannabis businesses today are no different than the retail of candy, cigarettes or alcohol. Certainly, segments of the industry have still struggled. Lack of tourism and the curbside/take out circumstances at dispensaries took their toll. But without the opportunity to still conduct business in some capacity, 50-60% of all operators would have gone out of business. Plus, as many people use cannabis to offset medical symptoms, including pain management, there is a legitimate need for cannabis to be available. The pandemic has provided the opportunity for many who might not have tried it before to give it a chance to help them medicinally.
Behaviors have changed, including those of buyers
Driven by consumer interests, many dispensaries have adapted to provide curbside pickup options, delivery of online orders and more. That has meant that the customer also needs to be more knowledgeable about cannabis: the experienced consumer knows what they like and want and can make their choices at a distance. Someone who is new to cannabis use might find navigating the choices and options a little more difficult, without the help of experienced staff. The breadth of material online and the ability of some dispensaries to share content that helps the consumer to make choices, in the absence of walking around the dispensary, have been additional tools at the disposal of businesses.
That said, the cannabis industry today is not a vastly different one: it is adapting to the new rules and new reality. Whether this way of doing business—at a distance—is a temporary or permanent solution will be dependent upon what federal and state regulators dictate in the months ahead, but there is likely to be ongoing demand for being able to order online and keep social distance protocols in place.
An interesting example is the Ontario Cannabis Store (OCS) in Ontario, Canada. This is a government run shop that has retail as well as a robust online presence, with free delivery during the pandemic. This has facilitated an increase in new customers, which had already jumped, post legalization. People who might have felt uncomfortable going into a dispensary can still learn about cannabis online and order it, from the relative comfort and safety of their sofa.
Supply chain disruptions and the cannabis industry
The industry has long been focused on overseas suppliers. With the arrival of the pandemic and restrictions on obtaining products from other countries, supply chains have been disrupted for many cannabis businesses. That has forced many to shift their supply chains to more local manufacturers, in North and South America.
In the long run, this should have a positive impact for the industry, so that despite the short-term disruption to the supply chain, which is having an impact on the industry as a whole, there could be an upside for local producers, growers and manufacturers. It will take time to know how this will all play out.
Funding and other issues for the cannabis industry
For a new cannabis startup in these times, the key will be what it has always been for any business, just to a greater degree: due diligence. Companies that want to open a cannabis business, whether during the pandemic or not, need to evaluate the opportunity as one would any investment. It’s all about the numbers: data for the industry as a whole and specifically from competition. These days, that data is widely available and more and more consultants and investors have expertise in this industry. “Overall, there is more interest in the industry than ever before”
It’s vital to be extremely well versed, particularly for businesses that are relatively new in the industry, because the single biggest issue for many has and will continue to be funding and investment. The cannabis industry is no different than any other business, except for the fact that it is a specialty business. With that comes the need to look for funding among investors who have some knowledge or appreciation for the industry.
Some of the key concerns traditional investors will have include:
Regulatory differences from state to state: since cannabis is still illegal at the federal level, there can be an array of hurdles at state and local level that make cannabis businesses trickier to work with.
There are religious based/morality issues for some lenders in dealing with the industry. These aren’t dissimilar from issues with other industries such as adult entertainment and gaming. It’s also fair to point out that, morality aside, these industries have thrived in the last several decades.
So, while traditional banking institutions will often deal with the proceeds from the cannabis industry, including allowing bank accounts for these businesses, there is far less of a chance that they would invest in a cannabis business, for fear of risking their license. They can even go so far as to refuse to include income from a cannabis business in the determination of a loan application.
There are more unique lending or investing groups that either specialize in cannabis or are starting to open their books to specialize in cannabis. Overall, there is more interest in the industry than ever before, as it becomes normalized in American society: more participants and more insiders of the industries that are willing to invest in the right idea.
Will legalization be more likely in the future?
The fact that cannabis businesses and dispensaries have been deemed essential services during the pandemic, where they legally operate, has shed new light on the relevance of these businesses and the advantages of more widespread legalization.“Consumers will help drive the innovations as they demand clean consumption methods”
In fact, the pandemic has normalized a lot of new behaviors, including the acceptable use of cannabis to help with stress and anxiety. People are, perhaps thanks to staying at home more, doing the legwork to understand how cannabis could be useful to them in managing their stress. The medicinal benefits of cannabis have long been researched and understood: consumers are coming into the fray to express their interest in it, which can only fuel the possibility of more widespread legalization.
Add to this the fact that the cannabis industry is a growth industry. There are companies and jobs that aren’t coming back, post-pandemic. There is an opportunity to grow the cannabis industry to the general benefit of many, both as business owners and employees. The revenue generated from taxation following legalization would also benefit many state coffers. Federal level legalization would be the panacea to eliminate the mixed message, state by state regulation that currently exists.
Opportunities for innovation, moving forward
As more and more people become interested in the industry, and as cannabis use is normalized within society through legalization, the opportunities for the industry can only expand.
For an industry that started on the simple concept of smoking cannabis, the advances have already been legion: edibles, nanotechnology-based formulations for effective, clean consumption and many more innovations.
In a world that increasingly sees smoking as a negative, for the obvious impact to lung health, there are so many opportunities to grow the industry to find consumption methods that are safe and still deliver the impact of the inhaled version.
Here again, consumers will help drive the innovations as they demand clean consumption methods. The technology is available to make this possible; it only takes innovation and education to find the best ways to move this industry forward.
As legalization expands—and particularly if it is dealt with at the federal level—the industry will be able to capitalize on existing infrastructure for manufacturing and distribution, allowing new businesses to grow, get funded and thrive in the new normal.
One of the biggest challenges that cultivators, processors and distributors face in doing business is the requirement to track the product at every step in the production process, from seed to sale. When you add the wide range of label sizes and requirements across the supply chain, labeling can feel overwhelming. While business systems such as METRC, BioTrack, MJFreeway and others are key, integrating accurate and secure barcode labeling with those systems will streamline the end-to-end process while meeting traceability requirements. Here are some things to consider, no matter what role in the cannabis supply chain you play.
Cultivation: Where Tracking and Labeling Starts
Cultivation is where the tracking process begins – integrating barcode labeling METRC, BioTrack, MJ Freeway from the start will streamline the end-to-end process
It’s crucial to implement accurate labeling processes from the beginning, whether growing for a customer or your own vertically integrated operation. The cannabis industry is faced with strict labeling regulations for a variety of cannabis products. Start with a labeling system that can integrate with METRC, BioTrack, MJ Freeway or other seed to sale software solutions. Your barcode labeling solution should also include label approval requirements, so you have role-based access and transparency with label changes and print history in case of issues or recalls. Whatever cannabis labeling regulations your business faces, label design software helps you create compliant cannabis labels throughout the supply chain, from grower to consumer.
Radio Frequency Identification (RFID) Labeling
Select regulations require growers to leverage RFID technology to track the location of the plants in their grow houses. RFID technology also enables accurate real-time inventory analysis and helps reduce manual labor costs, as well as errors that can occur with manual counting. To accurately encode RFID tags with variable plant data, be sure you are using a barcode labeling system that can enable easy RFID tag encoding that integrates data from all your business systems. Fastening RFID tags to plants across your grow house floor enables quick and easy location tracking, and RFID reading removes the need for a manual line of sight and allows hundreds of tags to be read at the same time, speeding up shipping and receiving.
Lab Testing
After a plant is cultivated, a certain percentage is sent to a lab to be tested to ensure its proper strain, weight and compound makeup. After your product has been lab tested, leverage the data from your certificate of analysis to accurately display on your cannabis product labels, including:
Pass/fail chemical testing
Final date of testing & packaging
Identification of testing lab
Cannabinoid profile & potency levels
Efficiently display lab testing results on product labels with the use of a QR code for the consumer to review the independent lab’s certificate of analysis
Processing and Production: Tracking and Labeling After the Plant Has Been Harvested
A lot of information needs to go on a cannabis label. Whether you’re producing pre-rolls, packaged flower, edibles, beverages, topicals or cartridges, your labeling software must have the capability to create a wide variety of label sizes with barcodes that encode a large volume of data, while also being fully compliant and showing consumer appeal.
Your cannabis labeling software should do the following for you:
Support database integration to populate variable data from METRC, BioTrack, and other systems
Import high-resolution artwork and leverage with dynamic barcodes and variable data
Contain barcode creation wizards for 1D & 2D barcodes
Automate weigh & print
RGB/CMYK color matching
Feature secure label approval processes, label change tracking and print history
Offer WYSIWYG (What You See is What You Get) printing
Automatically trigger printing directly from scales and scanners when cannabis is weighed
Automatically integrating data with your barcode labeling software improves regulatory compliance, security and reduces manual processes that can lead to labeling errors
Integrate labeling with your seed to sale software solution to automatically trigger label printing by an action in your seed to sale system or by monitoring a database. By integrating your label printing system with your seed to sale traceability system, you can expect to minimize errors, increase print speeds and maximize your ROI. Your business system already holds the variable data such as product names, license number, batch or lot codes, allergens, net quantity, cannabis facts, warning statements and more. By systematically sending this data to the right label template at the right time, labeling becomes an efficient and cost-effective process.
Distribution: labeling for consumer and industry demands
The ability to manage and distribute inventory efficiently is critical in the cannabis market. Warehouses and distributors need to ensure proper storage, handling and traceability of product, from the warehouse to the truck.
Leverage your labeling software to easily create:
Packaging labels
Shipping labels
Case & pallet labels
Inventory labels
If you use the same data for your documents and labels, consider moving document printing into your label design software for greater efficiency. An advanced label creation and integration software enables label and document printing standardization by allowing multiple database records to be on one file. That means when new documents or labels come into your database, your software can seamlessly integrate.
Dispensaries can benefit from integrated seed to sale labeling for traceability, speed to market
Whether you’re a small outlet or a large dispensary, you benefit from integrated barcode labeling that starts from the beginning of the process. How? When barcode labeling software is integrated with seed to sale software, product is fully traced throughout the entire process, from tagging each plant at cultivation to identifying the consumer at point of sale, and accurately communicating that data back to METRC, BioTrack and other critical systems. Some dispensaries do package raw flower onsite, which many times means manually weighing, recording and entering the weight on the label, which is a time consuming and error-prone process. Integrating weigh and print functionality with barcode software enables dispensaries to use the action of weighing raw flower to automatically trigger the label print job. The variable weight is then accurately and automatically populated on cannabis flower package labels, creating an accurate and efficient on-demand labeling process for dispensaries. With efficient labeling processes, time spent creating, correcting, approving and printing labels will be reduced, getting product on the shelves faster.
Cannabis extraction and manufacturing is big business in California with companies expanding brands into additional states as they grow. This is the fifth and final article in a series where we interview leaders in the California extraction and manufacturing industry from some of the biggest and most well-known brands.
In this week’s article, we talk with Kristen Suchanec, VP of Production at Island. Kristen converted her experience in traditional consumer packaged goods to cannabis to help create a brand that is sought after by many. The interview with Kristen was conducted on August 21, 2020.
Aaron Green: Good afternoon Kristen, I am glad we were able to put this interview together. I know you have been very busy!
Kristen Suchanec: I’m so sorry this took so long to actually work! Thank you for bearing with me. I’m happy we are able to talk.
Aaron: Great! I like to start off the conversation with a question that helps our readers get to know you a little better. So, Kristen can you tell me how you got involved at Island?
Kristen Suchanec, VP of Production at Island
Kristen: My background is in manufacturing and planning for consumer packaged goods. I had a friend of a friend and we were just at a happy hour and I asked what he was up to. He was actually our VP of Finance at Island and he handed me a box of pre-rolled joints. They were our Island Minis and I thought it was a great customer experience. I loved the brand and packaging which made it a consumer product versus, you know, this was a few years back where cannabis wasn’t necessarily commoditized or branded. I got really excited about that because I feel like cannabis should be traditional CPG and it should appeal to different people and it should have different brands that appeal to those different groups. So I literally just started a conversation. His brother is our founder and CEO and they needed someone to run production so that was my background and it all kind of lined up and I ended up being employee number five at Island!
Aaron: Wow, employee number five – awesome! OK, great. That is some nice background about how you got involved at the company. The next questions get into product development and manufacturing. The first question is: what’s your decision process for starting a new product?
Kristen: Yea, we are right now owning the lane between cultivation and distribution. So, getting those raw materials for whether it be concentrates or flower and then converting them into that final packaging for everything. So that is what we focus on and spend all of our time with automation and trying to make that process as efficient as possible.
When we’re looking at a new product we’re not necessarily creating a new extraction, we are really looking at the market and the end consumer and what people want. At Island we’ve really focused on vape, pre-roll and packaged flower. Those are the three categories we are working on right now. We are expanding and looking to move more towards vape and live resins and specialty concentrated products that we haven’t really had in our portfolio before. What we would like to do is make sure we have the capability to manufacture that and then take a look at where we think the market is going. We are trying to go in the flower, pre-roll and vape because that is where we spent so much of our time getting pieces of automation so not everything we are bringing in house is manual.
Aaron: Now when you say the capability to manufacture that are you talking about from a packaging perspective or…?
Kristen: Yes, so we won’t do any extraction on site. It’s getting distillate, shatter and flower and then we take that and convert that either into pre-rolled joint, a package of flower or any other final product. So, we are looking at automating that packaging piece.
Aaron: Got it. OK, so the next question — and I think you kind of touched on this as well — are you involved in manufacturing to the extent that you are manufacturing the packaging?
Kristen: Yes absolutely. My whole team’s manufacturing is based out of Oakland. That’s where we do all the conversion of products. I oversee that entire team and have been really involved in a lot of the equipment that we have sourced and iterations that we’ve gone through to make sure that we’re able to automate as much as possible. We’ve really focused on the issue of weighing the material. For our flower line everything is weighed and put into a jar, capped, sealed and labeled for it to come off our lines. We don’t have anyone in packing or anything like that. Our pre-rolls manufacturing is an automated machine where it actually weighs the flower before going into the cone so we’re not having to weigh after the fact and take into account the weight of the cone because that’s so variable so we know that the customer is getting consistency. Then for the vapes, it’ssame thing – the volumetric doses everything.
I have to give my credit to everyone on the floor who is doing the day to day, they find so many new solutions since they are the ones that are hands on. I am really involved in what new equipment we need, what problems we are looking to solve and what’s causing our bottlenecks so we can continue to improve our process week over week and year over year.
Aaron: We’ll dig into some of those problems in a bit. What is your process for not just starting new product but for developing a new product?
Kristen: Yeah, absolutely. So, I think it’s really interesting to see where the market is going. What’s selling really well and especially over the past year pre rolls have been a huge growth platform for us. And especially now, we’ve seen some changes because of COVID as well. We have single joints. But then we have our Minis, which I’ve mentioned before, which are half gram joints. We’re seeing sales on those actually increased because I think people are sharing joints as people want individual things because of this pandemic.
When we go through this process, we’re really – again – we’re so focused on what the consumer wants, and what we think is going to add to our portfolio. Then when marketing and our product team comes to me, we really focus on our machinery, what we can do with it currently, and if we would need something additional. So,we’re excited about expanding into 510s right now. We’re looking at how we can automate the process of capping – we can fill right now, but not cap. And then we also take a look at packaging.
I think it’s a little different than creating like a whole new product, extraction or anything like that, but we were looking at more sustainable options for packaging for child resistance because we’re trying to move away from barrier bags as much as possible. We’re looking at, okay, how many stickers do we need to put on there? What is the labor time going into each piece of product? And again, how are we eventually going to get some consistency across product lines, etc.
So, it’s really taking all three of those components, making sure we’re getting out the customer that feels like they want. I’m having it either fit into our process or again, then go through and look at what automations meanand automation equipment investment you want to make for long term future investments.
Aaron: Are you developing new products internally, or are you relying on outside manufacturers for that?
Kristen: Not everything we do is internal. We have a big network of, you know, cultivators and extractors we work with, but we’re in the midst of getting our own cultivation and manufacturing in house by working with other companies. So with that we’re doing everything.
Aaron: Do you ever bring in external product development consultants for helping out with your processes?
Kristen: No, we don’t bring in consultants. But we have brought in another brand into our fold via a brand called Neutron Genetics. That is part of our overall portfolio. We work very closely with the founder because he has a lot of trade secrets, a lot of his own processes to make sure you’re getting the best product for that specific brand.
Aaron: In your product development, what does getting stuck look like to you?
Kristen: That’s a good question. I think one of the biggest challenges is working with the plant itself, because it’s not consistent and it’s not homogenous. You could get the same strain from the same cultivator, but it’ll be a different batch. It might be a little stickier or a little larger, etc. When you’re looking at traditional manufacturing and automation, you want consistency, homogenized liquids, same viscosity every time, and we don’t have that because the plant itself is natural and is going to have all these different expressions depending on the batch and how it was grown and how it was trimmed even.“I think it’s really the proper equipment, the proper training and then, again, continuing to evolve as a team.”
So, getting stuck means finding an off-the-shelf solution that might work for, you know, nuts and bolts or some kind of food production and then you’re going to have to convert it to actually work with the cannabis plant. So that’s what makes it so challenging, but also really exciting. In the bud, humidity and air can really throw off a manufacturing process which is really different than just doing beverages for example.
Getting stuck means really having to work with the plant concentrates specifically if you think about just the nature of those whether it be shatter, distillate or very sticky product. So again, working with machinery isn’t always what goes hand in hand. So, getting stuck is dealing with all those different formats and inconsistency using the same product day after day.
Aaron: It sounds like consistency is kind of a main topic here?
Kristen: Yeah, I think it depends on what product format we have. For example, about a year ago, we launched infused pre-rolls for Neutron where we’re putting flower, kief and shatter into a joint. So that’s going to perform differently on a piece of machinery than just straight flower.
I think it all depends on the product. Usually it happens when it’s in that machine, you’re trying to get a good flow and a good consistency. You want to have time studies, you know how long it takes to make each batch. But if a certain flower mix is performing differently, it’s getting the settings of the machine dialed, right? It’s also properly training personnel so people know how to react when things get going. Sometimes things get physically stuck in the machine as well, so to be able to react on that.
I think it’s really the proper equipment, the proper training and then, again, continuing to evolve as a team. So for our pre-roll machine, we are now on our third version of it, just because we kept running into the same roadblocks and I’m hoping that continues to evolve and we just continue to get better equipment year after year.
Aaron: I see, do you ever hire outside consultants when you do get stuck?
Kristen: We’ve worked closely with vendors. I will say that we’re not a machine shop or engineering firm. So we’re not the ones creating a lot of what we use on the floor. We’ve partnered with various vendors, which has been helpful, but we haven’t used external consultants.“When you see the huge potential and then see how much is taken out from illegal activity right now, it is frustrating to see.”
Aaron: Okay, now imagine that you have a magic wand and somebody can come in and help you. What does your magic helper look like?
Kristen: I could probably make a really long list if I’m focusing on just my manufacturing and everything! I think the next thing which we’re already thinking about that magic wand is how to get a perfectly rolled joint without having so much manual human touch to it. And like I said, we’ve really attached to that weighing problem. And we’ve seen solutions out there that you know, claim to twist and have that “perfect roll” and you don’t need to even touch it. But I think the biggest challenge there is it depends how well it’s packed. You know, you don’t want it too tight. You don’t want it too loose for that customer experience. So getting that quality, if I could wave a magic wand where I’m putting in, you know, paper on one side and out comes perfectly rolled joints, that would be my magic wand for sure. Okay, I think there’s a lot of solutions out there but to get that quality and that consumer experience that we want, I haven’t seen working practice yet.
Aaron: Okay, What’s the what’s the most frustrating thing you’re going through with the business right now?
Kristen: Again, that could be a long list! I think from a more macro-level, it’s definitely the competition with the illicit market and just how there’s not enough outlets for legal cannabis right now in the state of California. When you see the huge potential and then see how much is taken out from illegal activity right now, it is frustrating to see. We’re going to get this growth and projection of the right number of dispensary licenses and things like that are definitely a huge frustration as well as with the tax structure right now because it’s obviously contributing to people going to the illicit market.
Aaron: So what are you following in the market? And what do you want to learn more about?
Kristen: Yeah, I think that’s a great question. I think the thing I’m most excited about for the larger population isjust more research to come out about the actual attributes of the plant, or how different cannabinoids react together and can have different effects. How terpenes can affect the high, how things can be used and distantly, recreationally, etc. And really, hopefully evolve and move away from strictly some sativa, hybrid,indica classifications, and really be able to educate the consumer more about the plant so people can have a more a personal relationship to understand how cannabinoids or specific terpenes are going to give them a different effect. And again, I think that’s so interesting because it could be used for therapeutic reasons that people do consume cannabis or it could just make it a better experience for people who want to take this as an escape or a way to relax and everything. So I’m really excited because more research is going to be able to get done and we can really learn more about how all of these things interact in the body and then people can take it to a whole new experience and be more educated all around.
Aaron: Alright that’s the end of the interview Kristen! Nice chatting and meeting you!
Roy Bingham, will present a current market overview as it relates to the current cannabis consumer. Our best-in-class consumer insights, market tracking data, and industry forecasts will illuminate current market conditions, market size, consumer landscape and the evolution of consumers since cannabis legalization. We will explore lessons learned from current consumer demographics to forecast and provide expectations as legalization efforts continue.
The New Normal: How Coronavirus Has and Will Affect the Cannabis Market
Nic Easley, 3C Consulting
This presentation will discuss the current state of affairs in the cannabis industry and how COVID-19 has impacted the market and the supply chain. Nic Easley will discuss how the pandemic has affected the cannabis market and how the market will adjust and adapt in this new normal.
According to a press release published in late August, CBD watchdog Leafreport found a large number of inaccuracies when testing CBD-infused beverages on the market today. Leafreport conducted independent lab testing on 22 different CBD-infused beverages and found more than half of the products had less CBD than the label claimed. To be specific, 12 out of the 22 products tested contained less CBD than advertised.
Canalysis Laboratories, the lab contracted to conduct the testing, found two of the products didn’t even contain any CBD. 18 of the beverages had CBD levels with a label claim variance greater than 10%. 14 of the beverages had CBD levels with a label claim variance greater than 40%. Only 4 of the beverages achieved an ‘A’ letter grade for coming within 10% of their advertised CBD levels.
According to Lital Shafir, head of product at Leafreport, the CBD beverage market is a bit tricky, largely due to product formulation issues. “This is in line with our expectations because CBD beverages are difficult to formulate and contain relatively small amounts of CBD, which means that variations of even a few milligrams can have a big effect,” says Shafir. “The CBD industry is completely unregulated and there have been many cases of companies selling products that contain little to no CBD. That’s why third-party testing is important for brands in this industry.”
Interestingly, this report did not find a positive correlation between a company’s reputation and their product’s test results. The full study can be found here. Leafreport is an independent, peer-reviewed website dedicated to increasing transparency in the CBD marketplace.
Cannabis extraction and manufacturing is big business in California with companies expanding brands into additional states as they grow. This is the fourth article in a series where we interview leaders in the California extraction and manufacturing industry from some of the biggest and most well-known brands.
In this week’s article we talk with Michael Schimelpfenig, head of R&D and BHO extraction manager at Bear Extraction House. Michael worked in the cannabis space for about five years prior to landing his role at Bear, having spent several years in the hills of Humboldt County. The interview with Michael was conducted on August 3, 2020.
In next week’s piece, we sit down with Kristen Suchanec, vice president of Production at Island. Stay tuned for more!
Aaron Green: Good morning Michael and thank you for taking the time to chat with me today!
Michael Schimelpfenig: Thanks, excited to be here!
Aaron: I like to start off the conversation with a question that helps our readers get to know you a little better. So, Michael can you tell me how you got involved at Bear Extraction House?
Michael Schimelpfenig, head of R&D and BHO extraction manager at Bear Extraction House.
Michael: You know, I actually landed my role at Bear through a job search on LinkedIn. I had been working in the traditional market for five years and was getting tired of the irregular paychecks and general uncertainty of working in that market. You know, too many helicopter buzzes and all that. I felt like the risk vs reward just wasn’t there. I like Northern California and knew I wanted to find something up in Humboldt County where I had been fortunate to get experience out in the hills. After I applied on LinkedIn, I was contacted in twenty-four hours. I had an interview twenty-four hours after that and the next day I had a job! It’s been a big change going to a legal company. The possibilities are lightyears beyond what you can do in the traditional market. Lots of resources and equipment available that just aren’t there in the traditional market.
Aaron: Fascinating! I spent a week up on Humboldt last year and it is beautiful up there. The next questions will be focused on product development and manufacturing. What is your decision process for starting a new product?
Michael: We get feedback from a lot of different places. Sometimes a new product idea is coming from our CEO, Per. He comes to me with new ideas and asks if we can do something. Often it will start with a general question. Is it possible with the given capabilities? Is it scalable? Some of our new product ideas are based on market input and then others are based on employee input. Sometimes we have pre-existing ideas and just need to sit down to formalize them. Here at Bear we have the capability of making a lot from a little input.
We’re always playing with ideas. We have lively R&D meetings each week where we throw ideas around. Take byproducts from a product development run for example. Maybe it’s not a byproduct, but maybe a separate new product altogether! Sometimes we’ll start off wanting to make something and, in the process, create something unexpected that we are then able to turn into a product. Creating new products is just as important as improving optimizations. Ideas come from all over the place.
We focus these ideas through the R&D committee. Common questions include: How do we develop the product? What are the costs? Is it marketable? We have to view things from an economic standpoint and we won’t proceed until we can figure out what the product can be and what we can make money from. Our R&D committee is made up of our COO, Jeff, our lead extractor, our oven room manager and our post-production manager who focuses on product separation. When we kick a new project off It all takes lots of scheduling and coordination.
Aaron: Are you developing new products internally?
Michael: We do 100% in-house product development and manufacturing. We are formalizing and creating a more focused approach to R&D and are bringing in some academics now. They are young minds with backgrounds in organic chemistry and thermodynamics. This is important because it’s the science behind the process that helps to generate the products. We believe the added talent should help to provide some grounding to the R&D. Before we made a lot of products by accident. The ultimate goal is uniform manufacturing and that requires an understanding of molecular processes.
Aaron: Answer the next question however you like. What does being stuck look like for you?“If a product isn’t behaving the way we expect, we will do testing to determine cannabinoid and terpene levels to gain better understanding.”
Michael: Well, there are a couple ways to get stuck. Sometimes you can get stuck with a limited product portfolio. A year and a half ago all we made was live resin. Now we have different levels of live resin and six different vape carts. If you are not changing and developing new products, you are stuck.
When the web of production stops going that is definitely what I consider getting stuck. You can get stuck if sourcing material is difficult to find or cost prohibitive. We will pivot and adjust manufacturing material if that happens. We are also exploring best avenues for sourcing high quality trim and working with farmers to specifically grow strains and exotic genetics. But overall, getting stuck happens. Being stuck, on the other hand, is a lack of creativity.
Aaron: If you get stuck is it usually the same place? Or is it different each time?
Michael: We have redundancies for equipment and components. If we are getting stuck in the same place it is usually due to a lack of source material. Sometimes we get material that degrades prior to extraction. It’s a matter of contacting supplier to coordinate with them on the best approach forward. If a product isn’t behaving the way we expect, we will do testing to determine cannabinoid and terpene levels to gain better understanding. In the end, sometimes we just have to pivot to other products with things we have.
Aaron: Thanks for that. Now, imagine you have a magic wand that can take care of your issues. What does your magic helper look like?
Michael: My magic helper would be someone to help with reporting. Someone that can take care of METRC indexing and preparing final R&D reports. Like a magic data processor. Someone to handle the minutiae.
Aaron: What’s most frustrating thing you are going through with the business?
Michael: There’s never enough time! We continue to manufacture at full capacity all the time. With that demanding of a schedule it can be difficult to manage time between day-to-day processes and being able to look at bigger picture.
Aaron: Now for our final question: What are you following in the market and what do you want to learn about?
Michael: I’m following the guys out there that are heavy into crystallization. There are some huge THCA diamonds coming from East Coast Gold. I would like to know what their solution is. What is their magic liquid and process? I am a big fan of diamond growth. You can grow extremely pure isolates that way. We grow our own diamonds and have had them tested greater than 99.99% THCA. I think high level purity THCA from diamonds is preferred versus distillate. There is a difference in the smoke between them too. Having a process for making large quantities of diamonds would open us up to sticking our foot in edibles and topicals too. There is control that comes with having a purity level like that. Dosage is difficult without it. I am also interested in improving extract purity and isolating terpenes. I like solvent-less products. It means it came from a high-quality source. I would be just as happy smoking good flower as concentrate derived from the same flower.
Aaron: Alright that concludes our interview! Thank you again for the time today, Michael!
With the death of Facebook arbitrage, direct-to-consumer (DTC) marketers are forced to look for new ways to drive sales more quickly than ever before. Enter TV. Once seen primarily as a branding medium, DTC brands are now using television to drive online and in-store sales. The continued growth and sophistication of attribution modeling in television has allowed marketers and their agency partners to more directly measure television’s impact on KPIs.
But what if you are a brand that can’t be on Facebook or Google due to ad restrictions? Or your potential customer base is spread across multiple demographics? TV is a great, if not the only, way to reach CBD customers on a mass scale. CBD brands face the same challenges that all DTC brands face with the added bonus of additional restrictions due to product perception, and can also vary drastically state-by-state around the country. These restrictions however, also create a huge opportunity for the savvy marketer to dive in and own share of voice in the CBD market. With Facebook off the table, CBD brands are spared the expense of learning that Facebook arbitrage no longer exists. The opportunity to scale an emerging CBD brand on TV has never been more accessible.
The acceptance of CBD brands on television still faces restrictions as each network group has their own standards and practices. However, the number of networks accepting CBD products grows by the day. As education and understanding around the efficacy of CBD increase, so are the networks’ willingness to accept advertising. Remember, there once was a time when liquor brands couldn’t advertise on TV!
Looking at other media platforms for reaching potential CBD customers through advertising, terrestrial radio also provides very strict guidelines, if allowed at all; the same can be said for digital options and satellite radio. Whereas podcasts are a popular option due to regulations mostly being decided upon by the podcast’s producers, it’s hard to compare the reach to consumers of podcasts vs. television.
The nuances of navigating the media landscape for CBD brands remains complex. The opportunity to capture market share through TV is wide open. The CBD brand who recognizes this and acts most quickly has the chance to become the undisputed brand leader in a market that projects to exceed $45 billion by the year 2024.
By Seth A. Goldberg, Justin M. L. Stern No Comments
Over the past year, more and more consumer class actions have been filed against manufacturers and distributors of CBD-infused products. These actions typically assert claims based on how the product is marketed, such as whether it (i) contained the advertised amount of CBD, (ii) contained more THC than it should have or (iii) has the ability to provide the therapeutic benefits touted. The marketing of these products is subject to regulation by FDA, which has yet to issue pertinent regulations that have been expected since passage of the 2018 Farm Bill legalizing hemp and CBD products derived therefrom. Thus, in recent months, a number of federal courts have stopped these class actions in their tracks pending further guidance from FDA as to how CBD-infused products should be regulated. This growing body of precedent should be welcome news for the CBD supply chain, as it may provide a disincentive to the plaintiffs’ bar to expend their resources on similar actions until the regulatory framework is clear.
Just some of the many CBD products on the market today.
The first case that was put on hold until the “FDA completes its rulemaking regarding the marketing, including labeling, of hemp-derived ingestible products” was Snyder v. Green Roads of Florida, a case about the content of CBD in Green Roads’ products pendingin the U.S. District Court for the Southern District of Florida. Then, in May, a judge in the U.S. District Court for the Central District of California took the same approach, deciding to stay the case of Colette v. CV Sciences, Inc., also on account of the lack of FDA regulations. Less than one month later, a judge in the U.S. District Court for the Eastern District of California, relying on the rulings in Snyder and Colette, stayed Glass v. Global Widget, LLC, also under the primary jurisdiction—a doctrine implicated where the claims involve a federal agency’s expertise concerning a regulated product.
On August 11, 2020, two federal judges became the most recent to stay putative class actions involving the sale of CBD products under the primary jurisdiction doctrine: Pfister v. Charlotte’s Web Holdings, Inc., in the U.S. District Court for the Northern District of Illinois, and Ahumada v. Global Widget LLC, in the U.S. District Court for the District of Massachusetts. Both were stayed on account of a lack of regulatory direction from FDA.
A trend appears to be developing, but not all courts faced with the option to stay the proceedings pursuant to the primary jurisdiction doctrine have chosen to put their respective cases on hold. In March, the judge overseeing Potter v. Diamond CBD (pending in the U.S. District Court for the Southern District of Florida) declined to stay the proceedings despite the absence of FDA regulations concerning ingestible CBD products. Despite the defendant’s objection, the court declined to stay the proceedings, finding that to the extent FDA regulations were forthcoming, they would be unlikely to change the food labeling requirements which were at issue in that case.
The stays of federal court cases involving CBD products highlight the need for FDA to issue regulations that cover the marketing of them. They also may provide the CBD product supply chain with a break in the number of consumer class actions filed until such regulations are issued.
Cannabis extraction and manufacturing is big business in California with companies expanding brands into additional states as they grow. This is the third article in a series where we interview leaders in the California extraction and manufacturing industry from some of the biggest and most well-known brands.
In this week’s article we talk with Joaquin Rodriguez, chief operations officer at GenX Biotech. Joaquin was introduced into the cannabis industry through a close personal relationship and has spent seven years researching and navigating the cannabis market before jumping into his career with GenX Biotech. The interview with Joaquin was conducted on August 4, 2020.
Next week, we’ll interview Michael Schimelpfenig, head of R&D and BHO extraction manager at Bear Extraction House. Stay tuned for more!
Aaron Green: Hi Joaquin! I appreciate you taking the time to chat today. I’m glad we were able to connect!
Joaquin Rodriguez: Absolutely! I’m looking forward to it.
Aaron: Me too! So, I like to start off the interview with a background question so people get a chance to know about you better. How did you get involved with GenX Biotech?
Joaquin Rodriguez, chief operations officer at GenX Biotech
Joaquin: I went to school at Cal Poly for mechanical engineering and spent some time in the oil industry. In 2011 I was introduced to who would be the future founder of GenX Biotech, Shea Alderete. I spent 7 years diving into cannabis industry to better understand the landscape and Prop 215 (California’s Compassionate Use Act of 1996) and then Prop 64. In late 2017, I joined GenX Biotech to spearhead the acquisition of licensing and scale up distillate manufacturing.
Aaron: Awesome. My next questions are focused on product development. What is your decision process for starting a new product at GenX Biotech?
Joaquin: Our founder, Shea Alderete, is an innovator in product development. He specializes in formulations and new formulas for vape products. We are big on gathering empirical data. In any new product we will run a small batch and test first with heavy cannabis users to gauge their reaction to the product. We will then test with light cannabis users and finally new cannabis users so we get the full spectrum of user experiences. Throughout the process, we are gathering empirical data on things like taste and perceived therapeutic effects.
Aaron: Are you personally involved in manufacturing? Tell me about your process.
Joaquin: I am, yes. We specialize in large scale distillate manufacturing to make THC oil and we formulate batches using cannabis-derived terpenes. This what we call Sauce, a full spectrum high-terpene extract obtained from a butane hash oil (BHO) process. This is a separate extraction method from our alcohol extraction process.
Aaron: Very insightful! What is your process for developing new products?
Joaquin:GenX Biotech’s core mission is to bridge the gap between cannabis culture and the science behind cannabis. We focus more on therapeutic effects as well as recreational. We keep a pulse on the industry as a whole to see what people are doing and saying as well as new extraction methods. When we capture that data we evolve and adapt and create new formulations based on that preference and test it out. It’s a constant game of “does this look good? taste good? make you feel good? how is the potency?” It’s really a big collaboration with our end users.
We will also collaborate with other brands and manufacturers to stay ahead of the curve, share information that can make us a better company, more power in numbers is what we say. As an example, Wonderbrett is known for their high-quality flower. They have a high-end product and high-end brand recognition. We would, for example, strategize and collaborate together to utilize a unique cannabinoid and terpene profile and test that with our vape products in the market. It’s more of a collaboration than a white label relationship. In this way, Wonderbrett can expand into the extracts space via their brand. We do this with other brands as well where we’ll use their raw material and joint market the brands on the final product.
Aaron: Fantastic. Are you developing new products internally?
Joaquin: We develop all our products 100% internally.
Aaron: Do you ever bring in external product development consultants?
Joaquin: Not for products, however there are certain situations, like hardware development, where we will work with outside groups that specialize in equipment manufacturing to create something specific and one off for us. We are currently working on bringing to the market an FDA-approved inhaler technology device that is a non-combustible metered delivery device that we are really excited about. In addition, we have an incubator program with our LA partners to introduce new brands to the market which is a great asset for consulting brands looking for a home and multistate resources.
Aaron: Very cool, that’s the first I have head of inhalers in the market. For my next question feel free to answer however you like. What does being stuck look like for you?
Joaquin: Getting stuck can happen in a few different areas. With respect to manufacturing, the main bottleneck issues are consistent quality of the raw biomass materials. Mother nature does not duplicate the same results exactly every time and fluctuations can affect the cost and quality of raw goods. Other things like wear and tear on manufacturing equipment are not normally an issue as everything is stainless steel and pretty stable. But things like valves, gaskets and grommets tend to wear down with consistent use. When those fail, a whole operation can be shut down. We keep a stockpile of those on hand to make sure we stay in production.
“I support the leaders that help increase the overall knowledge for consumer and patents to know the difference between a quality product and a boof product.”Aaron: If you get stuck is it usually the same place? Or is it different each time?
Joaquin: Like I said, if we get stuck its usually in the sourcing of raw materials. Cultivators can have a bad crop or weather might affect their crop. It almost always comes down to the relationship with your cultivators. They fuel the industry and are the back bone of the whole supply chain. If they have any issues it affects everyone down line.
Aaron: Do you ever hire outside consultants when you get stuck?
Joaquin: Not really. We rely on our experience and years of operating and going through our own failures to navigate any issues with manufacturing. Collectively we work together to pivot and adapt to the ever-changing legal cannabis landscape. We do on occasion outsource to a 3rd party to help acquire raw goods. On the other hand, we separately consult for other people and groups looking to build out labs!
Aaron: That’s an excellent position to be in! For the next question imagine there’s a magic wand. What does your magic helper look like?
Joaquin: Someone that can come in and help with taxation. Triple taxation is tough. There’s the cultivation tax, manufacturing tax, state tax and local taxes. Long Beach recently lowered their local tax from six to one percent, so that is encouraging, but there needs to be a fair taxation for this industry to really thrive.
Aaron: What’s the most frustrating thing you are going through with the business?“I’m really excited for the continued education and deregulation of cannabis and its medical applications.”
Joaquin: I think that would be sales downline. With Prop 215 and the transition to prop 64, legal outlets have been heavily truncated. There are now approximately 600 legal retail outlets down from a high of about 4500 prior to prop 64. The competition landscape is really high and it’s hard to get product on the shelves without proper capital to keep the brand going. It is advantageous to partner with an established distro in order to get involved with their downline and run lean and mean.
Aaron: Now for our final question. What are you following in the market and what do you want to learn about?
Joaquin: I’m really excited for the continued education and deregulation of cannabis and its medical applications. It never should have been illegal to begin with, but with government corruption and greed it was targeted and use for multiple agendas. I support the leaders that help increase the overall knowledge for consumer and patents to know the difference between a quality product and a boof product. You have seen the results of the vape scare and there’s a good reason for it. Most people don’t want to pay the high ticket for legally compliant product so they turn to the illegal side where no regulation or testing is conducted to ensure they are getting safe, quality products.
In addition, the demand is so strong that illegal producers are able to put whatever they want in their products and sell them as if they are legit, provided they have the knock-off packaging, and those operators further harm those people because the state they are selling in hasn’t adapted to the times and has prohibited the availability of legal cannabis. Their inaction and support of the continued “war on cannabis” makes them just as guilty in the results of those people who have fallen ill or been hospitalized.
There have been lots of new studies published that are slowly making their way into social media and reaching consumers so that is encouraging. Another important element is the education of bud tenders because they are the face of the brand when the customer or patient is at a legal dispensary so they need to be educated on what makes for a quality product and how it can help or achieve a desired result for a customer or patient.
Aaron: Well, that concludes the interview Joaquin. Thanks for taking the time today to talk. This is all awesome feedback for the industry. Thanks so much for these helpful insights into product development in the cannabis industry.
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