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Flower-Side Chats Part 8: A Q&A with Andreas “Dre” Neumann, Chief Creative Director of Jushi Holdings Inc.

By Aaron Green
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In this “Flower-Side Chats” series of articles, Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses integrate innovative practices to navigate a rapidly changing landscape of regulations, supply chain and consumer demand.

Jushi Holdings Inc. (OTCMKTS: JUSHF | CSE: JUSH) is a multi-state operator with a national footprint and core markets in Illinois, Pennsylvania and Virginia, with developing markets in California, Nevada, Massachusetts and Ohio. In addition, Jushi maintains offices in Colorado, New York and Florida. In Q1 2021 they posted $42M in revenue representing 30% growth over Q4 2020 and 77% of their sales were conducted online. Jushi brands include Beyond / Hello, The Bank, The Lab, Tasteology, Sēchē, Nira CBD and Nira+ Medicinals.

We interviewed Andreas “Dre” Neumann, Chief Creative Director of Jushi Holdings. Dre joined Jushi in February 2020 after connecting to the founders through a colleague and running a large user experience research project. Prior to Jushi, Dre cut his teeth in advertising and branded entertainment. He was a startup founder at TalentHouse.com and a Partner at Idean, which he later sold to Capgemini.

Aaron Green: How did you get involved in the cannabis industry?

Andreas Neumann: I’m a guy who has been interested in many genres – I’m always looking for the next big thing. I started out in advertising and then I faded into branded entertainment when the traditional advertising wave was kind of shaky due to the digital attack of the internet with platforms like Facebook and Myspace.

I’ve also been fascinated by digital which led me to move into Silicon Valley. I had a startup called TalentHouse.com which was like LinkedIn for creative people. I learned a lot there about building a company in Silicon Valley. It was the first time I was confronted with experienced customer and user experience people. CX and UX was already kind of a thing in Silicon Valley at the time. My last company I was a partner in was a company called Idean, a Silicon Valley-based user experience company which we sold to a French company called Capgemini about four years ago.

I continue to be involved in the entertainment industry as kind of a creative outlet. I’m working with a lot of big rock bands like The Foo Fighters and Queens of the Stone Age. I just did the last Foo Fighter album. Photography is my last domain of total creativity where I can do whatever I want specifically in the rock business.

Andreas “Dre” Neumann, Chief Creative Director of Jushi Holdings Inc.

Coming to the cannabis point, I was actively looking for a partner to do a cannabis brand with The Queens of the Stone Age. I met Jushi through a very interesting coincidence. I was on the way to do a shoot in Silicon Valley with a guy called Les Claypool, who is from a famous band called Primus. I shot Les there and I was driving through Silicon Valley and remembered I had a friend nearby I should talk to. So, I called him and he was in Singapore. He called me right back (he never calls back normally) and said “You’ve got to talk to Jushi! You’ve got to talk to these guys Jim Cacioppo and Erich Mauff (two of the founders). They are starting something very exciting. They could be your partners.”

This is where the conversation started. It was my first time confronting a cannabis MSO and understanding how this works. I had just exited from my last agency and put together the best people from my previous endeavor to create a new sort of “creative collective” of UX and marketing experts. We did a test project for Jushi, a big research project on cannabis for California in retail, which was super interesting. It was a 200-page document – the first phase of user experience of the process before you build something – and through that I saw this as a big opportunity. I spoke to the founders again and came fully onboard in February 2020, just before the pandemic hit. From then on, it’s been a real amazing journey with me and the team. And it was the right moment to jump on the Jushi train as it was just about to leave the station.

Green: Can you talk about some of the geographies you are active in?

Neumann: Jushi is a multi-state operator. The most important state for Jushi is Pennsylvania. That’s where we have the most stores and we are building more stores there this year as well, very aggressively. We currently have 13 Beyond / Hello medical cannabis dispensaries in the state with many more to come, bringing an unmatched in-store experience, coupled with online reservations and in-store express pick-up.

The next important market for us is Virginia. We have a unique position there in Manassas with a cultivation facility and manufacturing and extraction facility, with the license for up to six stores. We started store number one in the facility, and we are rolling it out in HSA II. We are the only ones who can open stores in HSA II and this is straight on the border to Washington D.C. We call Virginia the “sleeping giant.” So much happened in the last year in Virginia around regulation and the industry, and now flower is finally legal.

Then we have Illinois – super interesting stores there. We have two flagship stores located straight on the border of Missouri, basically in East St. Louis. They are our biggest performers in the whole network because of the location. You have people coming over from Missouri, which is really in the beginnings of a medical market, and Illinois, which is now adult use. It was a super cool experience to see a medical market change to adult-use and be part of that change.

In other states, we recently announced the acquisition of Nature’s Remedy in Massachusetts, where we will have cultivation, processing and stores there. In Nevada, we have a grower-processor and we’re looking at opportunities in retail as well. At the moment, we have all our brands launched there. We are also continuing to build out our processing and cultivation capabilities in Ohio.

Last but not least is California. I’m based in California and the whole creative team is here. It’s a vanity market and it’s very competitive, but you’re in the capital of the world of cannabis in terms of brands and retail. California is in the future compared to the other states. So, we need to be here. It’s just like a soccer team. You must compete against good people or you’re not going to grow. So, that’s why competing here in California is key.

Green: How do you think about brand development, specifically in the cannabis CPG space?

Neumann: California is the king of brands. There are more products than brands in the cannabis industry at the moment. The products may have nice packaging, but brands aren’t really out there yet. The only states where you have “brands” as I would call them are California, Colorado and Oregon. I think we are just about to get to the place where the first rush is over and people with more experience about brands come in and build on the story of the brand. The myths, the cult, the legend of that story is important, and I think this is just about to get started.

Our brands, The Bank and The Lab, have good stories. They have been around a long time. We acquired them from a company in Colorado and we rolled them out in Nevada with a total revamp of look and feel as well as story. The Bank is celebrating this kind of roaring 20s idea. We have a lot of images, from black and white prohibition-style photos to this black-gold, very high-end, adult use tailored brand.

Vaping products from The Lab brand in Colorado

The Lab is a solid vaping brand from Colorado, and one of the 8th best-selling vape brands of all time. We revamped The Lab image to “take the lab out of the lab.” So basically, take the hairnet and the lab coat out of the vibe and add a whole new energy, with symmetry and nature in a leading role.

Tasteology, which is one of our self-made, self-created brands, was all based on customer research. In Pennsylvania, we have thousands of people we can communicate with, and we can test our brands. So, we’ve done focus groups and testing to see what sticks, and the name Tasteology came out of a huge research project with hundreds of names.

The last brand comes back to your question “Where are the brands going?” I think our brand Sēchē is the first one of our own creation and has this total lifestyle feel. It’s fine grind flower which normally might make its way to extraction. We treat it well and then we sell the raw flower, as well as a pre-roll line. It’s this kind of a young, cost effective, very affordable pre-roll and pre-ground brand, which is fabulous. And Sēchē really gets a lot of traction – flies off the shelves in Pennsylvania. It is a great product.

So, this is now the first stage where brands are created, but I think overall, there’s not many brands yet. They have to find their stories and their real purpose, I think. But California is ahead of it. And there’s some of them coming out now. So, I think there’s a new wave coming. It always goes in phases.

Green: How do you think about brand partners?

Neumann: We did the first step towards outside partnerships recently. We just partnered with Colin Hanks, Tom Hanks’ son, on his handkerchief line called Hanks Kerchiefs and we’re going to sell these in our stores. Hanks Kerchiefs has nothing to do with cannabis, but it takes our stores to a place where it’s not only cannabis products, it’s more the retail scene, the lifestyle scene. If we go into future partnerships with people, we would partner with big talent agencies to create something special. Maybe it’s limited editions, maybe it’s something more story-driven, but it doesn’t have to be there forever. I see using outside partnerships for more “drops,” as we call it. But we will see. You cannot force these collaborations. They have to come at the right time and need to be real. That’s what people feel. If it’s real you can feel it.

Green: Do you notice any differences in consumer preferences between the states you’re in and do you have to tailor your messaging differently?

Neumann: This is a super interesting question. I’ve been working in Europe, and you have all these different countries, so every market is different. Every market gets different messages. Every market gets different commercials. It’s the same in cannabis in the United States! The only difference is that it’s so regulated. I could launch a gummy in Virginia and all Virginia would know about it. It would become a household name, and everybody uses that gummy. But in California, no one will hear about it. No one would care about it. And the same vice versa, right?

So, different states, different brands. With our acquisitions, we are acquiring new brands, which then live only in those states. Then we have to support that. If the data would show we should then we do it. When we acquire something we consumer test in many states, and specifically in the states where the acquisition happened.

Overall, you can say flower is always what people want. But in markets like Virginia, we cannot sell flower at the moment. In Pennsylvania you have flower, but you can’t have edibles. Do Pennsylvanians want edibles? Of course, they want it but it’s not allowed yet. So, there’s always this to consider.

Green: What are some of the forward-looking opportunities that you see to merge product with technology?

Neumann: It’s interesting that flower, the most old-fashioned thing you could have, is the biggest thing. If you get into it, it’s pure, you can smell it, you can trust it. Flower has its own charm.

The Beyond / Hello retail location in Scranton, PA

So, asking about merging technology and product is like asking what technology comes with drinking wine. There’s lots of stuff around it. I think in the end the technology will be more about how you can create a product which delivers high THC, fast and controlled. The technology that goes into making stuff like live resin has a big future, because not everybody can make it. It has a very complicated process of freezing the product within four hours after the harvest, and then cold extraction. So, I think technology there has a big impact and gets the experience of the consumption right.

In the consumer world, people have tried a lot of things with technology. For example, limiting doses and inserting flower into a device. There are people trying all kinds of stuff. Common sense is always the key. What do you want to use most? Do you want to have a pre-roll and just enjoy it? A long one when you have friends around? A short one if you’re alone walking a dog? I think you have to keep it simple. That’s the most difficult thing most of the time.

Green: Final question here. What are you most interested in learning about? This can be personal life or cannabis.

Neumann: When I entered the cannabis industry, I hadn’t been a consumer since I was 18. I was more of an alcohol guy, but then later I stopped drinking alcohol, so I was totally clean the last 15 years until I entered the cannabis industry.

When I do something like making films about a jet fighter, I have to fly the jet fighter. If I make a film about jumping out of a plane, I have to jump out of the plane. So, if I work in the cannabis company, I have to consume cannabis. I cannot not consume it. So, I started professionally consuming cannabis every day. From day one when we started research, every day I tried other products and I became a real user. Not during the day, but in the evening when it’s the right time.

First of all, I compare it a lot with music. It’s like a feeling. Everybody feels it differently. I think what it does – and this fascinates me about it and it’s why I love to be in this industry – is it seems to be slowing down the world a little bit and your desperation. This slowing down of desperation actually opens you up to receive and when and you receive good stuff it comes to you kind of effortlessly. Not only is it great for medical use – it has helped me for pain as well – but also as a receiver of energy. I think it clears a lot of the “signal.” I’m always interested in learning more about this incredible plant.

Green: Thanks Dre, that concludes the interview.

Neumann: Thanks Aaron.

Soapbox

Can Cannabis Avoid Alcohol’s 3-Tier Distribution System?

By Rick Kiley
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As an experiential marketer that works with a lot of vice-oriented brands, I’ve always been fascinated by the story of the rise of spirits in the US – a history marked by ingenuity in the face of heavy restrictions, clashing social norms, crime and political ideals. Since then, those same qualities have emerged in the story of cannabis and how, against all odds, it has recently begun to push its way into the mainstream. But on the path to legalization, cannabis can also learn a lot from the spirits industry about what not to do.

For example, when laws governing the spirits industry were written in the post-Prohibition 1930s, the federal government wanted to create an equitable landscape. So, they created a 3-tier system – manufacturers or importers must sell to wholesalers, wholesalers must then sell to retailers and retailers sell to us. They figured that keeping manufacturing interests separate from wholesale and retail interests would keep any large company from owning an entire supply chain, muscling out smaller competitors.

In theory, it’s not a bad idea. Imagine the consequences of massive companies like Diageo or AB InBev using their money to pay bars and liquor stores to only stock their brands and not competitors. Add on the Tied House Laws, which basically says an entity in one of the three categories cannot have an ownership stake in any of the others, and you get a seemingly even-handed marketplace.

Tied House Laws theoretically limit one entity from monopolizing a supply chain

In truth, it makes it almost impossible to be disruptive or for new brands to break through. Other industries have innovated by cutting out the middleman and selling direct-to-consumer – something that simply cannot happen in alcohol (minus the wineries and distilleries that can sell direct out of their tasting rooms). Also, now distributors are so consolidated that there are only one or two big distribution companies in each state. So, as a company trying to bring a new product to market, you have to get into one of these highly selective and competitive distributors if you are going to be successful – a challenging ask for a small, independent brand.

Protection racket

Now, imagine that same challenge coming to the cannabis space. With legalization around the corner, the adult use (as opposed to medical use) cannabis industry could easily look like alcohol in the rules that will be set up.

The demand for high quality cannabis continues to increase, but the prices need to level out to stave off the black market.

Right now, adult use manufacturers can sell their products to dispensaries directly. Some use a distributor, but there is no nationwide mandate to – which is probably for the best. If a distributor isn’t a requirement, it forces brands to offer something new to differentiate themselves. It will spark innovation, rather than add an extra profit margin that will get rolled into the final price – a price that is already higher than it should be due to the murky federal legal status. Adding complexity and cost will only make it harder to compete with the illicit market. For the industry to grow, costs for illicit cannabis can’t be lower than its legal counterpart.

Of course, we are in the nascent stages of legalization here and we’ve come a long way culturally and technologically since the 30s. But remember, the rules governing alcohol were written nearly 100 years ago along with the passage of the 21st amendment repealing prohibition. Startlingly, those laws haven’t changed that much since they were written, so any mistakes made now in dealing with the cannabis industry could last for a long time.

A new way forward

What the cannabis industry needs is a new model for the adult use/recreational space, keeping some of what exists in the alcohol industry but without ever mandating use of a distributor – the middle tier. This would mean keeping Tied House Laws in place and applying them to cannabis so that a manufacturer could never hold an interest in a retailer, while still allowing them to sell directly to dispensaries and to consumers. Currently, some states allow for vertical integration, which would change under Tied House Laws.

This should be pretty simple, since most states are already separating licenses by type of activity (manufacturer, retailer, etc.) and it would promote competition while bringing the widest array of products possible to each consumer. Also, it would prevent any behemoths from squeezing out the up and comers.

extraction equipment
Constant innovation is a hallmark of the cannabis market and a key factor in continuous growth.

Of course, some retail license allowances could be considered on a case-by-case basis. For example, I would carve out an exception that growers/manufacturers could sell direct to consumers through a single “tasting room” at their brand home. This is similar to the operations of microbreweries, distilleries and wineries. It would encourage education for consumers, and provide great opportunities for brands to show why their products are better or unique.

Given the technology and logistics solutions available to businesses in a 21st century economy, mandated distributors create a sometimes-unnecessary barrier to an already efficient supply chain. If mandated, prices will inflate to cover added margin, thus making it harder to bring consumers over from the legacy market to the legal one. I’m not against the idea of a distributor – they can add tremendous value, but the mandate would seriously curtail industry growth.

Direct-to-retail and direct-to-consumer sales are necessary for the economic health and growth of the industry. Without this, using alcohol as a cautionary tale, at some point the middle tier cannabis brands will inevitably begin to wield an outsized amount of power. We are living at a time where innovation is going to be the key to explosive growth in the cannabis industry, so it’s important to do everything possible to let the market find its way without falling into a century-old trap.

Leaders in Cannabis Testing – Part 1: A Q&A with Milan Patel, CEO and Co-Founder of PathogenDx

By Aaron Green
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In this “Leaders in Cannabis Testing” series of articles, Green interviews cannabis testing laboratories and technology providers that are bringing unique perspectives to the industry. Particular attention is focused on how these businesses integrate innovative practices and technologies to navigate a rapidly changing landscape of regulatory constraints and B2B demand.

PathogenDx is an Arizona-based provider of microbial testing technologies. Since their inception in 2014, they have broadened their reach to 26 states in the US. In addition to cannabis product testing, PathogenDx also provides technologies for food safety testing, environmental testing and recently started offering human diagnostics testing to support COVID-19 response efforts.

We interviewed Milan Patel, CEO and co-founder of PathogenDx. Milan founded PathogenDx as a spin-off from one of his investments in a clinical diagnostics company testing for genetic markers in transplant organs. Prior to PathogenDx, Milan worked in finance and marketing at Intel and later served as CFO at Acentia (now Maximus Federal).

Aaron Green: What’s the history of PathogenDx?

Milan Patel: PathogenDx was effectively a spin-off of a clinical diagnostics company that my partner Dr. Mike Hogan, the inventor of the technology, had founded when he was a professor at the University of Arizona, but previously at Baylor Medical College back in 2002. I had invested in the company back then and I had realized that his technology had a broad and wide sweeping impact for testing – not just for pathogens in cannabis specifically, but also for pathogens in food, agriculture, water and even human diagnostics. In the last 14 months, this became very personal for every single person on the planet having been impacted by SARS-CoV-2, the viral pathogen causing Covid-19. The genesis of the company was just this, that human health, food and agricultural supply, and the environment has and will continue to be targeted by bacterial, fungal and viral pathogens impacting the safety and health of each human on the planet.

We founded PathogenDx and we pivoted the company from its original human organ transplant genetics market scope into the bigger markets; we felt the original focus was too niche for a technology with this much potential. We licensed the technology, and we repurposed it into primarily cannabis. We felt that achieving commercial success and use in the hands of cannabis testing labs at the state level where cannabis was first regulated was the most logical next step. Ultimately, our goal was and is to move into markets that are approved at the federal regulatory side of the spectrum, and that is where we are now.

Green: What year was that?

Milan Patel, CEO and Co-Founder of PathogenDx
Photo credit: Michael Chansley

Patel: 2014.

Green: So, PathogenDx started in cannabis testing?

Patel: Yes, we started in cannabis testing. We now have over 100 labs that are using the technology. There is a specific need in cannabis when you’re looking at contamination or infection.

In the case of contamination on cannabis, you must look for bacterial and fungal organisms that make it unsafe, such as E. coli, or Salmonella or Aspergillus pathogens. We’re familiar with recent issues like the romaine lettuce foodborne illness outbreaks at Chipotle. In the case of fungal organisms such as Aspergillus, if you smoke or consume contaminated cannabis, it could have a huge impact on your health. Cannabis regulators realized that to ensure public health and safety there was more than just one pathogen – there were half a dozen of these bugs, at a minimum, that could be harmful to you.

The beauty of our technology, using a Microarray is that we can do what is called a multiplex test, which means you’re able to test for all bacterial and fungal pathogens in a single test, as opposed to the old “Adam Smith” model, which tests each pathogen on a one-by-one basis. The traditional approach is costly, time consuming and cumbersome. Cannabis is such a high value crop and producers need to get the answer quickly. Our tests can give a result in six hours on the same day, as opposed to the two or three days that it takes for these other approved methods on the market.

Green: What is your business model? Is there equipment in addition to consumables?

Patel: Our business model is the classic razor blade model. What that means is we sell equipment as well as the consumables – the testing kits themselves.

The PathogenDx technology uses standard, off-the-shelf lab equipment that you can find anywhere. We didn’t want to make the equipment proprietary so that a lab has to buy a specific OEM branded product. They can use almost any equipment that’s available commercially. We wanted to make sure that labs are only paying a fraction of the cost to get our equipment, as opposed to using other vendors. Secondly, the platform is open-ended, meaning it’s highly flexible to work with the volumes that different cannabis labs see daily, from high to low.

One equipment set can process many different types of testing kits. There are kits for regulated testing required by states, as well as required environmental contamination.

Green: Do you provide any in-house or reference lab testing?

Patel: We do. We have a CLIA lab for clinical testing. We did this about a year ago when we started doing COVID testing.

We don’t do any kind of in-house reference testing for cannabis, though we do use specific reference materials or standards from Emerald Scientific, for example, or from NCI. Our platform is all externally third-party reference lab tested whether it’s validated by our external cannabis lab customers or an independent lab. We want our customers to make sure that the actual test works in their own hands, in their own facility by their own people, as opposed to just shrugging our shoulders and saying, “hey, we’ve done it ourselves, believe us.” That’s the difference.

Green: Can you explain the difference between qPCR and endpoint PCR?

Patel: The difference between PathogenDx’s Microarray is it uses endpoint PCR versus qPCR (quantitative real time PCR). Effectively, our test doesn’t need to be enriched. Endpoint PCR delivers a higher level of accuracy, because when it goes to amplify that target DNA, whether it’s E. coli, Salmonella or Aspergillus pieces, it uses all the primer reagent to its endpoint. So, it amplifies every single piece of an E. Coli (for example) in that sample until the primer is fully consumed. In the case of qPCR, it basically reaches a threshold and then the reaction stops. That’s the difference which results in a much greater level of accuracy. This provides almost 10 times greater sensitivity to identify the pathogen in that sample.

The second thing is that we have separated out how the amplified sample hybridizes to the probe. In the case of our assay, we have a microarray with a well in it and we printed the actual probe that has the sequence of E. coli in there, now driving 100% specificity. Whereas in the qPCR, the reaction is not only amplifying, but it’s also basically working with the probe. So, in that way, we have a higher level of efficiency in terms of specificity. You get a definite answer exactly in terms of the organism you’re looking for.

In terms of an analogy, let’s take a zip code for example which has the extra four digits at the end of it.  In the case of endpoint PCR, we have nine digits. We have our primer probes which represent the standard five digits of a zip code, and the physical location of the probe itself in the well which serves as the extra four digits of that zip code. The analyte must match both primary and secondary parts of the nine-digit zip code for it to lock in, like a key and a lock. And that’s the way our technology works in a nutshell.

Endpoint PCR is completely different. It drives higher levels of accuracy and specificity while reducing the turnaround time compared to qPCR – down to six hours from sample to result. In qPCR, you must enrich the sample for 24 to 48 hours, depending on bacteria or fungus, and then amplification and PCR analysis can be done in one to three hours. The accuracies and the turnaround times are the major differences between the endpoint PCR and qPCR.

Green: If I understand correctly, it’s a printed microarray in the well plate?

Patel: That’s correct. It’s a 96-well plate, and in each well, you’ve now printed all the probes for all targets in a single well. So, you’re not running more than one well per target, or per organism like you are for qPCR. You’re running just one well for all organisms. With our well plates, you’re consuming fewer wells and our patented foil-cover, you only use the wells you need. The unused wells in the well plate can be used in future tests, saving on costs and labor.

Green: Do you have any other differentiating IP?

The PathogenDx Microarray

Patel: The multiplex is the core IP. The way we process the raw sample, whether it’s flower or non-flower, without the need for enrichment is another part of the core IP. We do triplicate probes in each well for E. Coli, triplicate probes for Salmonella, etc., so there are three probes per targeted organism in each of the wells. We’re triple checking that you’re definitively identifying that bug at the end of the day. This is the cornerstone of our technology.

We were just approved by the State of New York, and the New York Department of Health has 13 different organisms for testing on cannabis. Think about it: one of the most rigorous testing requirements at a state level – maybe even at a federal level – and we just got approved for that. If you had to do 13 organisms separately, whether it’s plate culture or qPCR, it would become super expensive and very difficult. It would break the very backs of every testing lab to do that. That’s where the multiplexing becomes tremendously valuable because what you’re doing is leveraging the ability to do everything as a single test and single reaction.

Green: You mentioned New York. What other geographies are you active in?

Patel: We’re active in 26 different states including the major cannabis players: Florida, Nevada, California, Arizona, Michigan, New York, Oklahoma, Colorado and Washington – and we’re also in Canada. We’re currently working to enter other markets, but it all comes down to navigating the regulatory process and getting approval.

We’re not active currently in other international markets yet. We’re currently going through the AOAC approval process for our technology and I’m happy to say that we’re close to getting that in the next couple of months. Beyond that, I think we’ll scale more internationally.

I am delighted to say that we also got FDA EUA federal level authorization of our technology which drives significant credibility and confidence for the use of the technology. About a year ago, we made a conscious choice to make this technology federally acceptable by going into the COVID testing market. We got the FDA EUA back on April 20, ironically. That vote of confidence by the FDA means that our technology is capable of human testing. That has helped to create some runway in terms of getting federalized with both the FDA and the USDA, and certification by AOAC for our different tests.

Green: Was that COVID-19 EUA for clinical diagnostics or surveillance?

Patel: It was for clinical diagnostics, so it’s an actual human diagnostic test.

Green: Last couple of questions here. Once you find something as a cannabis operator, whether its bacteria or fungus, what can you do?

Patel: There are many services that are tied into our ecosystem. For example, we work with Willow Industries, who does remediation.

There’s been a lot of criticism around DNA based technology. It doesn’t matter if it’s qPCR or endpoint PCR. They say, “well, you’re also including dead organisms, dead DNA.” We do have a component of separating live versus dead DNA with a biomechanical process, using an enzyme that we’ve created, and it’s available commercially. Labs can test for whether a pathogen is living or dead and, in many cases, when they find it, they can partner with remediation companies to help address the issue at the grower level.

Another product we offer is an EnviroX test, which is an environmental test of air and surfaces. These have 50 pathogens in a single well. Think about this: these are all the bad actors that typically grow where soil is – the human pathogens, plant pathogens, powdery mildew, Botrytis, Fusarium – these are very problematic for the thousands of growers out there. The idea is to help them with screening technology before samples are pulled off the canopy and go to a regulated lab. We can help the growers isolate where that contamination is in that facility, then the remediation companies can come in, and help them save their crop and avoid economic losses.

Green: What are you most interested in learning about?

Patel: I would prefer that the cannabis industry not go through the same mistakes other industries have gone through. Cannabis started as a cottage industry. It’s obviously doubled every year, and as it gets scaled, the big corporations come in. Sophistication, standards, maturity all help in legitimacy of a business and image of an industry. At the end of the day, we have an opportunity to learn from other industries to really leapfrog and not have to go through the same mistakes. That’s one of the things that’s important to me. I’m very passionate about it.

One thing that I’ll leave you with is this: we’re dealing with more bugs in cannabis than the food industry. The food industry is only dealing with two to four bugs and look at the number of recalls they are navigating – and this is a multi-billion-dollar industry. Cannabis is still a fraction of that and we’re dealing with more bugs. We want to look ahead and avoid these recalls. How do you avoid some of the challenges around antimicrobial resistance and antibiotic resistance? We don’t want to be going down that road if we can avoid it and that’s sort of a personal mission for myself and the company.

Cannabis itself is so powerful, both medicinally as well as recreationally, and it can be beneficial for both consumers and industry image if we do the right things, and avoid future disasters, like the vaping crisis we went through 18 months ago because of bad GMPs. We must learn from those industries. We’re trying to make it better for the right reasons and that’s what’s important to me.

Green: Okay, great. That concludes the interview. Thank you, Milan.

Patel: Thank you for allowing me to share my thoughts and your time, Aaron.

The Importance of Understanding Cannabis Testing Results

By Josh Reed
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Cannabis testing is important for both operators and consumers, but there are some differences in what is important to each group. Obviously, safety and efficacy are important to both. Cannabis is primarily tested for safety reasons to ensure that consumers are receiving a product that is safe to consume and accurately labeled. In addition, consumers may look for a potency they’re used to consuming or a certain terpene profile that gives them a desired effect. Cannabis operators, on the other hand, use testing results to improve their processes and to monitor product quality versus state specific regulatory requirements that could cause their products to pass or fail.

What cannabis operators need to understand about cannabis testing results

Historically, there was an education gap on the side of the operators when it came to interpreting results. The regulated cannabis industry is still quite new and cannabis operators were initially focused on getting products to market. While there was always a focus on regulatory compliance and safety, the same level of quality control that existed in other regulated industries like food production seemed to lag. That has changed as operators have become more sophisticated and are hiring experts skilled in interpreting results and quality control. For a laboratory, hiring scientists with a regulatory background offers the operators the experience needed to ensure they’re getting accurate results that are easy to understand. This has led to more meaningful collaboration between labs and operators who work together to understand what test results mean to their processes and business operations.

OGanalytical instruments.
Consumers can easily grasp high level results in the form of charts and graphs

A common problem is that some operators see testing as just a speed bump. This doesn’t have to be the case. Third-party testing is an integral part of getting safe products to consumers. Businesses need to find a lab that understands their objectives and knows how to support the manufacturing and production cycles. Establishing a testing protocol with a lab will help ensure that there are no surprises and that products can be tested and sold as quickly as possible.

Now that operators and labs are speaking the same language, the challenge becomes translating that information into a consumer-friendly format. Consumers don’t necessarily need (or want) to explore the minutiae of every tested analyte, but they can easily grasp high level results in the form of charts and graphs. Translating the testing results into an easy-to-digest format allows consumers to better understand the products they are buying.

What are the main components of test results cannabis businesses should look for?

The first and most obvious results to look for is what was tested and if any tests delivered a failing result. A failing result is determined by comparing the tested values against the state requirements. If a product has failed testing in any area, operators will need to work with the lab and their internal teams to determine exactly what the issue is and if it can be rectified. Failing of any state required test (pesticide, microbial, metals, ….) means the product cannot be sold in its current form. Depending on the state, failing results may be required to be confirmed by another lab, processed further to remove the failing contaminants or destroyed. The production cycle to grow, process and manufacture cannabis products can take anywhere from 120 to 160 days with many different processes and handlers. Despite attempts to control all the variables that impact final product quality, failing tests do occur.

EVIO labs photo
Despite attempts to control all the variables that impact final product quality, failing tests do occur.

Once businesses have passed the state-required testing, the remaining tests are focused on product characteristics including potency and terpene profile. The potency of a product measures the levels of cannabinoids and influences both production and marketing decisions. Lower potency flower may be extracted for distillate products while higher potency flower will demand a higher price and will most likely be sold as flower or processed into concentrate products. Cannabinoid profiles go well beyond just CBD and THC. Understanding the full cannabinoid profile of a product is an important factor in how it can be marketed, and how it will be used.

The terpene profile of a product is also quickly becoming just as important to medical and adult use consumers. Terpenes play a major role in the effects that consumers experience with cannabis products. In the past, consumers relied heavily on strain names to purchase products that they believed would give them the effects that they were looking to achieve. Moving forward, we believe that consumers will be more interested in a product’s terpene profile given the strong influence that terpenes have on effects. In states like Nevada, cannabis businesses put terpene profiles on their product labels and cannabis consumers are starting to select products based on terpenes rather than raw potency numbers.

What is the most important factor in cannabis testing results?

Trust is the most important factor when testing cannabis. Operators need to trust that their lab is providing consistent, accurate and timely results. Consumers need to be able to trust what they read on the certificate of analysis, and they ultimately need to trust that the products they buy will deliver the effects that they expect.

The easiest way for businesses to increase trust in their products and testing results is transparency.

The easiest way for businesses to increase trust in their products and testing results is transparency. When there is transparency from the testing lab to the business and customers, it will help build trust and establish a brand for the long term.

Another important aspect of this process is ensuring businesses share the right information with consumers and educate them as to what it means to them. Information overload, without explanation, will only lead to confusion. It’s important to educate employees, especially those interfacing with customers, on how to interpret and explain test results in a way that consumers can understand.

It can be challenging to translate highly technical test results into consumer-friendly language but being able to do so will enable businesses to build a stronger relationship with customers. This isn’t something that businesses need to figure out by themselves. Rely on your trusted lab partners to help design and deliver easy to understand, consumer friendly certificates of analysis. Consumers want to be educated and understand what is in their products, and how the products will work for them. Trust, transparency and education will help cannabis operators strengthen relationships and continue to grow their business.

PlantTag

Quality Systems 101: CAPA Programs Drive Improvement & Prevent Costly Mistakes

By David Vaillencourt
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PlantTag

No business is perfect, especially when humans are part of the equation. But, how do you tackle fixing quality issues as they arise? The goal of this article is to shed some light on the value of a CAPA program and why many states are making them mandatory for cannabis businesses.

Let’s consider the following situations:

  • Analytical lab results for a production batch test above the limit for a banned pesticide or microbial contamination
  • You open a case of tincture bottles and some are broken
  • A customer returns a vape pen because it is leaking or ‘just doesn’t work’

Do you…

  • Document the issue?
  • Perform some sort of an investigation, asking questions of the people involved?
  • Ask for a retest? Then, if the test comes back positive, move on?

Let’s go through each one of these and understand why the suboptimal answer could be costing your business money:

You don’t document the issue

I hear excuses for skipping on documentation all the time.

  • “It’s not a big deal”
  • “It was a one off”
  • “The glasses probably broke in transit”
  • “They are cheap and easily replaceable”
  • “It’s not worth the time”
Tracking and documenting supplier shipments can help you identify supply chain issues.

In the situation of a couple of broken bottles in a shipment, what if it was the seventh time in the last two months? If you haven’t been documenting and tracking the issue, you have no way of knowing if it was a single occurrence. Remember when you were surprised that your filling team did not have enough bottles? Those broken bottles add up. Without documenting the incident, you will never know if it was truly a one-time mistake or the sign of a deeper issue. The reality is, it could be sloppy handling on the production line, issues with the shipper or even a sign of poor quality coming from the supplier.

Have you ever compared the number of fills vs the number of bottles ordered? How much money have you already lost due to those broken bottles adding up? Do you have the ability to answer this question?

You perform an investigation

Let’s say a customer returns a leaky vape pen. You perform an investigation by asking the production workers what they think went wrong. They say that it’s very difficult to get the seal for the cartridge into place. Their supervisor tells them to try harder, refunds the customer and moves on. But, why is it difficult to get the seal into place? Is it a design flaw? Should a special tool be used to assemble the cartridge properly? Without getting to the root cause of why the seals are leading to leaking cartridges, you are doomed to have repeat issues. Numerous studies have found that less than one in twenty dissatisfied customers will complain, and that approximately one in ten will simply leave for another brand or provider. How much is this unresolved issue truly costing your business?

Asking for a retest and if it passes, releasing the product and moving on.

labsphoto
In Colorado, 15% of the final tested cannabis flower products continue to fail.

Suppose a major producer of cereal received test results for its most popular cereal that were positive for levels of heavy metals that research has shown to be linked to cancer or developmental issues in children. Now, suppose the company stated that it was an isolated incident and a retest showed that the product met acceptable limits. Further investigation showed no paperwork, save for a couple of emails and a phone call between the lab and the producer. Would that give you peace of mind? This is known as “testing into compliance” and was the subject of a landmark lawsuit in 1993 that Barr Laboratories lost.

For many the answer would be a hard NO. But this happens every day. In Colorado, 12.5% of cannabis batches failed final product testing in 2018 and 2019. That’s one in eight batches! What happened to those products? Good question.

Enter: CAPA (Corrective Action and Preventive Action) programs! For people with a background in quality and GMPs (Good Manufacturing Practices), CAPA is a household name. And, it’s quickly becoming a requirement that cannabis regulatory bodies are looking at. Colorado was the first state to explicitly require CAPA programs for all license holders effective January of this year and has provided a free resource for them. But, for the large majority of people, including those in the cannabis industry, it’s just another acronym.

What does a CAPA program do?

The benefits are numerous but two major ones are:

An effective tool for investigating the true root cause

First of all, a CAPA program provides the framework for a tool for investigation – as Murphy’s Law posits – things go wrong all of the time. Whether you have a manual, labor-intensive process or a highly automated operation, the equipment is programmed, maintained and monitored by humans. The logical sequence of problem solving within a CAPA program allows you to thoroughly investigate and determine the root cause of the issue. With a complete understanding of root cause, you are then able to eliminate it and prevent future occurrences – not just in the one area investigated, but in all similar situations throughout the company.

System for continuous improvement

Gathering info from a customer complaint like batch or product IDs can be crucial in a CAPA system

Anyone who is in the market for a new car lately can appreciate the technological advances. In the 1980s, it was air bags and ABS brakes (those of you that drive in snowy climates and remember having to pump your brakes can appreciate technological advancements). Bluetooth technology for hands-free communication and radio control is another example of continuous improvement in cars.

This is one of the biggest predictors and differentiators between profitable and successful companies with satisfied clients and one that is barely scraping by. The cost of poor quality adds up!

Key inputs in a CAPA system 

If the output is an improved system and lower cost of quality, we need to make sure we’re considering the potential inputs. 

Information that feeds into your CAPA system:

Customer complaints

Every complaint must be recorded. Gather as much information as possible, but at a minimum: the product type/SKU, the customer name and date of purchase. If possible, the batch or product ID.

This is not necessarily to identify products for a recall, but to prevent…

Laboratory test results

This should not be restricted to final product testing, but include any in-process inspections. Say you have a product repeatedly failing final testing, what if it’s actually been consistently failing or very close to failing at the very first in-process inspection? It’s also important to work with your laboratory to understand their method validation process, including the accuracy, precision, robustness, etc.

Infrastructure & environmental controls/monitoring

Most people consider “environmental controls” to be things like temperature and humidity control. While that is true, it can also include pest and contamination control. Poorly designed infrastructure layouts are major contributors to product cross contamination as well.

Supplier information

Undetected supply chain issues (remember the broken bottles?) can add up fast! CAPAs for suppliers cannot just include supplier monitoring, but improvement in how you communicate your needs to your suppliers. It’s easy to overlook non-cannabis raw materials as sources of microbiological and chemical contamination. Conduct a risk assessment based on the type of contact with your product and the types of contamination possible and adjust your supplier qualification program accordingly.

Are you ready to recognize the benefits of a CAPA program?

One more major benefit of CAPA programs to mention before we go is … Preventive via predictive analytics.

In Colorado, 15% of the final tested cannabis flower products continue to fail, mostly due to mold and mildew. A quality system, with effective data capture that is funneled into a CAPA program can easily reduce this by 75%. For even a small business doing $2M per year in revenue, that equates to a revenue increase of nearly $200,000 with no additional expenses.

Whether you are operating in the State of Colorado or elsewhere, a CAPA and Recall program will provide immense value. In the best case, it will uncover systemic issues; worst case, it forces you to fix mild errors. What are you waiting for?

cannabis close up
Soapbox

Too Many Cannabis Firms Put Sustainability in Last Place

By Mitesh Makwana
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cannabis close up

Cannabis has long been considered a green industry by the masses.

As a standalone item, the cannabis plant is very environmentally friendly. This is particularly true when it comes to hemp, a variety of the cannabis plant with a huge range of environmental benefits. An extremely versatile and robust crop, hemp uses far less land and water than other common crops and even captures carbon dioxide and regenerates soil. Approximately 20,000 products can be made from its seed, fiber and flower, from biodegradable plastics to food supplements, meaning all in all – it is an environmentally and economically sustainable crop

Yet as with most things, when cultivated in mass, the cannabis plant isn’t quite so green anymore. With its high demand for water, land and artificial lighting, cannabis cultivation can actually leave a large environmental footprint (this does however, pale in comparison to the food industry).

What’s more, many firms do not properly understand how to correctly treat and apply chemical fertilizers and pesticides, and use a machine gun approach to growing their crops. This can result in unnecessary bleed waste, which in turn can kill micro-organisms and contaminate soil, water and other vegetation. Packaging has also been cited as particularly environmentally unfriendly in the cannabis industry, with several organizations using single use plastic for their products, due to the strict guidelines attached to packaging products of a medical or pharmaceutical nature.

A field of hemp plants, (Cannabis sativa L.)

So as the CBD, medical and even adult use cannabis industries become increasingly commercialized across the globe, there is risk cannabis might start moving in the wrong direction when it comes to sustainability.

Still relatively new, the cannabis sector is nascent and exciting, with the global cannabis market size valued at $10.60 billion in 2018 and projected to reach $97.35 billion by the end of 2026. Yet as the industry grows, so too will its footprint.

I’ve seen it first-hand. The industry being hugely competitive, so for companies vying for precious investment and fighting for a spot on the stock market, often, sustainability is the last thing on their minds. In my opinion, this is wrong. Not only morally – we all play a part in looking after our planet – but it’s also a poorly calculated business decision.

It’s no secret sustainability and ESG have become a hot topic when it comes to investing. Just yesterday, Credit Suisse told CNBC that the pandemic has accelerated the trend towards sustainable investments. The bank has even introduced an exclusion strategy whereby those investing can actively exclude controversial sectors.

So with the environment firmly on investors’ minds, cannabis firms need to realize that actually, if they want to secure the support of forward-thinking shareholders, they need to consider more than just the bottom line and truly take the sustainability of their operations into account.

photo of outdoor grow operation
Outdoor growing can require less energy inputs

Luckily, there are practices which cannabis cultivators can take on board to reduce their environmental footprint. To start with – growing outdoors. This enables cannabis farmers to harness the sun’s natural power, saving them money on electricity bills and increasing energy efficiency. With cannabis being a rather thirsty plant, water use is also a major concern – although this is nothing compared to the amount of water used by cotton plants. However, it is in fact possible to design indoor operations which recycle close to 100% of the water use, including capturing the perspiration from plants – at AltoVerde this is something we are looking to implement in our upcoming Macedonian sites.

Firms keen to improve on sustainability should also cultivate in a way in which soil is fully replenished and repaired after use – this is called regenerative farming, and it’s extremely effective for maintaining and improving soil quality, biodiversity and crop yields. Another interesting concept is the use of hemp. Some farmers have started using hempcrete – a concrete-like material made from harvested cannabis plants. As if the recycling aspect wasn’t good enough, hempcrete is actually carbon negative, meaning the production of hemp for hempcrete removes more carbon from the atmosphere than it produces.

It’s been incredibly exciting to be a part of the cannabis industry and I am excited to watch its growth in the years to come. It’s taken hard work for the sector to improve its traditionally poor image and to be accepted across the globe, so now, cultivators must lead by example and stop industry from being branded as one which pollutes. By transitioning to more environmentally sustainable practices, firms will be doing their bit for the planet, attracting the investors of tomorrow and ensuring their own success for years to come.

Flower-Side Chats Part 7: A Q&A with Max Goldstein, CEO of Union Electric and Founding Partner at OpenNest Labs

By Aaron Green
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In this “Flower-Side Chats” series of articles, Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses integrate innovative practices in order to navigate a rapidly changing landscape of regulations, supply chain and consumer demand.

The California legal flower market is the largest in North America. According to recent BDSA data, monthly cannabis sales in January 2021 were $243.5 million. Flower sales represented 35.6% of overall sales, or about $87 million, representing a $1 billion yearly run rate for 2021 flower sales in California.

Union Electric was founded in California in 2020 as one of OpenNest Labs’ first incubator brands. Its model is uniquely asset-light, and focused on filling an area of opportunity with a consumer-first approach, aimed at an underserved market: the working-class customer. The name Union Electric was inspired by the punching-in and punching-out aspect of working a union job — more specifically, the average cannabis user’s job. The name also represents the brand’s union of stakeholders: Customers, cultivators and retailers alike, working together to provide affordable, quality products.

Max Goldstein is the CEO of Union Electric and Founding Partner at OpenNest Labs. Max incubated Union Electric at OpenNest Labs, a cannabis venture studio he helped co-found, and launched the brand in 2020 the day after COVID lockdowns began in California. Prior to Union Electric, Max worked at Google managing a 90 person, 12-market partnerships team.

Aaron Green: How did you get into the cannabis industry?

Max Goldstein: I’ve had a fun entrepreneurial and professional journey.  I started my career in my 20s with Google working in the marketing department sitting at the intersection of new product development and customers. During that time, I really learned the ins and outs of bringing products to market and building brands. I had to understand how to value and champion the customer, or the user. At Google, I was sitting at the intersection of people building products that are affecting billions of people’s lives and users and customers that potentially have really cool insights and feedback. It was an incredible learning experience. I was able to focus on what I’m good at, which is that early stage of businesses and most importantly, listening to the consumer and developing products and services that they ultimately really want.

Max Goldstein, CEO of Union Electric and Founding Partner at OpenNest Labs

Near the end of 2018, I co-founded OpenNest Labs, a cannabis venture studio. We came together as a four-person partnership to form OpenNest, as an assortment of skill sets, with all of us contributing an area of focus that we could really combine our experiences to take focused and concerted efforts at building brands that resonate with different consumers across various form factors in cannabis and health. My partner Tyler Wakstein has been in the cannabis industry for several years and helped launch the brand, hmbldt (which is now Dosist) and a number of other projects in the cannabis space.

Green: Was Union Electric an incubation project out of OpenNest?

Goldstein: Yes. Union Electric is the first project we incubated out of OpenNest. We launched the day after the pandemic. So, it was interesting timing.

At Union Electric we’re focused on the core, everyday consumer of cannabis. I think a lot of folks, particularly the new money that have come into the industry, have often focused on new form factors or things that they think the new cannabis consumer is going to enjoy or appreciate. Because quite frankly, that’s their level of familiarity with the industry. For us at Union Electric, we want to hit the end of the market with exactly what they want and that is high-potency, affordable flower with a brand that really stands for something and has values.

Union Electric is positioned as an advocate for the legal cannabis industry as a whole. We look at the stakeholders and the work that needs to be done across the board. The idea of just being one member of the value chain and not trying to ultimately uplift and elevate everyone in that value chain, it’s just not going to work in cannabis. We’ve seen a lot of people trying to go at this alone and I think the pandemic, if anything, showed that you’re only as good as your partners. We truly believe that the investment in our partners, in the local communities and everyone that’s really touching this industry is critical to ultimately building success for one company because a rising tide raises all ships.

Green: How did you settle on the name Union Electric?

Goldstein: One of the things that we wanted to do was focus the brand on who we see as the core consumer, which is somebody that is working hard, like a shift worker punching in and punching out and putting in the long hours on a daily basis and using cannabis as a critical part of their personal wellness and relief. There are elements of that which we certainly want to tap into. The “Union” represents our stakeholder approach, which is, all of us are in this together and our tagline “roll together” represents that. The “Electric” part is what we’ve seen cannabis sort of representing culturally, and for people more broadly. This is an exciting product that’s going to change a lot of people’s lives and, and I just don’t think there’s anything else in our lifetimes that we’re necessarily going to be able to work on from a consumer-packaged goods perspective, that’s going to change as many people’s lives. It’s electric. That’s how we came up with the name.

The coloring and a lot of the brand elements that we focused on were about providing transparency and simplicity to the marketplace: big font and bold colors. There are little nuances with our packaging, like providing a window just so people can see the flower on our bags. We look at the details and made sure that we’re ultimately out of the way of the consumer and what they want, but providing that vehicle that they’re really comfortable with.

Green: You have an asset-light business model, focusing on brand and partnerships. How did you come to that model?

Goldstein: I think everyone who’s operating and working in cannabis right now is looking at strategy and what the model is that’s going to work for them. We’re ultimately going to find out what works, which is why this industry is so fun and exciting. Our specific approach is really under the assumption that vertical integration in a market that’s maturing as quickly as California is going to be hard, if not impossible – it’s just too competitive. There are too many things going on in order to be successful in California. You have to be really good at cultivation, really good at manufacturing, really good at distribution, and then ultimately, you have to be able to tell a story of that process to ensure sell-through and that you really resonate with the consumer.

I think the big, missed opportunities that we’re seeing are that a lot of great cultivators are not marketers or storytellers. They really do need people that are there to help amplify and provide transparency to their stories. There are amazing stories out there of sacrifice and what cultivators have done to create a new strain. We all enjoy Gelato. What’s the process to make that happen or to create any other new strain? It’s fascinating. It’s too hard for a lot of these cultivators to go out and tell that story themselves. So, we act as a sales and marketing layer on top of the supply chain to provide visibility, transparency and trust with the consumer so that they know who grew their product, how it was grown, when it was cultivated and that they can build a real strong relationship with that cultivator as well.

It’s also hard to be a brand that’s using 19 different suppliers, selling the same genetics and expecting the same results. As an example, we’ve gotten Fatso from one of our partners, Natura. We’ve also gotten Fatso from Kind Op Corp (fka POSIBL). We renamed one of the strains – by adding a number on the end – just so that the consumer knew that we’re not saying that this is the same product, because it’s not. It’s from a different farmer and there’s going to be differences. While it does create a little bit more complexity for the consumer, we ultimately believe that every consumer has a right and will expect to know that type of information in the future.

Green: You launched Union Electric one day after the COVID lockdowns began in California. How did you navigate that landscape?

OpenNest Labs Logo

Goldstein: A lot of praying to the cannabis gods! It was really an incredibly challenging and difficult time. We were all concerned about the impacts of the virus. There were moments where we didn’t even know if dispensaries would be open, particularly in states that just legalized. You went from something being completely illegal to an essential business in 12 months. As a team, we were just trying to hold on to our hats and focus on product and partnerships.

Fortunately, with a brand like ours and the price point that we’re operating at, we just needed to consistently be on the shelves and available, and to be present with the bud tenders. So, we focused on that and shoring up our supply chain and just trying to wait it out. COVID forced a lot of cannabis companies to make a lot of decisions quickly and I think in some ways, because we have not been in the market for 24 months under one paradigm, we were pretty quick to be able to adjust and keep the team super lean to fit the emerging and rapidly changing environment. We learned a lot. We focused on partnerships and we leaned into the model that we set out to build which is being asset-light and focusing on the sell-through.

Green: I understand you have a 2% giveback program. Tell me about that.

Goldstein: The 2% giveback program was something that we wanted to put on the bag from day one. It’s on every bag that we made and put out into the market. We’ve seen a lot of cannabis companies come in and invest tens and hundreds of millions of dollars in infrastructure. Then, month 24 they realize “oh, crap, I gotta figure out what I’m going to do to get back and actually tap into the issues that are most important to cannabis consumers.” These are issues like social equity, equitable development of the industry, and ensuring that cannabis companies and its owners are active, responsible members of society.

What we’re going to focus on with our giveback program is working with our supply chain partners. We highlight the local communities, because when you look at the landscape in California, two thirds of its municipalities still don’t allow cannabis operations. We’re in a heart and minds battle still, even here in California, just proving that the operators here are not criminals and that they’re not going to bring negativity to local communities.

As we scale in California and scale to other states, the giveback program for us is a platform and a medium to work with our supply chain partners to make sure that we’re giving back and investing every step of the way. As founders and operators, it’s how we show that we are being mindful of the importance of equitable development of the industry. Ultimately, prosperity is going to come if everyone is getting a piece of the pie.

Green: What are you most interested in learning about?

Goldstein: I’m a student of history (I was a history major) and I was very fortunate to be part of a big evolution of technology development starting in 2011 working at Google and other tech companies. In some ways, this is the second generational industry that I’ve been a part of, and I have a lot of regrets about how the first one developed – not that I necessarily was the chief decision maker. The idea that large tech companies would always act responsibly (i.e. “Don’t be evil”) didn’t really pan out. I think it was an ignorant thought process as a person in my young 20s.

What I’m most interested in learning is: Can the cannabis industry develop consciously? Can you keep the greed and the things that bring industries down at bay? How can I, as an operator, be the best facilitator of that future? I’m always thinking how I can continue to bring in the people around us and around me as the CEO of Union Electric to ensure that we’re always focused on that.

Green: Great, that concludes the interview. Thank you, Max.

Goldstein: Thanks Aaron. 

From Union Electric: Union Electric Cannabis will be offering their first Regulation CF crowdfund raise in an effort to give everyday consumers a stake in one of California’s fast growing cannabis brands. Due to the ever-evolving legal status of cannabis in the US, there have been very few opportunities for individuals to invest early on in American cannabis brands. This decision to give everyday cannabis smokers access to investing in their favorite cannabis brand (for as little as $100) is a natural manifestation of Union Electric’s mission: Collective power and championing accessibility for the plant. You can learn more about their raise by visiting https://republic.co/union-electric

A Q&A with George Mancheril, Founder & CEO of Bespoke Financial

By Cannabis Industry Journal Staff
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Bespoke Financial was the first licensed FinTech lender focused on the legal cannabis industry. Founded in June of 2018, Bespoke offers four types of lending products: Invoice financing, inventory financing, purchase money financing and a general line of credit. With just over two years of originating loans to clients, they have benefitted from being a first mover in the cannabis lending space.

George Mancheril is the founder and CEO of Bespoke Financial. He has over fourteen years of experience in finance, with a special focus on asset-based lending, off balance sheet financing of commercial assets and structured credit. Following a stint with Goldman Sachs, he worked at Guggenheim Partners Investment Management’s Structured Credit Group in Los Angeles where he worked on structuring esoteric asset financing for a variety of commercial assets including airplanes, container leases and receivables.

Since 2018, Mancheril and his team at Bespoke Financial have deployed over $120 million in principal advances without any defaults and across eleven states. We sat down with Mancheril and asked him about the history of his business, how it’s been received so far and how the past few years of financial activity in the cannabis sector might shape the future.

Cannabis Industry Journal: What is Bespoke Financial in a nutshell?

George Mancheril: Bespoke Financial is the first licensed FinTech lender focused on the legal cannabis industry. Bespoke offers legal cannabis businesses revolving lines of credit that address the top problem in the industry – lack of access to non-dilutive, scalable financing to capitalize on growth opportunities and improve profitability. Due to the federal illegality of cannabis, traditional banking institutions cannot work with our clients even though these operators are working within the legal regulatory framework of their state. Bespoke solves this problem for businesses across the cannabis supply chain along with ancillary companies affected by the lack of access to traditional capital markets.

CIJ: How does your company help cannabis businesses?

George Mancheril, Founder & CEO of Bespoke Financial

Mancheril: Bespoke Financial offers 4 lending products – all are structured as a revolving line of credit but each allows our clients to access capital in a unique way based on their specific needs. Our Invoice Financing product, allows businesses to borrow capital against their Accounts Receivables in order to manage general business expenses, particularly if the borrower’s business growth is slowed due to a long cashflow conversion cycle. Inventory Financing and Purchase Money Financing allow our clients to finance payments to their vendors, which helps our clients achieve economies of scale by increasing their purchasing power. Lastly our general Line of Credit allows for the most flexibility for our clients to utilize our financing by either financing payments made directly to vendors or drawing funds into the client’s bank account to manage business expenses.

CIJ: I know the company is only a few years old, but can you tell me about your company’s success so far?

Mancheril: [Clarification, Bespoke was founded in June 2018 so we’ve been around for 3 years but we now have over 2 years of originating loans to clients.] Bespoke Financial has benefitted by being a first mover in the cannabis lending space as the first licensed lender specifically addressing the financing needs of cannabis operators, starting in early 2019. Over the past 2 years we have developed and refined our proprietary underwriting model to identify over 50 active clients spanning the entire cannabis supply chain. Since inception, Bespoke has deployed over $120 million in principal advances without any defaults to date and expanded our geographic footprint across 11 states. Our growth and success highlights our company’s expertise in structuring financing solutions which address the unique capital needs of cannabis companies.

CIJ: Can you discuss how the recent M&A activity, current and recent market trends, as well as the pandemic has affected your company’s growth?

Mancheril: The cannabis industry overcame a variety of challenges presented by the COVID-19 pandemic, ending the year with record sales in both new and existing markets. The support from state and local governments, evidenced by the industry’s essential business designation and the easing of regulations, coupled with increasing consumer adoption of cannabis combined to increase the industry’s demand for capital throughout the pandemic. Bespoke was well positioned to partner with cannabis companies across the supply chain and was proud to help our clients thrive during this pivotal period.

Jeeter was able to grow sales over 1,000% within the first year of working with Bespoke

Coming into 2021, the cannabis industry and investors shared a very positive outlook for the future based on the previous year’s experience and expectations of material easing of federal regulation. While M&A activity in the industry has increased over the past 6 months, the overall consensus has been that both the frequency of exit opportunities and the corresponding valuations will continue to increase as federal decriminalization opens new sources of capital and materially changes investors’ valuation assumptions. In general, we’ve seen cannabis companies focused on both capitalizing on the increasing opportunity presented by the industry’s organic growth and maximizing the benefits of future regulation changes by utilizing the resources and capital currently available to increase revenue, expand into new markets, and work towards profitability. All of these factors have further compounded the industry’s demand for financing and we expect to see continued growth in our lending activity in line with the industry’s growth.

CIJ: Who has been your most successful client?

Mancheril: We have a handful of cases studies and client success stories here on our website. One of the most exciting growth stories we have seen has been our client DreamFields whose in-house brand, Jeeter, is now the #1 pre-roll brand in the state of California. Prior to working with Bespoke, the brand was not ranked in the top 25 but was able to grow sales over 1,000% within the first year of working with us and achieve the #1 spot in their product category.

Navigating the Complexities of Out-of-Home Cannabis Advertising Nationwide

By Matthew O’Connor
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Cannabis hit major milestones in the first half of 2021. Adult use cannabis is legal in five more states, bringing the total to 16 plus Washington D.C. In addition, two pieces of federal cannabis legislation were recently revived by Congress. Even with these developments, the cannabis industry faces an uphill climb to navigate state and local regulations levied on its sales, operations, taxes and advertising.

Advertising regulations present big hurdles for cannabis businesses to overcome. With cannabis illegal at the federal level, traditional advertising avenues like broadcast and radio are limited to the states where it is legal. Still, many networks won’t touch cannabis ads. Major tech companies like Google, YouTube and Facebook largely bar cannabis businesses from online marketing. With cannabis advertising laws that vary state to state, companies face a hodgepodge of regulations with little consistency.

So, how are brands working within this messy regulatory framework? They’re turning to out-of-home (OOH) advertising. Here’s what to know about legally advertising cannabis products and brands through outdoor media.

A state-by-state patchwork of regulations

Medicinal cannabis has been legal in California for more than two decades, and adult use cannabis is going on five years. Yet, debate rages on over how visible cannabis advertisements should be in daily life. This isn’t just happening in The Golden State. Other states like Colorado and Oregon with established legal cannabis industries continue to grapple with how to regulate cannabis advertising in print and outdoor formats. Not to mention that states just getting into the legalization arena are playing catch up to get rules and regulations in place.

With the right partner, cannabis companies can navigate the nation’s mélange of advertising regulations to share their products, services and marketplaces. The best online OOH buying platforms are even equipped with cannabis filters that seamlessly identify cannabis-compliant OOH ad inventory.

Growing and innovating with out-of-home advertising

This dispensary ad appeared on Variety.com

While it’s the oldest form of advertising, OOH is a far cry from an old-fashioned advertising avenue. It’s a hot, dynamic form of communication that is poised for big growth alongside the cannabis industry. Sure, OOH includes more traditional highway-side billboards. But it also spans eye-catching digital billboards, taxi-top advertisements, building wallscapes, and digital vehicle charging stations – all of which are accessible through OOH buying platforms.

Such platforms make it easy for cannabis brands to effectively target consumers compliantly. Brands like Cookies, Eaze, MedMen and MONOGRAM have launched laugh-inducing, Instagrammable, and thought-provoking campaigns to build brand awareness. The Northern-California brand Cookies has mastered the art of cross-product branding, building an entire clothing line around its brand. Real California Milk even got in on the fun with a dispensary-inspired pop up and an OOH media buy. With OOH, cannabis businesses have effectively connected adult consumers with their latest products, promotional offers and physical storefronts, but also sparked conversations about cannabis legalization and decriminalization.

What to consider when leveraging OOH for cannabis advertising

If you work in the cannabis industry, are an agency partner or a small-business owner managing the advertising process, here are some things to keep in mind when planning your OOH ads.

  • Know the rules of where you plan to advertise. This is a fast-moving space. New markets are coming online. Regulations are being established and challenged. It’s crucial to find industry partners who provide reliable, up-to-date information on the status of advertising rules in the markets you’re in so you stay compliant and don’t jeopardize your business license.
  • Both Ivyside and Weedmaps are featured on this page

    Get into the practicalities. What do local cannabis advertising rules mean for your brand? Are there regulations that impact more than the location of an OOH campaign? Rules on creative artwork or words that are banned? A guide to regulations is likely laid out at the state level (see the states of Illinois and Massachusetts), but will ultimately be governed by local municipalities (see the City of San Diego). There are workarounds here. Just because you can’t show people engaging in cannabis consumption, cannabis leaves or products, it doesn’t mean your creativity is limited. Look no further than Weedmaps. The company launched its Weed Facts campaign across hundreds of billboards in half a dozen or more markets to highlight the many benefits of cannabis. One read: “States that legalized marijuana had 25% fewer opioid deaths.”

  • Determine specific goals for your campaign. What do you want to achieve with an OOH campaign? Are you looking to build brand awareness? Share a new product? Drive foot traffic to a physical location or prompt customers to visit your website? Are you advocating for change? Laying out your goals will drive your creative and the locations in which you launch your campaign. Speaking of launching, with OOH – especially digital outdoor ads – your creative can be up and running in 48 hours. Outdoor ads are customizable and with location tools, verbiage and design, can be directed to a specific cross-section of the market.
  • Measure Success. Barring state and local regulations, the OOH possibilities for furthering and promoting your brand are almost endless. Once your campaign is launched, the right OOH buying platform will enable you to track goals and success. With the ability to track and isolate OOH, you’ll be able to attribute conversions, measure your return on investment, compare performance by unit and optimize your campaign.

As regulations at the local, state and federal levels change and evolve, OOH advertising will remain the tried-and-true standard for cannabis companies to get word out about their brand, market their products and drive traffic to their websites and storefronts.

Anthony Franciosi, Honest Marijuana

Essential Elements to Set Up a Green, Zero-Waste Grow Facility

By Anthony Franciosi
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Anthony Franciosi, Honest Marijuana

Clean, ecologically sound production methods are the ideal for any cultivation or farming activity. Taking from the earth only what is needed to grow the crop and leaving behind little in the way of chemicals and land/water loss is the goal; with cannabis grow facilities, it can also be a reality.

This type of production does require some capital investment into state-of-the-art equipment and facilities, with standards that are equal to or even surpass current EPA and USDA regulations. While cannabis growing does not yet have access to the organic certification, that doesn’t mean growers can’t abide by and even go beyond the rules, to grow clean, healthy and environmentally sound cannabis.

There are a few essential elements required to make this kind of operation a reality.

Ecologically advanced use of power

  • For any indoor facility, one of the key elements is lighting. Using as energy efficient a system as possible is key. The best option at the moment is LEC lighting, which provides a spectrum of light that is very close to natural. This makes checking on plant progress more realistic and, with the inclusion of UV-B in the spectrum, can improve yields as well. In addition, the LEC bulbs have a long life—up to 2 years—which means lower maintenance costs as well.
  • The demand for high-quality, organically grown cannabis continues to increase

    Another aspect of growing that tends to use a lot of power is the cooling system. A standard HVAC system will be power intensive, so alternative ones like water chilled climate control systems are just as effective and 30% more power efficient. These systems are also able to reuse wasted power by feeding it back into the system, creating an additional 10% energy reduction. In addition, when the outdoor air temperature dips below 45 degrees, a water chilled system can switch to using the outside air, creating 60—70% in energy savings.

Efficient management of water resources

  • Cultivators depend heavily on water to ensure that the plants are hydrated and able to absorb the nutrients they need to grow and thrive. The result for many however is an excessive waste of water. This is a problem when a grow facility is leveraging municipal water resources. A water meter helps to manage and track usage but to ensure that it is used as efficiently as possible, a “top feeding” method of usage ensures minimal water waste (5% or less).

Effective waste management

  • Wastewater is a byproduct of any water intensive cultivation method but there again, managing the systems to ensure that what water isn’t reused and becomes “gray water” is still as clean as possible is the ideal. A high-quality filtration system keeps sediment, chlorine and other harmful elements out of the water supply — and out of the municipal sewage system. Further, by using organic matter throughout the growing process, the wastewater that is produced will meet every federal standard for organic food production.
  • All plant waste in a grow facility—for example: stems and fan leaves—is disposed of according to state and local laws. With cannabis plants, that requires a certain level of security, including locked dumpsters that are only unlocked and placed outside when the removal trucks arrive on site.

Organic farming practices

  • Using OMRI (Organic Materials Review Institute) listed soil is an essential part of clean, environmentally friendly growing. To ensure the proper nutrients are available for each harvest, once a crop is gathered, the soil is transferred to a local landscape company to compost and reuse.
  • Pesticides need to obviously be avoided and all fertilizers need to be USDA approved as organic and all nutrients need to be certified by OMRI to ensure they don’t contain any synthetic materials.

Considering all of these aspects is essential to creating an ecologically friendly grow facility with tremendous yields that are clean and safe for the end consumer, as well as minimizing the impact to the earth.