Tag Archives: deal

Canopy Growth Acquires Wana Brands: An Interview with Nancy Whiteman

By Aaron G. Biros
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On October 14, Canopy Growth announced their plans to acquire Wana Brands, the number one cannabis edibles brand based on market share in North America. The two companies entered into an agreement that gives Canopy the right to acquire 100% of the membership interests of Wana Brands (a call option to acquire 100% of each Wana entity) once a “triggering event,” such as when plant-touching companies begin trading on major US stock exchanges or full federal legalization, occurs.

As part of the agreement, Canopy Growth makes an upfront payment of $297.5 million to Wana Brands. Until the United States moves on cannabis legalization or companies can start trading on U.S. exchanges and Canopy uses the call option to acquire Wana Brands, they don’t get any voting or economic interest in Wana Brands. The two companies are essentially operating completely independently of each other until the US legalizes cannabis.

Nancy Whiteman co-founded Wana Brands in 2010 and since then the company has expanded significantly. Following the legalization of adult-use cannabis in Colorado, their sales skyrocketed. Over the next few years, Whiteman oversaw the company’s expansion into a number of new states. In 2016, they moved into Oregon’s market and quickly grew their brand presence, seemingly overnight. Then they expanded into Nevada, Arizona and Illinois in 2017. After that the company made a major East Coast push, expanding into Maryland, Florida and Massachusetts, with other major northeast markets expected to be added soon. The brand now has products available in twelve US states and nine Canadian provinces, with plans to add four additional states by the end of the year.

Nancy Whiteman, CEO & Co-Founder of Wana Brands

Shortly after the announcement, we sat down together over coffee in Las Vegas to discuss Whiteman’s journey to success, her plans for the company’s expansion and what the future might hold for Wana Brands.

Aaron G. Biros: First of all, congratulations on the acquisition. As a co-founder and CEO, it must be amazing to see the success of your company and all you’ve accomplished. How do you feel?

Nancy Whiteman: I feel ecstatic. I am so excited and so proud of what Wana has accomplished. Just all around a great feeling.

Biros: What was it like leading up to this moment? From the inception of the business, did you ever have any doubts you’d make it this far?

Whiteman: A thousand times. Absolutely. Anyone in cannabis that tells you they didn’t have any doubts is probably not being very honest. I had been thinking about partnership for a while. I felt the timing was right because of a variety of reasons, but also the possibility of federal legalization. I wanted to make sure that Wana was really going to be well positioned for future growth. One of the things that I said in our employee meeting – I quoted the old proverb of ‘If you want to go fast, go alone, but if you want to go far, go together.’ We’ve been going it alone for eleven years and we’ve gone very fast. But I want Wana to continue to be a major player in the industry and to go far. I really felt that this was the time in the industry to strike a partnership.

So that’s a little bit of the thinking behind it. I think when there is federal legalization, there is going to be a host of competitors entering the industry that are going to be unlike anything we’ve faced before. I think it’s going to be challenging for independent brands to scale as rapidly as they’re going to need to scale to compete against all of this new competition on their own. So that’s the why behind the timing of it.

Canopy_Growth_Corporation_logoIn terms of why Canopy, I’ve known Canopy for quite a while. I met them when we were looking for partners about three and a half years ago. We did not end up putting together a deal at that point in time, but I did get to know the company quite a bit. Since then that company has changed significantly with leadership changes and became a very different company with the Constellation Brands investment behind them.

When I think about the future of the industry and particularly post-legalization, I have certain things that I am looking for in partners. Of course, I am looking for financial strength in a partner. I was really looking for a company that has a very long-term perspective on the industry, with both the proper resources and the proper mindset to make long-term investments for the future. And then my belief is that post-legalization, we’re going to see radical changes in the industry including where products are cultivated in a global market, more distribution outside of dispensaries – and I think liquor stores could be a likely form of distribution at some point in time, so the relationship with Constellation was very interesting and appealing to me. But all of those things wouldn’t mean as much to me if I didn’t feel we didn’t have a good fit in terms of our shared values and how we saw the industry. We spent a lot of time talking about that and I think one of the aspects that really attracted me to Canopy was that we are very aligned on how we see the future of the industry shaping up. Certainly, I think there is a wonderfully viable position for cannabis as an alcohol replacement, however we also have a lot of focus on innovation and the health and wellness aspects of cannabis. I was really looking for a partner that felt the same, and it ended up that we really were aligned on those values.

Biros: What does it look like going forward? Since you’re staying on board, how will your new role change?

Whiteman: My new role doesn’t change at all actually. I woke up last Monday—the week after the big announcement–and it felt very normal getting back to work and having my usual meetings. This was my fifteen minutes of fame and thankfully its diminishing so now it’s just back to work as usual.

But moving forward, we have big plans. Wana is launching in four new markets over the next couple of months, we’re in discussions to launch in an additional six markets, and we have very robust innovation pipeline. So, we’re just really busy right now just executing on our strategy. I am looking forward to getting to know our new colleagues at Canopy better and exploring different collaboration possibilities.

I feel very optimistic. I was thrilled our employees were delighted with the news and morale is very high. The feedback from the rest of the industry has been really positive and overall, I am feeling very good about this decision.

Biros: So you mentioned some expansion plans for four new markets in the next few months. How does the acquisition help Wana Brands expand?

Whiteman: You know we haven’t announced the new states so I can’t speak to those publicly yet. They were all in the works before this deal and are currently in the process of being onboarded. Where it will get interesting is how this deal impacts new states that we move into. Until Canopy decides to exercise the call option [to acquire 100% of membership interests in each Wana entity], we are still an independently owned and run company. So we are still going to be looking for the best partners that we can find in new markets, and the Canopy connection will certainly be helpful to us. But to your point about the plans, we’ll be announcing those new market expansions in the coming weeks.

Biros: As a woman leader with an extremely significant position in the cannabis industry, do you have any advice for young aspiring entrepreneurs, women leaders or other women in the cannabis space?

Whiteman: I do. I posted something on LinkedIn the other day and I’m going to make the same comment to you as I made in that post because I think it’s important and particularly important for young women. People have said a lot of nice things about me in the past couple of weeks and of course everybody loves to hear nice things about themselves. But the truth is, some of them are not true. And one of them that is definitely not true is that I am somehow fearless. And I guess what I would say to women and young entrepreneurs is that fearlessness is a myth.

Being an entrepreneur is hard. You’re putting your money on the line, you’re putting your time on the line, you’re putting your reputation, you’re potentially putting your family’s, your friends’ and your investors’ money on the line. Who would not be afraid against that backdrop? We all have times of feeling fearful, of feeling anxious, of having sleepless nights. So, what I would say is don’t aspire to be fearless. There are other aspirations that are much more useful. For example, aspire to be resilient, aspire to be persistent, aspire to be of service to other people, aspire to be very true to your values and your strategy. Don’t let this mythology of what a “leader” is supposed to look like make you feel bad about your emotions. It’s not about having those emotions, it’s what you do with them.

That’s what I would say to young entrepreneurs and especially to women. Because I do believe that women hold themselves to a very high standard a lot of the time and have a lot of misconceptions of what they’re supposed to be living up to when it comes to leadership.

Biros: What an incredible perspective to have. Okay, one last question for you: what are you doing to celebrate?

Whiteman: So far, I’ve been too busy to celebrate! This just happened so recently. I would like to take a great trip with my kids. I don’t really know I have not had time to figure that out. People tell me I need to go to Disney. But right now, it’s still taking a little while to let it all sink in. 

Biros: Wonderful! And Nancy, thank you so much for your time I really appreciate it.

Whiteman: And thank you! So nice to see you in person.

Sustainable Hemp Packaging is the Future of Industrial Packaging

By Vishal Vivek
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The future of packaging is ripe for capitalization by the drivers of sustainability culture. With the battle lines drawn and forces at play in motion, change is now inevitable. The question arises: how quickly can the industry grow in the space of the next decade?

With an increasing number of nations banning non-biodegradable and petroleum-based plastics in certain uses, the choices at hand have naturally led to bioplastics. Bioplastics are a major ingredient of the renewable packaging industry. We derive them from various renewable agricultural crops, of which hemp is among the chief examples.

The Change for Hemp

The legal ramifications of the European Green Deal and the American Farm Bill of 2018 have created a microcosm where the sustainability discussion has turned into corporate initiatives for crops like industrial hemp, which are a source for bioplastics and numerous other products. The smaller carbon footprint of industrial hemp plays its role in shaping consumer demands towards a greener future.

Farmers are now able to cultivate the plant in the U.S., due to its removal from the list of controlled substances. Agribusinesses and manufacturers are aware of the plant’s versatility, with uses in packaging, building construction, clothing, medicinal oils, edibles like protein powder and hemp hearts, hemp paper and rope. What was once George Washington’s strong consideration as a cash crop for his estate, may gradually become the world’s cash crop of choice.

Hemp’s Sustainability Beckons 

Why is the crop unanimously superior in the aspect of eco-friendliness? Its growing requirements are frugal: water, soil nutrients and pesticides are not needed in large quantities. It absorbs great quantities of carbon dioxide from the atmosphere, and uses it to create 65-75% cellulose content within its biomass. Cellulose is vital in the manufacture of bioplastics. Hemp is also flexible within crop cycles, due to its small harvesting period of only 4 months.

Thus, farmers use it as a rotational crop, allowing them to also cultivate other crops after its harvest. High-quality crops like cotton, though superior in cellulose content and fibrous softness, require far more water quantities, soil nutrients and pesticides. Farmers face greater difficulties in cultivating cotton as a rotational crop, because it requires far more space and time.

Hemp Bioplastics For Packaging                                

We manufacture bioplastics from the hurd and cellulose of the hemp plant. Hemp bioplastics are biodegradable, and take up to a maximum of 6 months to completely decompose; by contrast, normal fossil-fuel-based plastic takes up to 1000 years to decompose.

Manufacturers incorporate these ingredients into existing manufacturing processes for regular plastics, such as injection molding. Thus, we can apply bioplastic ingredients to similar plastics applications, such as packaging, paneling, medical equipment and more. New technologies aren’t necessarily needed, so companies and manufacturers do not have any reservations about its viability as an industry.

Here are a few types of bioplastics derived from hemp:

  1. Hemp Cellulose-based Bioplastics

This is a substance found in plant cell walls. We use cellulose to manufacture a broad range of unique plastics, including celluloid, rayon and cellophane. These plastics are usually entirely organic. We mix cellulose and its variations (such as nanocellulose, made from cellulose nanocrystals) with other ingredients, such as camphor, to produce thermoplastics and the like. Using natural polymer, we process a broad range of bioplastics and corresponding polymers. The difference in their chemical properties is down to the nature of the polymer chains and the extent of crystallization.

  1. Composite Hemp-based Bioplastics

Composite plastics comprise organic polymers like hemp cellulose, as well as an addition of synthetic polymers. They also have reinforcement fibers to improve the strength of the bioplastic, which are also either organic or synthetic. Sometimes, we blend hemp cellulose with other organic polymers like shellac and tree resins. Inorganic fillers include fiberglass, talc and mica.

We call any natural polymer, when blended with synthetic polymers, a “bio composite” plastic. We measure and calibrate these ingredients according to the desired stiffness, strength and density of the eventual plastic product. Apart from packaging, manufacturers use these bioplastics for furniture, car panels, building materials and biodegradable bags.

A composite of polypropylene (PP), reinforced with natural hemp fibers, showed that hemp has a tensile strength akin to that of conventional fiberglass composites. Furthermore, malleated polypropylene (MAPP) composites, fortified with hemp fibers, significantly improved stress-enduring properties compared to conventional fiberglass composites.

  1. Pure Organic Bioplastics With Hemp

We have already generated several bioplastics entirely from natural plant substances like hemp. Hemp fibers, when made alkaline with diluted sodium hydroxide in low concentrations, exhibit superior tensile strength. We have produced materials from polylactic acid (PLA) fortified with hemp fibers. These plastic materials showed superior strength than ones containing only PLA. For heavy-duty packaging, manufacturers use hemp fibers reinforced with biopolyhydroxybutyrate (BHP), which are sturdy enough.

With the world in a state of major change due to the coronavirus outbreak of 2020, the focus is back on packaging and delivery. In this volatile area, perhaps the industry can learn a few new tricks, instead of suffocating itself in old traditions and superficial opportunism. The permutations and combinations of bioplastic technology can serve a swath of packaging applications. We must thoroughly explore this technology.

Hemp’s Future in Packaging

Fossil fuel-based plastic polymers are non-renewable, highly pollutive and dangerous to ecosystems, due to their lifespans. They are some of the most destructive inventions of man, but thankfully could be held back by this crop. Industrial hemp upheld countless industries through human history and now is making a comeback. After existing in relative obscurity in the U.S. due to false connotations with the psychoactive properties of its cousin, it is now back in business.

With the American hemp industry on the verge of a revolution, hemp packaging is primed to take over a significant part of the global packaging sector. The political, economic and environmental incentives for companies to adopt bioplastics are legion. Its lower cost lends to its allure as well. Consumers and agribusinesses are following suit, making the choice to be environmentally-conscious. By 2030, it is estimated that 40% of the plastics industry will be bioplastics.

We can only mitigate the plastic pollution in oceans, landfills and elsewhere, with the use of biodegradable bioplastics; otherwise, animals, humans and plants are getting adversely affected by imperceptible microplastics that pervade vast regions of the Earth. With hemp bioplastics, we use the cleaner, renewable matter of plants to conserve the planet’s sanctity. We can expect this new technology to continue to light the way for other nations, societies and companies to build upon this sustainable plan.

european union states

Why Europe May Serve as an Important Bellwether for Hempcrete Use in the United States

By Stephanie McGraw
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european union states

Hemp-based construction materials are an attractive option for achieving environmentally friendly goals in construction, including reduced emissions and conservation of natural resources. Hemp construction materials dating back to the 6th Century have been discovered in France and it has long been eyed with interest by hemp growers and manufacturers, as well as environmentalists in the United States and abroad. As the European Union moves forward with its 2019 European Green Deal, United States hemp, construction and limestone industries, as well as regulatory agencies, will be provided with an important preview of the benefits, risks and issues arising out of the use of hemp in construction.

The European Green Deal and Circular Economy Action Plan

Hemp applications in construction are gaining increased interest as the EU seeks to neutralize its greenhouse gas emissions by 2050. Much of the specifics for this transition to zero emissions are outlined in the EU’s “A New Circular Economy Action Plan,” announced on March 11, 2020. According to the EU, “This Circular Economy Action Plan provides a future-oriented agenda for achieving a cleaner and more competitive Europe in co-creation with economic actors, consumers, citizens and civil society organisations.” The plan aims at accelerating the transformational change required by the European Green Deal and tackles emissions and sustainability issues across a number of industries and products, including construction.

Construction in the EU accounts for approximately 50% of all extracted natural resources and more than 35% of the EU’s total waste generation. According to the plan, greenhouse gas emissions from material extraction, manufacturing of construction products and construction and renovation of buildings are estimated at 5-12% of total national greenhouse gas emissions. It is estimated that greater material efficiency could save 80% of those emissions. To achieve those savings, the plan announces various efforts to address sustainability, improve durability and increase energy efficiency of construction materials.

How Hemp Could Help Europe Achieve Neutral Emissions

Hemp, and specifically hempcrete, is being eyed with heightened interest as the EU enacts its plan. Indeed, recent mergers and acquisitions in the European hemp industry signal just how attractive this hemp-based product may be as international, national and local green initiatives gain momentum. But how would hemp be utilized in construction and what types of legal issues will this industry face as it expands?

Image: National Hemp Association

The primary hemp-based construction material is “hempcrete.” Hempcrete is typically composed of hemp hurds (the center of the hemp plant’s stalk), water and lime (powdered limestone). These materials are mixed into a slurry. The slurry petrifies the hemp and the mixture turns into stone once it cures. Some applications mix other, traditional construction materials with the hempcrete. The material can be applied like stucco or turned into bricks. According to the National Hemp Association, hempcrete is non-toxic, does not release gaseous materials into the atmosphere, is mold-resistant, is fire– and pest-resistant, is energy-efficient and sustainable. To that last point, hemp, which is ready for harvest after approximately four months, provides clear advantages over modern construction materials, which are either mined or harvested from old forests. Furthermore, the use of lime instead of cement reduces the CO2 emissions of construction by about 80%.

Watching Europe with an Eye on Regulation and Liability Risks

Hempcrete indeed sounds like a wünder-product for the construction industry (and the hemp industry). Unfortunately, while it may alleviate some of the negative environmental impacts of the construction sector, it will not alleviate the threat of litigation in this industry, particularly in the litigious United States. The European Union’s experience with it will provide important insights for U.S. industries.

Hempcrete blocks being used in construction

Because hemp was only recently legalized in the United States with the passage of the 2018 Farm Bill, it is not included in mainstream building codes in the United States, the International Residential Code, nor the International Building Code. Fortunately, there are pathways for the consideration and use of non-traditional materials, like hempcrete, in building codes. However, construction applications of any form of hemp, including hempcrete, at this point would likely require extensive discussions with local building authorities and an application showing that the performance criteria for the building are satisfied by the material. Such criteria would include standards and testing relating to structural performance, thermal performance, and fire resistance. Importantly, the ASTM does have a subcommittee working on various performance standards for hemp in construction applications. European progress on this front would pave an important regulatory pathway for the United States, as well as provide base-line standards for evaluating hempcrete materials.

Insights into regulation and performance standards are not the only reason to watch the EU construction industry in the coming decades. Introduction of hempcrete and hemp-based building materials in the United States will likely stoke litigation surrounding these materials. Although there is no novel way to avoid the most common causes of construction litigation, including breach of contract, quality of construction, delays, non-payment and personal injury, the lessons learned in Europe could provide risk management and best-practice guidance for the U.S. industry. Of particular concern for the hemp industry should be the potential for product liability, warranty, and consumer protection litigation in the United States. The European experience with hempcrete’s structural performance, energy efficiency, mold-, pest- and fire-resistant properties will be informative, not just for the industry, but also for plaintiff attorneys. Ensuring that hempcrete has been tested appropriately and meets industry gold-standards will be paramount for the defense of such litigation and EU practices will be instructive.

The United States construction industry, and particularly hempcrete product manufacturers, should pay close attention as the EU expands green construction practices, including the use of hempcrete. The trials and errors of European industry counterparts will inform U.S. regulations, litigation and risk management best practices.

 

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International Cooperation: The Next Generation of Cannabis Development?

By Marguerite Arnold
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european union states

The Canadian-German market connection has been a “thing” ever since the middle of the last decade. But this is not the only international cannabis connection. Indeed, firms in multiple countries have been developing international partnerships for quite some time – and not just deals involving the plant or its extracts, but on the cannabis technology front.

This year and going forward expect these to bear fruit, and in interesting ways.

What are the trends? And who is doing what?

Europe
The entire European cannabis market has slowly been developing momentum since 2017 when Germany kicked off its first attempt at a domestic cultivation bid. The first German-grown cannabis is expected to hit pharmacies this fall, and further at a price that will keep everyone else hopping (€3.20 a gram from BfArM to distributors). However, because domestic cultivation was never expected to keep up with patient demand, Germany has become one of the hottest destination markets on the planet.

While there is clearly product still coming in from Canada, the big importer into Germany is actually from Holland (Bedrocan), right across a common border.

european union statesBut Holland is not the only game in town anymore. Europe has long had promise as one of the most international cannabis markets in the world, simply because of relatively open, cross-border trade. Cannabis from Denmark, Portugal and Spain as well as Australia and South Africa have already made it into the German market. Greece, Italy and Poland are all moving into position as major sources of at minimum, floss if not extracts, along with growing interest in Eastern European entries (and not only the Czech Republic).

The intra-European market for cannabis is well underway, in other words, and this is likely to be an increasing trend, particularly as cannabis continues to make waves on the medical front as well as continually mounting evidence that the drug treats difficult to treat conditions including neurological disorders, cancer and the ever-present chronic pain.

Then of course, there is Israel, which is expected to be a big contender now that the country is finally in the export game.

Beyond the direct imports, however, there are also multiple country hops in play (such as Uruguay to Portugal to Germany). Malta is also increasingly shaping up to be an intriguing pass through port, if nothing else.

But of course, Europe is not the only international game in town.

The UK
Despite all of the problems that British patients face in obtaining high quality medical cannabis at a price that is affordable, the UK has actually led the world in cannabis exports (benefitting so far only GW Pharmaceuticals). However many firms have also been cooperating to bring cannabis into the country (from Canada and Holland in particular so far). The biotech partnerships set up by firms like Canopy Growth are also expected to bear fruit as cannabinoid research begins to truly come into its own in the coming decade.

The Americas
Despite the fact that exporting from the U.S. is still difficult (although some firms have managed to export hemp to Europe), there is a lot of cross border cooperation going on throughout the hemisphere (including investment and all kinds of creative partnerships). Canada of course, got its export game going early. Yet one of the more intriguing cross border stories of the last 18-24 months is the amount of South American cultivated cannabis ending up “north of the border.” Changing laws in the region make Latin America a major export location as well as a source for product bound elsewhere including Europe (see Columbia, Uruguay and Jamaica in particular). Mexico is expected to be a power player globally going forward too.

There are also many American firms who have developed strategic partnerships globally beyond the actual plant (including in Israel).

Israel
israel flagThe country is absolutely in the export market, but that is not the whole story. Earlier in the year, the country received its first import from Uganda. There are also multiple U.S. companies in partnership with Israeli firms, and this will increasingly play out in terms of both product and cannabis technology as the market continues to open internationally. American firms, in other words, are still largely prohibited from shipping from the U.S., but they can now do so from Israel, and further, anywhere in the world.

South Africa
Another newcomer, South African firms are partnering internationally (including with American firms) to develop not only product but extraction technology. Cannabis firms here have also already shipped product to Canada and Europe.

Australia
Agricultural exports generally are a major part of the Aussie economy, and cannabis is shaping up to be no exception. Domestic firms are increasingly exporting to Europe (in particular), but partnerships here will be intriguing to watch, particularly as the Chinese market comes into its own. And there are already plenty of firms with partnerships now established or in the last phases of inking out deals with Israeli firms. Canada has been the largest source of imports into the country since 2017.

Practical Advice on How to Avoid a TCPA Suit

By Paul Gipson
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Texting consumers is a very effective means to drive engagement and ultimately sales. Text messages have outpaced emails when looking at conversion and click-thru rates. In fact, 95% of texts are read in ninety seconds or less! While text messages can be a great way to engage with prospects and customers, the FCC’s Telephone Consumer Protection Act (TCPA) is a regulation you need to be mindful of. In fact, the average cost of a TCPA settlement is over $6m dollars, which doesn’t include legal fees or reputational damage.

Over the past few years, there have been about 4,000 TCPA cases filed annually. Take a look at the growth:

Companies are being targeted for various reasons, but there are a few that I’ll cover below along with some advice on how to avoid TCPA suits.

See if you can spot the trend in these cases:

  • Papa Johns: $16.5m settlement due to texting pizza specials to consumers without their consent.
  • Abercrombie & Fitch: $10m settlement due to texting store promotions to consumers without their consent.
  • Rack Room Shoes: $26m settlement for texting their reward program members with various sales without their consent.

Do any of these campaigns sound like something your company is engaged in?

So, you’ve got someone who has signed up for a rewards program, wants to receive deals, or has provided their number to your company for other purposes, but you are concerned about the TCPA (hopefully). Based on my experience working with hundreds of clients at CompliancePoint, here’s where I think you should start. But first…

Quick assumption: Your company is using an automated system to send both informational and promotional texts. Examples include “blast campaigns” (upcoming sale) or “triggered campaigns” (signed up for rewards).

Quick point: Just because the text message says your store is having a sale but doesn’t ask the consumer to buy anything on the message, you may think it’s not considered “telemarketing”. This is wrong. Any plan to sell now or in the future through direct marketing is telemarketing and subject to the TCPA.

Here are my top 5 things to consider:

  1. Obtain consent. This is not achieved by simply having a number provided by the consumer. Instead, the consumer must affirmatively agree to receive promotional calls/texts by automated means. This is done through a clear disclosure and often accompanied by an unchecked checkbox.
  2. Honor opt-outs. This seems obvious right? Provide instructions on how to opt-out and look for other phrases like “stop/quit/cancel”. Opt-outs should occur immediately with most common texting platforms.
  3. Keep records. If you receive a complaint, you want to be able to respond confidently and records help you do that. The key records to maintain are your texting records (the phone numbers you texted, the date/time of the text, and the content of the text), your consent opt-in forms, and opt-out requests from consumers with dates. Ask yourself: what records do you need to prove you had consent, and what records prove you didn’t text a consumer after they opted out.
  4. Only text consumers between the hours of 8AM and 9PM according to their time zone. I always recommend going off address and not phone number due to cellphone mobility. If you text a California number at 8PM, but the phone owner lives in New York, you might get a few complaints.
  5. Monitor compliance with these items. Another one that seems obvious, yet most companies fail to do so, and you see above what happens. I guarantee you’ll find issues with most audits.

Bonus – here is a more comprehensive checklist on how to achieve a Safe-Harbor defense.

This article is not intended to be a scare tactic. The TCPA legal landscape is rampant and consumers are more aware now than ever of their rights. A quick Google search of “Cannabis TCPA” helps to illustrate the fact that this industry, like most, is not immune. However, with proper compliance parameters in place, your company can enjoy the benefits of texting with consumers with peace of mind.

2020 Financial Trends for the Cannabis Industry

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

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

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

Finding New Capital Investment Will Be Tougher

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

Image: Flickr

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

Expect More M&A and Consolidation

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

New Markets & Regulations

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

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

Image: Cafecredit, Flickr

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

Credit Card Payments

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

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

The Fall of Farmako?

By Marguerite Arnold
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Chances are if you follow the European cannabis scene, particularly out of Germany, that you might have heard of a firm called Farmako. They have certainly, in the three quarters or so they have been in business, been given a lot of “good press.” They certainly worked hard to get into the headlines.

The problem is that no matter how scintillating initial claims were to many members of the media if not industry beyond, the bloom was quickly off the rose in the same circles. Since at least March, these grumbles have earned the company increasingly bad press. Industry insider complaints and background knowledge also began appearing in places like Manager (a top German business magazine), Vice and Business Insider Germany. Behind the headlines and insider quotes, however, quite a few people are admitting, even if off the record, that while initially impressive enough to be believed – at least on the surface – most of Farmako’s claims have panned out so far to be just hot air. And there have been a lot of them, not only from the sourcing perspective but also from the research, scientific development and certainly tech fronts.

The rebutting, editing and confronting of which has also set off a round of really bad press.

Live by the sword, die by the sword.

Further, apparently even the embarrassing fallout (and of course resulting reorganization) is not what it seems to be. Which of course has also been described so far publicly by the Frankfurt-based company itself, and Berlin-based tech funder, Heartbeat Labs. The former of which are so far unsuccessfully walking back just about every claim made over recent months. The latter of which has a great deal of embarrassing egg on its face on the compliance front.

When reached for comment by Cannabis Industry Journal, Heartbeat Labs responded via email that they had none.

While Farmako is struggling to regain the confidence of the industry if not regulators and appears to be trying to hang on to its distribution license, the story itself is also illustrative of many of the failings of the so-far establishing cannabis industry. In Germany and elsewhere. Coming as it does within the summer of scandal involving both larger companies and start-ups, bigger questions about industry practices, in general are in the room. If not the backgrounds of those boasting about “industry experience” (or even worse when caught, “oops I have none, really”). Highly stereotypical fixes so far have also not helped.

Everyone makes mistakes in a world where everything is new and one where the regulations are constantly changing. The problem with Farmako in particular, is that there were so many.All the bragging in the English and German language press had consequences.

The Story So Far

Farmako made headlines earlier this year when they issued a press release claiming that they had inked a deal to “import 50 tonnes of cannabis from Poland.” They further claimed, when contacted by CIJ that they stood by the story. At this point, their claims were clearly about a future delivery. However, Farmako CEO Niklas Kouparanis then embellished further on Bloomburg. Kouparanis claimed that they were already distributing product from Macedonia.

The reality of course was nothing of the sort. While Farmako was distributing product it had sourced from other places, no Macedonian product had ever crossed the border. But as May rolled into June, it was clear that there was something else afoot. All the bragging in the English and German language press had consequences. The German press had a field day with the storied and very colourful past of both Farmako founders. The regulatory agency, BfArM conducted an investigation. Kouparanis was out by the beginning of July.

Producers Do Not Trust Them

Cannabis industry insiders (both producers and distributors) who contacted CIJ about this story, but wished to remain off the record, confirmed that many producers who had initially heard of the firm in both Poland and Macedonia, in particular, were distancing themselves from Farmako. But the stories were not limited to Eastern Europe. In the UK, where Farmako had used a chunk of its investment from Heartbeat Labs to also open a London office, cannabis professionals expressed scepticism of almost all of the company’s claims including not just sourcing, but on the tech and R&D side. One senior executive in the Canadian industry said on deep background that he was tired of the lies from Diemer in particular, and never wanted to speak to anyone associated with the company ever again.

And clearly all was not well within Farmako itself, no matter the constant cheery optimism, if not “shucks we didn’t know” attitude of all involved when actually confronted or questioned about their behaviour – and or statements – particularly to the press.

What Has Been The Upshot To Date?

Kouparanis may be history but Diemer remains with the company. Although Heartbeat Labs claims this has nothing to do with the subsequent company re-org and Kouparanis’ departure, insiders in the industry claim otherwise. Further, several also suggested that any attempt on the part of Farmako to enter into contracts until July was fundamentally compromised by the actions of Farmako execs themselves.

Diemer certainly, has been remarkably candid at least in review about one aspect that most in the cannabis industry who have encountered him so far agree with. He has come clean in interviews that he knows very little about the legitimate cannabis industry. Perhaps that is also why he has continued to claim that there is no crisis at the company.

Both statements of course also raise questions about why he is still there.

The company is still in business although apparently finding it very difficult to source product.The appointment of a new CEO, Geschäftsfüherinen– a female and first head of any kind of cannaspecialist distribution company auf Deutsch, Katrin Eckmans is also interesting. Eckmans makes her apparent cannabis industry debute with a professional background that includes ex-im at Frankfurt airport, after the quick departure of Kouparanis. Particularly given that he co-founded the company with Diemer after leaving a year long stint at Cannamedical (the second indie cannabis specialty distributor in Germany, established in 2017 by David Henn). And she is apparently being hired for both complementary experience and her gender (which while refreshing in a still male dominated industry is widely also regarded as at this point fairly easy-to-spot window dressing conveniently proffered to regain confidence of investors if not customers in a gender-friendly twist when a company or organization hits an existential crisis).

Calling in even a highly competent if inexperienced in the cannabis niche woman, in other words, even in this industry, does not necessarily “fix” things. This goes from company culture to critical relationships within the industry (upon which distributors like Farmako depend on at this point).

For now, at least, Farmako, and its financier in Berlin appear to have deflected criticism of their efforts although those who have had interactions with the staff are placing bets on when the doors in both Germany and the UK will shutter.

Farmako’s detractors may yet also lose such wagers. The company is still in business although apparently finding it very difficult to source product. Not, in this case because they cannot find it – but rather because producers are flat out refusing to work with them.

In the meantime, particularly other German canna specialty distributors are taking a lesson from this story. If Farmako survives, in other words, it will do so by overtaking the competition that has sprung up all around them – which is not only unburdened by the baggage, but is also determined not to make the same mistakes.

european union states

Why International Trade Agreements Are Shaping The Cannabis Industry

By Marguerite Arnold
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european union states

If you have wondered over the past several years, why the big Canadian companies (in particular) are following the global strategy they are, there is actually a fairly simple answer: Newly implementing trade agreements, particularly between Europe and North America.

More specifically, they are highly technical trade agreements that are also called Mutual Recognition Agreements, (or MRAs).

In fact, look at the schedule of the MRA agreements signed between the U.S. and individual EU countries over the last several years, and it also looks like a map of the countries that have not only legalized at least medical cannabis, but where the big Canadian companies (in particular) have begun to establish operations outside of their home country.

But what is going on is actually more than just CETA-related and also will affect cannabis firms south of the Canadian-U.S. border.

All of these swirling currents are also why the most recent MRA to come into full force in July this year, between the U.S. and Europe, is so interesting from the cannabis perspective. Even before federal reform in the U.S. If this sounds like a confusing disconnect, read on.

What Are MRAs?

MRAs are actually a form of highly specialized trade agreement that allow trading countries to be certain that the pharmaceuticals they purchase from abroad are equivalent to what is produced at home. This includes not only ingredients but processing procedures, production plant hygiene, testing, labeling and more.

When it comes to the  EU-US MRA agreement, this means that individual states of the EU can now recognize the American Food and Drug Administration (or FDA) as an effective federal regulator of American pharmaceutical production that is equal to the procedures in Europe. US GMP standards, in other words, will be recognized as equal to those of EU states.

This will now also, by definition, include GMP-certified medical cannabis formulations.

What is so intriguing, however, is how this development will actually place certain American (and Canadian) manufacturers in a first place position to import cannabis into Europe ahead of the rest of the American cannabis industry.

What Are Mutual Recognition Agreements All About?

One of the most important quality and consumer safety aspects of establishing a clean supply chain is tied up in the concept of GMPs (Good Manufacturing Practices). These are procedures, established by compliant producers of pharmaceuticals, to ensure seed (or source) to sale reliability of the medication they make. In the cannabis industry, particularly in the advent of Canadian-European transatlantic trade in cannabis, this has been the first high hurdle to accept and integrate on the Canadian side.

GMPIf European countries recognize a country’s GMP certifications are equivalent to its own, in other words, and cannabis is legal for export, a country can enter the international cannabis market without facing bans, in-country inspections and the like. In the interim, imported products still have to be batch tested until the agreements are fully accepted and operational.

Israel, for example, already had an MRA with the EU, and medical cannabis is legal in the country. However, Israel was prevented from selling cannabis abroad until a legislative change domestically, passed on Christmas Day.

That is why the MRA agreement between the US and EU with Canadian companies in the middle also put both Israeli and U.S. firms at an extreme disadvantage in comparison. Both in entering the market in the first place, and of course associated discussions, like the German tender bid. That is now changing- and as of this year.

A Specialized Map Of Global Medical Cannabis Exporters

Ironically, what the new US-EU MRA could also well do is create a channel for pharmaceutical cannabis from the United States to Europe (certainly on the hemp and CBD front) just as Israel is expected to enter the international cannabis export industry (later this summer or fall). It could well be also, particularly given the Trump Administration’s tendency to want to not only “put America first” if not pull off “a better deal” in general and about everything, that this is why President Trump offered the delay to Israel’s president Benjamin Netanyahu in the first place.

Regardless of the international individual developments and subtleties however, what is very clear that from the time the first bid stalled in Germany in the summer of 2017 until now, the U.S.-EU MRA has been in the room even if not named specifically as a driver.

For example, the FDA confirmed the capability of Poland and Slovenia to carry out GMP inspections in February of 2019.  It was only last fall that Aurora pulled off its licensing news in the former (on the same day licensing reform was announced by the government). Denmark was recognized in November of last year during the first year of its “medical cannabis pilot progam.” Greece was recognized in March 2018. Italy, Malta, Spain and the UK came online in November of 2017.

Overlay this timetable with a map of cannabis reform (and beyond that, cannabis production) and the logic starts to look very clear.

The upshot, in other words, is that while cannabis still may be “stigmatized” if not still “illegal” in many parts of the world, more generalized, newly negotiated and implementing, specialized global trade agreements between the US, Europe and Canada in particular have been driving the development of certain segments of the cannabis industry globally and since about 2013.

The Biggest News?

As of this year, as a result, expect at least from the GMP-certified front at least, that such international trade will also include medical cannabis from the U.S.

Want an example of the same? First on that list if not early in the game will now undoubtedly be Canadian-based Canopy Growth, with Acreage on board, headquartered in New York.

Marguerite Arnold

Canopy Growth Makes Multi-Billion Dollar Conditional Acquisition Deal

By Marguerite Arnold
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Marguerite Arnold

The first German cannabis bid may have come to an end more or less, and with a whimper rather than a bang (not to mention the inevitable still-to-be-settled legal challenges). However even as the dust settles, one of the biggest “names” in cannabis and the company formerly expected to win at least a few of the tender lots is looking elsewhere.

Namely Canopy Growth, which was a finalist in the first round of the tender, has not shown up as a finalist firm in Germany this time (at least not so far).

However, it is clear the firm has other intentions afoot, namely U.S. expansion.

In an unprecedented move, Canopy announced its intent to buy the largest U.S. based producer of cannabis, a firm called Acreage Holdings, just before Easter. The conditional deal is being consummated in both cash ($300 million) plus stock swaps, and will not finally close until federal reform has come in the U.S. In fact, the deal makes the bet that the entire issue of U.S. federal reform will be solved within the next decade.

Canopy_Growth_Corporation_logoIn the meantime, however, what this also does is place one of the world’s largest cannabis companies in the middle of what is largely seen as the world’s most valuable overall cannabis market. Further it does so in an environment where the company benefits from Acreage’s considerable market and political clout. Former speaker of the U.S. House of Representatives John Boehner (a fierce opponent of legalization until it was personally convenient and profitable) is on the board of Acreage.

But there are those who might still be confused about why this deal happened. Canopy after all is fond of saying that its first focus is the “more valuable” medical rather than recreational market. And the U.S. market has many challenges still, that stem from a lack of federal reform. In fact, Canopy has frequently said in the past that they would not enter the U.S. until federal reform occurs. What gives?

What The Deal Also Does…

It is not “just” entry into the U.S. recreational market, albeit still on a state level that is significant about the deal. That starts with its timing.

When trying to understand the motivations of Canadian cannabis companies, especially ones who have eschewed the U.S. market in the past (at least until federal reform passes), it is also necessary to understand that they operate in a shifting world of global strategy that is never as straightforward as one might think. And often has nothing to do with cannabis per se.

Namely, while this deal places Canopy in the middle of the U.S. state industry it also does something else. It positions Canopy as a U.S. producer just two months after a new international pharmaceutical trade deal went into force (on February 8) called an MRA.

MRA agreements, also known as Mutual Recognition Agreements, are essentially trade deals between countries to accept the equivalency of their pharmaceutical production and supply chain.

On the cannabis front, the existence of MRAs between existing countries as cannabis has become legal, has also largely dictated the new international cannabis trade (see Canada and Germany as a perfect example) although this has been held as a closely held secret by the largest cannabis company executives (some of whom have previously denied that this was driving their expansion across Europe).

However, thanks to the agreement on this MRA in February, as of July of this year, Europe and the U.S. will formally kick off a situation where the European and therefore German health authorities will formally recognize American GMP processes.

That means that on the pharma front, Canopy has also essentially re-entered the European market, albeit by a bit of a backdoor. It also means that Canopy can immediately start to import cannabis drugs at least, made in the U.S. into the European and by extension, German market.

Cannabis drugs have been going in the opposite direction across the Atlantic to the U.S. for at least a year now (see the GW Pharma’s Epidiolex adventure last year). And further over the U.S.-Canadian border if now only bound for academic research (see Tilray).

It also may mean that they can import medical cannabis itself to be used as “medicine” or processed into one in Europe.

Does This Mean That U.S. Federal Reform Is Imminent?

Not necessarily. In fact, keeping the U.S. market in general out of the global cannabis trade, while allowing the top companies to participate both in the cross-state market and the global pharmaceutical one benefits the biggest companies. Conveniently, this also allows U.S. cannabis “pharmaceutical” producers to enter the EU in force just as Israel is expected to (third quarter this year). This also puts the “deal” U.S. President Trump and Israeli President Netanyahu cut on the subject to delay Israeli sales in an entirely new light (and one that should outrage both Americans and Israelis in the industry on this front even more). Not to mention every European hopeful producer unaware of the larger game afoot.

That said, what federal U.S. legalization will do is drop the operating costs of the larger U.S. entities now engaged in multi-state operations.

Cannabis in other words is not likely to be legalized in the U.S. before the next presidential elections for reasons that have everything to do with the profits of a few – and for that reason will certainly be a major theme in the next national political race.

And in the meantime, the biggest companies, Canopy included, are not only laughing all the way to the bank (although their shareholders are another story), but setting themselves up to be at the ground floor DNA of the global cannabis business as it establishes itself in every country of the world.

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British Cannabis Firms Facilitate First Bulk Shipment of Cannabis Into UK

By Marguerite Arnold
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Move over Canopy Growth! Along with Aurora, Tilray, Wayland, Namaste and everyone else trying to break into the British cannabis market with authority. Ahead of all of them, a group of innovative start-ups just imported the first legal bulk medical shipment of cannabis into the country via a new entity designed to facilitate market access for such imports called Astral Health.

Jolly good show, as those on the ground due to benefit are no doubt thinking right now even if larger competitors are left in the proverbial cannadust for at least a few months.

That said, this is a larger gulf than it might otherwise be. Let’s not forget, Brexit, or etc. is due next month as Parliament disintegrates and Prime Minister Theresa May heads to Brussels for another fruitless round of “negotiations” that everyone except the occupants of Number 10 (Downing Street, the residence and office of the British government) seem to understand have gone nowhere for two years. What that does to firms entering the market, including in the cannabis space has yet to be understood.

On the Dutch side, the export was handled by the Office of Medical Cannabis. On the British side, the medicine will be sent to directly to pharmacies.

The cannabis will go to patients who have multiple sclerosis and chronic pain.UKflag

About The Companies Involved

Astral Health is a holding company and subsidiary of European Cannabis Holdings (ECH), which also worked alongside specialist pharmaceutical importer IPS Specials and another new start-up Grow Biotech, to bring the cannabis into the country legally.

Of all of them, ECH is perhaps the best known. It is a growingly influential investment company and one of the first (and few) “local” dedicated medical cannabis funds exclusively focused on the European space. ECH shares an office with Prohibition Partners, a cannabis consultancy and the organizer of Cannabis Europa, which just held a sell-out, standing room only conference in Paris. Both groups were also founded by Rob Reid, a Director of SOL Global, a Canadian listed cannabis company which has also made strategic investments of late – notably Greenlight Cannabis in Dublin, with a reach to 1,000 pharmacies across the UK and Ireland.

Most of the companies involved on the ground on this one, in other words, are start-ups. No matter the predominance of the larger Canadian companies in the news, the European cannabis space is starting not only to flourish, but do so in a way that is local, entrepreneurial, and in this case, ahead of the much larger, deeper-pocketed companies.

Niche Providers For Tense Times

In case anyone has forgotten, the deadline for Brexit is now in everyone’s immediate gunsights if not, before March, marked on the kitchen calendar. Even if it looks now like there might be a delay until 2021 or even another “people’s vote.”

Regardless of the outcome, the interim is going to be sticky going for some time.

And of course, imported cannabis, even from Holland, and even if fitting into “regular” unique medical ex-im categories, absolutely also faces this enormity of uncertainty as well. No matter how well the new trade pact with the United States (cunningly crafted to include pharmaceuticals) goes if and when Euro trade (including pharma and cannabis) falls off the cliff. There are also indications that the “emergency Brexit” medical stockpiles and emergency import routes now underway could conveniently aid the cannabis industry from the Euro side, as drugs and other essential medical supplies will be sourced from Belgium and sent into the UK through alternate routes to avoid Brexit delays and backlogs.

Just remember as the mess continues to devolve, no matter what happens, current British PM May is in a remarkably good position to benefit. Her husband, Philip May has been highlighted before for his financial involvement in both tech and cannabis pharmaceutical firms (see both Amazon and GW Pharmaceuticals which obtained the first medical cannabis import rights into the US for its CBD-based Epidiolex last year).

That is also why niche provision is such an interesting space in general in Europe, if not even more specifically the UK at present. No matter how unfair it also is to those who do not have the money to pay for their medication out of pocket (which is also in the cards as the NHS dithers if not disintegrates a little bit more). And in Europe that discussion is very pricey. Cannabis, without either public or private health insurance coverage to offset the cost, is unbelievably expensive. In the realm, right now, of as much as $3,000 a month at point of retail (pharmacies.) Those lucky enough to obtain pre-claim coverage however, pay as little as $12 for their monthly supplies.

In the UK right now, patients can obtain medical cannabis with a Schedule II prescription. However, just as in other legalizing countries in Europe, beyond price and approval issues, doctors have been reluctant to prescribe at all, and insurance approvals are complicated. Even before Brexit, supplies were scarce.

What happens come the end of March if the proverbial sheisehits the fan? That is a very good question. It is very likely that a patchwork of care networks will develop, driven by imports and the companies, if not families and patients behind them.

Regardless of what occurs in the daily particulars of politics, in other words, supply chain issues, particularly at the last mile, promise to be problems for some time to come. Even if all the hullaballoo over Brexit disappears in a wand waive of some Parliamentary fairy who magically appears in the nick of time and sprinkles dust over every MP making everyone come to their senses before Cliff Date arrives.

The Brexit Referendum
Image: Mick Baker, Flickr

Even in Germany, the struggle between patients and pharmacies in terms of supply, and further, supply matching prescription, are far from over two years into “legalization by insurance approval.”

It is very likely, in other words, that the specialized care required for timely import of cannabis in the UK in particular – no matter where it is sourced after Brexit – will require the unique kinds of knowledge that only British- or EU-based, highly focused start-ups can bring, at least in the immediate interim. For this reason, look for a lot of innovative “service focused” start-ups to come out of the next phase of both European and post Brexit cannabis industry developments.

And, as a result, more than a few surprise market entrant hybrids increasingly founded and sourced with both European and UK partners.


Disclaimer: ECH is a sponsor of MedPayRx’s go to market pilot program.