Tag Archives: dispensary

Banking Rights in the Hemp Industry

By Jonathan Miller
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The hemp industry has experienced and continues to see a surge of growth and awareness nationwide. Following the passage of the 2018 Farm Bill, permanently legalizing the crop and removing hemp from its classification as a controlled substance, consumer demand for hemp and hemp products like CBD have skyrocketed.

Unfortunately, there remain many challenges. Confusion about hemp’s legal status – and the differences between hemp and its intoxicating cousin, marijuana – has too often stymied commerce in the industry, particularly with traditional banking products and merchant services being limited in their availability to those trying to grow their businesses.

This month, we witnessed a breakthrough development. Upon the bipartisan urging of Senate Majority Leader Mitch McConnell and Senator Ron Wyden, four federal banking regulatory agencies – Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, the Federal Reserve, Financial Crimes Enforcement Network – joined by the Conference of State Bank Supervisors – issued joint guidance confirming the legal status of hemp and the requirements for banks providing financial services to businesses.

Just some of the many CBD products on the market today.

The new guidance achieves many necessary benchmarks integrating hemp and banking, such as no longer requiring banks to file suspicious activity reports for customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. Further, the guidance clarifies the difference between hemp businesses and marijuana businesses – adding yet another point of relief to banks concerned with national and state legality.

The hope is that the joint guidance should alleviate any fear of audits or regulatory crackdowns that have slowed financial institution integration with the hemp industry. However, this does not require banks or financial entities to participate in business with hemp companies. Nor does this guidance directly address the legality of hemp-derived CBD commerce.

With all of this in mind, there is still work to be done. Priority #1 is passage of the SAFE Banking Act. This bipartisan legislation, initially focused on providing a green light to marijuana banking in states where pot is legal, was amended to ensure a separate safe harbor for hemp, with far fewer hoops since it is not a controlled substance. It also directs federal financial agencies to provide clear guidance to both banks and other financial institutions – such as credit card companies – that hemp and CBD commerce are legal. The bill was passed overwhelmingly by the House in September and we are hopeful to see full Senate consideration soon.

Banking is one of the key targets that the hemp industry is aiming to secure, as this will allow for an increase in legal hemp business growth and practices. The goal of the U.S. Hemp Roundtable is to provide consumers with safe and legal hemp products along with the knowledge that the companies are meeting the highest standards and complying with national and state law.

Top International Cannabis News Stories of 2019

By Marguerite Arnold
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Cannabis as a news story and an industry moved forward again this year, albeit in a rather more halting way than the last few. The volatility of the market in fact was one of the largest stories of the year, particularly after the events of this summer.

It’s Been A Wild Ride Kind Of Year

This time last year, the world was in a tizzy over the literally billions of bucks invested into a few top Canadian cannabis companies. This year, predictions are definitely a little more sober when it comes to the future of cannabis stocks. Most of the industry has taken a major beating this fall.

That said, the current correction was in the cards for just as long. What goes up, dramatically, must come down.

That said, this is not the whole picture of the industry – not by a long shot. Reform ain’t going back. Patient numbers are climbing, albeit slowly.

Here in Europe, the first and so far biggest public tender on cannabis was finally concluded in Germany with Aurora, Aphria and the cannabis company formerly known as Wayland (ICC) winning the bid lots for domestic cultivation this spring.

The British, who waffled around all year on what kind of “animal” cannabis actually is, celebrated that anniversary late in the year with a highly limited scope of coverage by the NHS.

And Luxembourg threw down the gauntlet on “recreational” within an aggressive timeframe (by 2022) and tripling its medical cannabis training budget for doctors next year.

International Cannabis Is Growing Like…A Weed

The most interesting discussions right now are clearly emerging on the international front. Cannabis became an internationally mainstreaming commodity this year as patient numbers began to climb on the continent.

Canopy_Growth_Corporation_logoThis in turn has led to the normalization of the idea at least of an export trade in cannabis not only across Europe but globally as companies target the region. Cross border cannabis companies, in other words, are a “thing” that blossomed this year – and frequently, while sometimes financed by Canadians, called another country home.

The announcement of at least the first German wholesale reference price this year will also do wonders to start to normalize prices across not only the EU but all those hoping to export here.

That in turn will have global impact.

Regulation Is Beginning to Materialize

For those who thought that higher standards were a passing fad, the events of this year, particularly of the latter half of it have confirmed one thing for sure: Regulatory muster is here to stay.

GMPTo add to the general confusion, however, international standards on medical products and even food are absolutely in the mix as countries find that standards, measurements and production processes might be similar, but on the ground, still differ. Harmonization is a word many in the cannabis industry are hearing now, and not just in the medical space, but also the food and supplements market.

The initials “GMP” are on the lips of many this year. Not to mention another exciting development the cannabis industry from abroad did not see coming and still broadly does not understand – namely Novel Food.

The War For Reform Is Being Fought On Several Fronts

Inevitably, just as in the United States, the fights in the room right now as well as legislative gridlock are focusing on some strange nitty gritty. For example, cannabidiol (CBD) is just one cannabinoid from the plant. It is a chemical substance. Yet, suddenly, in Europe, this discussion is being bogged down in pseudo-scientific discussions in the name of public policy about whether CBD is a “new kind” of food.

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

Ultimately this is a discussion about regulation – whether CBD and hemp production should be regulated differently than they are right now – and whether the plant should be put in a different bucket than, say, tomatoes. Or when extracted, tomato juice.

GMP is also a very strange discussion which has still not exited the stage – mostly because of the lack of uniformity internationally between Canada and European states although that is moving in the right direction.

The last issue of course, which has been looming from the Canadian side for several years, including of course all the pesticide scandals, new regulations on the cultivation of all plants for human consumption. Even German farmers are up in arms (with a recent tractor protest in Berlin that paralyzed the city).

Cannabis is in the bullseye on all fronts.

Auld Lang Syne

If there was a theme to the industry as of this summer, it was clearly that things cannot continue as they have. The CannTrust Scandal absolutely encapsulated all that is wrong with the industry.

That said, there is every reason to believe that the most egregious scandals (or at least quite so many of them) are a passing fad. Indeed, many in the industry are in fact committed to turning over a new leaf (for the new year or just because).

The good news? There is every sign of course that it will.

european union states

The European Cannabis Industry In Review: 2019

By Marguerite Arnold
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european union states

2019 opened with a strange vibe in the air on the cannabis front. Israel and Thailand set the stage with dramatic reform announcements last Christmas. And as the calendar counts down to 2020, the larger players all seem to be licking their wounds (if not stock prices).

But cannabis reform is not just about profits on the public markets. What has gone down and where and ultimately, has the year lived up to its promise?

Reform Marched On In Several Countries

At this point, reform is certainly “too big to fail.” There will be no going back anywhere no matter the laggards still in the room.

german flag
Photo: Ian McWilliams, Flickr

From the perspective of opening patient access (and markets beyond that), There were several big stories on the medical front this year – and – in a real first for the EU – of not only the medical, but recreational kind as well.

Germany of course is going, relatively speaking, like “gangbusters” on the medical front although supply, quality and supply chain issues are still in the room. Even more so now because the German government has also announced, for the first time, a public reference wholesale price per gram of floss. That alone is big news, although expect that too to drop (see Aurora’s pricing for Italy, for starters).

In the UK, the NHS finally got down to brass tacks and negotiated a bulk discount for GW Pharmaceuticals cannabis drugs for a very narrow band of patients (mostly child epileptics and MS patients). A tiny minority of the estimated 1.4 million daily British “medical” users including those suffering from chronic pain can afford imports. The rest is all black, or in the case of CBD, gray market.

In France, the country finally got on the reform bandwagon with a “medical trial.” This means that all the major countries in the region are finally on board with some kind of reform. That too is a meaningful move.

Poland is also opening – a good sign for the remaining conservative countries in Europe still on the fence.

And in a real first (although do not get too excited just yet), on the “recreational” front, it is not just Holland that is in the room any more. Both Denmark and Luxembourg announced that they were opening this conversation. In Denmark and Holland’s case, this is in the form of “trials” in places where operational grey markets have already been established. In Holland, this is of course, regulating the “coffee shop” trade in large cities like Amsterdam. In Denmark, the new “trial” will be on the grounds of a revived hippy experiment called Christiana, that morphed predictably into the control of gangs over the last generation.

Luxembourg, however, seems intent on setting the benchmark if not timeline and is moving aggressively in one direction. As a result, as of this year, the strategic “heart” of Europe is now on the schedule to go full monty by 2022. That said, it is a country of about half a million people. Further, no matter the inevitably hype on the way, don’t expect the country to turn into a big cannabis hub- nor encourage pot tourism even from neighboring Europeans.

The end of 2021 is the time to watch for all things recreational. In the meantime, including next year, look for increasing “experiments” in other places. Particularly of the Swiss variety (where both recreational and medical products are sold via pharmacies.)

THC Is Being Accepted As Having Medical Efficacy

No matter the controversy in the room, and the strange inclinations of the British NICE to try to undo forty years of medical knowledge about the impact of THC on chronic pain, medical cannabis and specifically medical cannabis with THC has made its global medical debut as of this year.

UKflagThat said, the push is on to “pharmacize” the product.

Flower (floss) is in the room, in other words, but the future is looking towards oils and distillates – at least for the medical market long term. And a lot of that will also come increasingly to this market from places like Portugal, Spain, Greece and other European markets now moving into the cultivation space seriously.

Then again, there is still a lot of road to travel. Wags who predicted that German health insurers would never pay for floss cannabis just five years ago were wrong.

CBD Is Not All Its Cracked Up To Be

For all those who sang “Free the CBD” this year, Europe has taken a rather conservative and concerted push back. From Austria to Italy and Sweden to Poland, the path to market for any product containing CBD has been a tough one this year.

Just some of the many CBD products on the market today.

That said, perhaps it is a call for more standardization- no matter how painful that might be economically. At a presentation given at this year’s IACM medical conference in Berlin, a medical researcher revealed the results of a study he had conducted on the accuracy of labelling of these products in several European countries. The industry has not standardized, labelling is all over the place in terms of accuracy – and the claims about “medical efficacy” are hard to swallow for substandard over-the-counter product.

If the CBD-based part of the industry is to thrive here, it will have to find a way to establish and certify itself. That appears to be going on in Italy right now. It also impacts every cultivator from Portugal and Spain to Eastern Europe looking at the possibilities right now.

However, with labelling and other EU cross currents in the room, this route to the industry has been fraught this year with all the cross winds and those are not likely to dissipate next year or indeed for the next several.

The Cannabis Winds Of Trade Are In The Air

While it may be a bit ironic, given that international trade has pretty much always been a hallmark of the development of the modern cannabis industry, next year will undoubtedly be the year of “International Cannabis Trade.”

GMPNo matter the problems “back home,” as of this year, a German-based manufacturer of GMP-certified product got fully underway (see ICC/Wayland’s success this year). That, along with the final decision on the first German cultivation bid, has clearly shaped a market that is still changing. And that change is driven by the admission, even by authorities, that there is not enough legal cannabis grown in the country.

That means that the strength of the German market will continue to drive policy (see the recent announcements on wholesale pricing) as well as demand that will be met across the continent.

Along the way, cannabis reform is also being driven locally. And that means, no matter the trials and tribulations of the Canadian part of the sector, which perhaps can be considered aptly warned for getting a bit too big for its britches, and no matter how faulting, the winds of reform are still afloat. Just perhaps, on the cards for next year and those to come, blowing from many more points on the globe.

The Secret to Marketing Cannabis to Women

By Jacquie Maynard
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The world is changing, and women are the ones changing it. Classic methods of advertising to women just don’t work anymore, and worse, make you seem outdated and out of touch.

According to a 2017 study by BDS Analytics, 45 percent of cannabis users are women and that number is quickly rising. It could be even higher since according to Van Der Pop’s Women & Weed survey, 66 percent of women hide their cannabis use. No one seems to be able to agree on the exact figure, but experts do agree that women are the fastest growing market in the cannabis industry.

Harvard Business Review reported in their 2009 article “The Female Economy” that worldwide, women control nearly $30 trillion in household spending and make the majority of purchasing decisions in the family. If they’re not directly purchasing something with their $18 trillion in collective income, they are influencing others’ purchasing decisions. Often, they are the primary caregivers in their family circles, making them responsible for buying things for their children, or on behalf of their elderly loved ones.

Gender can often be a marketing blind spot, even though it’s the biggest influence on consumer behavior, according to a 2017 report from The Journal of Business and Management. Now that the number of women working in the cannabis industry is at 36 percent and rising, they are using their experiences and perspectives to market effortlessly to women, and it shows. If your brand is ignoring this powerful demographic, you’d better catch up quick.

Why do women use cannabis products?

Women are into cannabis wellness, but like to get high, too.

In Headset’s 2019 report entitled “What Women Want in Cannabis: Shopping Trends Among Female Cannabis Consumers,” some of the most popular cannabis products among women are still classics like flower and pre-rolls, but women are more likely than men to try capsules, topicals and sprays. They are fascinated by the concept of CBD helping them with issues like menstrual cramps, body and muscle pain, and even sensitive skin, but enjoy products with THC as well.

In general, women’s purchases in the cannabis industry end up being more centred towards wellness, but it’s not all about spa treatments and relaxing.

Sex sells, but not in the way you think.

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

There has been a growing interest in using cannabis and CBD for women’s sexual health. Researchers haven’t quite caught up with the science yet, but researchers at the Center for Sexual Health at Saint Louis University think that cannabis and CBD can help women overcome pain and anxiety during sex. Foria Wellness is a brand that sells CBD suppositories and lubricants that help women have a better sex life. Not only are their products seemingly effective, but they provide loads of education to their audience and work with influencers to build their community.

Beauty is Pain.

Being a woman is hard. Or at least, painful. Between walking in heels, getting in an intense workout, and feeling the stress of general life, women end up with quite a few aches and pains. Topicals and bath bombs seem to be leading the way in this area. Celebrity stylists have been using CBD lotions on the feet of starlets before a long night on the red carpet, and more brands are marketing their products to fitness buffs.

Market to specific kinds of women.Skincare is another burgeoning market. Van Der Pop reports that 60 percent of women are interested in cannabis skin care. Again, the science hasn’t quite caught up, but anecdotally it has been shown to have anti-bacterial and anti-inflammatory properties when applied to the skin. Women with psoriasis, eczema and other skin troubles are also finding relief with CBD. A bunch of large retail brands have already jumped on the bandwagon and indie brands are starting to pop up as well.

Life is Stressful.

A report from Spate and Landing International found that there has been a 24 percent increase in consumer interest in anxiety. Young people these days are under more pressure than ever, and they are turning to their products to solve it. The American Psychological Association says that 12 percent of millennials are officially diagnosed with an anxiety disorder, so it’s no surprise that anxiety and depression are the fastest-growing search terms associated with CBD.

Does this make me a bad mom?

Being a mom is stressful, and a lot of moms have been toking since before their kids were born, so after the kids are asleep they relax on the porch with a joint. It’s right for them, but the stigma is still there and they can feel it. Over 70 percent of women believe that there is still a stigma attached to cannabis use. The answer is not only marketing to Mary Jane moms but also using marketing to help end the stigma around cannabis consumption.

What do women look for in cannabis brands?

Women use cannabis for different reasons than men, so it makes sense that they would look for different things in a cannabis brand.

“Traditionally, marketing weed to men has either been about projecting fantasy, or appealing to the everyday guy that men feel like they could smoke a bowl with,” Mary Pryor, CEO and co-founder of Cannaclusive, told AdAge. “But women want to know what gets the job done without having to do too much work to know what we’re going to get.”

That means lots of education and support at the customer level. Women are used to a higher level of customer service and will most certainly take their business elsewhere if they feel they aren’t being heard or served effectively.

Women buy things that make them feel good, or items that help them express themselves, so aesthetic is important, too. There was a time in cannabis culture when most cannabis accessories had flames, or skulls, or aliens, and while that may appeal to some women, the majority want a more feminine and streamlined look. Brands like Van Der Pop offer modern designs that will readily fit into the consumer’s decor, and Lord Jones packages their CBD oil with an ornate style that invokes more of a luxury perfume brand than a cannabis product. Women are looking for a product that will look good on their shelf or in their homes.

The Secret? Know Your Audience

The first rule of marketing to women is: don’t market to women.

The absolute best way to reach women is to create authentic content for women, by women, addressing their specific concerns.At least, not women as a mass, general group. Market to specific kinds of women. Like cannabis, women come in many beautiful and exotic varieties, each one more interesting and lovely than the last, and each with their own values and shopping habits. For example, the wellness guru will have different needs from the sun-weathered gardener, who will have different needs from the stressed-out mom with a sore back.

Here are some time-tested generalizations that could help you out, though. The Journal of Business and Management reports that women are more likely to appreciate finer distinctions and enjoy more of a conversational style dialogue. When it comes to problem-solving, women care more about how a problem is solved, and like sharing and discussing it. Similarly, shopping is also a process where women tend to enjoy more interaction and take more pride in finding the best bang for their buck and the best product for them.

According to Bloomberg, you should study women as if they were a foreign market. All groups of women have their own culture, values and even language. The key here is to get to know each and every one of these personas so that you can create a targeted strategy to reach them specifically.

The absolute best way to reach women is to create authentic content for women, by women, addressing their specific concerns. Create a community for them. Formulate products for them that actually work. Hire them, listen to them, hear them and they will choose your brand every time.

Managing Cannabis Waste and Protecting Your Business from Risk

By David Laks
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Cannabis producers know that they cannot treat plant waste like common yard waste. They need to develop a detailed waste disposal plan in order get a license to operate.

Failing to follow the approved plan and improperly disposing of dry waste materials and waste products from oil extraction leads to fines, liabilities or even having your license rescinded.

Learning to deal with cannabis waste appropriately is crucial to the success of an operation. There are a number of strict controls in place for dealing with any kind of hazardous waste, which can’t just be sent to a landfill or composting facility.

In the US, the EPA and state governments provide guidelines for disposing of hazardous waste properly, and other countries have federal and local requirements as well. The EPA, like other environmental bodies, differentiates between two types of waste: solid and liquid.

Solid waste disposal: The guideline for identifying solid waste is that it’s “unrecognizable and unusable.” This means no one should be able to look at a bag of waste and know immediately that it is cannabis. Many cannabis operations have a facility on site for grinding down the waste into smaller bits. If the waste is non-hazardous, it is mixed with other non-cannabis organics such as garden trimmings and then composted or sent to the appropriate landfill. If it’s hazardous, it’s mixed with cat litter, sand, plastic or sawdust and sent to the appropriate landfill.

Liquid waste disposal: Liquid waste is a bit more complicated. It must be disposed of properly or sent to a hazardous waste treatment facility. Cannabis operations must partner with a shipping company to dispose of the hazardous waste appropriately, unless they transport it themselves.

It can be confusing to manage the risks of proper disposal of cannabis waste. Keep it simple by following these three tips:

  1. Become an expert in all the legal restrictions – and follow them. Federal restrictions will guide you overall, but local (i.e., state and municipal) restrictions are equally important and may vary.
  2. Seek out experienced, reputable disposal companies – and hire the best one.Look for one that is familiar with handling hazardous waste in general and cannabis waste in particular.
  3. Familiarize yourself with the guidelines for proper tracking, transportation and sign-offs – and follow them.Completing all appropriate documentation ensures you have a paper trail to protect you in the event of an audit. Much of the documentation creates a written record so inspectors can confirm appropriate handling.

Waste disposal policies should be reviewed regularly as state and municipal regulations can change. At the same time, it would be wise to review your environmental insurance policy to ensure your business is covered for any accidental releases.

It can be tempting to take shortcuts – saving both money and time – when it comes to hazardous waste disposal. But properly disposing of hazardous materials can demonstrate your organization’s credibility and financial wellbeing, and it can also save you from unnecessary risk.

Khiron Life Sciences Makes Strategic Moves In South America

By Marguerite Arnold
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Khiron Life Sciences Corp. has played an interesting game globally for some time now. Far from a “high flier” in the first tiers of Canadian cannabis companies to watch, that may be changing. Not to mention, this fall, what exactly do these labels mean right now as almost all the first movers retrench and reconsider?

How and where Khiron’s influence will be felt however, is still very much a question in the air.

The big news? The company has obtained authorization from the Colombian government to commercialize high-THC cannabis, and further, for both domestic and international consumption.

There are several interesting things about this announcement.

The first is that Khiron inevitably got its domestic license to supply a 15,000-patient trial “at home” in Columbia (and for the prestigious Latin American Institute of Neurology and the Nervous System).

The second is that the company will also be exporting – and to where.

Uruguay is at the top of that list – starting with the fact that the country has had a “recreational market” that actually predates Canada’s. To import medical cannabis here in other words, is also an interesting statement in and of itself. Namely, what is wrong with domestically produced Uruguayan product? Even and especially in this case, for the medical market? (The answer of course has more to do with U.S. banking law than product quality).

The second is the UK where the company will also supply the patient trial there – Project Twenty21. This is even more intriguing considering that the NHS has just denied the efficacy of cannabis for treating neurological conditions and pain and only recently agreed that Sativex was “cost effective” after negotiating a lower bulk price with GW Pharmaceuticals made possible by the new NICE guidelines.

The third is Brazil – a growingly valuable market now firmly on the radar of those watching all things cannabis-related in the hemisphere.

Regardless, it shows that the lights are on in the executive suite at Khiron. The question is, will this early mover advantage pay off – and more interestingly, where?

A Hemispheric Play – But In Which Long Term Direction?

While the UK at least seems to be Brexiting itself off a cliff of free trade agreements with the world (and expect cannabis to be in the early room of conversation about commodities in this regard), is Latin American cannabis really price impactful in low price per gram Europe long term? Especially given the inclinations of a company whose CEO admits in press statements that he wants to be a “Starbucks of Cannabis” – selling not coffee beans at “80 cents a pound…” but rather a cup of coffee “for four dollars.”

That is a still-to-be answered question. Especially in an environment where the German government has announced its essential reference wholesale price for floss at €2.30 per gram (around four dollars American). Not to mention what is going on domestically in countries across the continent from Denmark and Portugal to Poland.

However, what all this positioning also does of course, is pose questions for Khiron’s intentions throughout the American hemispheres, both more locally and of course north of the Rio Grande (in the U.S. market) not to mention Canada.

This is the kind of reverse hemisphere play of course that everyone in North America has been expecting since Uruguay’s early market movement earlier in the decade. The great South American fruit and veg market is finally allowed to turn to legal production in the form of cannabis.

Is the “Drug War” finally in its last, dying days? The answer appears to be yes. Trade wars, inevitably, however, are looming. Protectionism in the cannabis industry may be a new flavour of the day but not in any other agricultural or indeed any other kind of commodity. And on this front, things are also likely to be fierce.

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.

Harvest Connect Aims to Advance Georgia Hemp Market

By Aaron G. Biros
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Georgia doesn’t have a hemp market yet, but that is about to change. In 2019, the Georgia state legislature passed two bills: HB 213, the Georgia Hemp Farming Act and HB 324, the Hope Act, which legalized low-THC oil. While the regulatory framework for the program is still being decided, the market in the state is now beginning to materialize.

Kevin Quirk, CEO of Harvest Connect LLC, wants to be a pioneer for the hemp industry in the Southeast. With a strong focus on local economic growth, Quirk is moving quickly to corner the market and establish a thriving enterprise. His background is in consumer packaged goods (CPG). He’s worked for Anheuser-Busch, Coca Cola and Minute Maid before becoming an entrepreneur in the CPG space. He started White Hat Brands, a children’s health and wellness company, where they worked with the Juvenile Diabetes Research Foundation to co-develop wellness brands for children.

Kevin Quirk, CEO of Harvest Connect LLC

During that time, he saw two major trends unfolding in the CPG arena: organic health and wellness products and hemp-derived CBD products. “Every year we’d see more and more CBD products on the market,” says Quirk. “Almost a year ago, we decided to get into the hemp space coinciding with Georgia’s push around the hemp and medical cannabis market.” That’s when Georgia’s state legislature introduced those two bills.

In October of 2018, Hurricane Michael wiped out an entire season of crops for Georgia farmers, an almost $3 billion hit to the local agricultural economy. Farmers in Georgia were devastated, taking massive losses. “That put momentum behind the hemp program and gave Governor Kemp the impetus to move forward right after the 2018 Farm Bill passed,” says Quirk. With the launch of his newest venture, Harvest Connect LLC, a Georgia-based hemp-derived CBD extraction and retail company, he saw a way to help some farmers get back on their feet.

Quirk says he expects the state will have applications ready for submittal in the next 60-90 days. The state is going to issue permits to processors and farmers. For farmers, the barriers to entry are pretty low- just $50 per acre for a hemp farming permit with a $5 thousand dollar cap. For a processing permit, the barriers are higher and include an application fee, a surety bond and a minimum of at least five Georgia farmers committed to process in a permitted facility. According to Quirk, it is also critical to understand how to manufacture quality products in a highly regulated environment. Quirk has experience in building and running food-grade USDA and FDA manufacturing facilities and already has a number of farmers signed up to process with them once the program gets off the ground. Many of them are tobacco and cotton farmers hit hard in the aftermath of Hurricane Michael.

Harvest Connect, through its subsidiary Graceleaf, is planning to launch a series of retail CBD stores throughout the state. “This will help us  meet the demand in Georgia, which will help patients in Georgia and which will then help farmers in Georgia,” says Quirk. Georgia hasn’t launched a new agricultural product in decades at least, so for Quirk and Harvest Connect, this is about putting Georgia farmers first. “We plan to work very closely with our growers as partners to make sure everyone succeeds,” he added.

Quirk predicts the Southeast will be a leading producer of hemp for years to come. “I think it’s going to be huge,” says Quirk. “With just the pure amount of agricultural land mass that we have, plus the ideal climate, we’ll be able to turn 2-3 crops a year in the southern parts of Georgia. We actually think Georgia could be one of the most significant producers of hemp in the country.”

While the state is working on promulgating the rules, establishing the licensing process and rolling out the hemp program, Quirk is working to iron out the details of his business so they are ready as soon as the time comes. “We expect to be up and running with our processing facility by Q2 of 2020.”

What’s Going Down In The Danish Cannabis Market?

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

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

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

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

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

A Few Numbers

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

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

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

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

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

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

The Winds of Change

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

How to Protect Your Brand From Counterfeiters

By Gail Podolsky
5 Comments

Global counterfeiting is expected to reach $1.82 trillion by 2020.1 Counterfeiting includes, but goes way beyond, fake watches or bogus polo shirts. In fact, no product is safe, including cannabis.

Counterfeiting is insidious; it supports child labor, human trafficking, organized crime, and has been linked to terrorist groups.2 “[C]ounterfeit good sales have been linked to al-Qaeda, FARC, Colombia’s rebel army and paramilitary groups in Northern Island.” 3 The FBI believes that counterfeit goods financed the World Trade Center bombing and the attack on September 11, 2001.4

Counterfeiters and their fake merchandise are typically difficult to locate and remove from the marketplace. Currently, we are seeing a proliferation of counterfeiting in the cannabis industry. Cannabis companies must consider the impact that counterfeit products have on their brand and goodwill. It is vital for cannabis companies to implement strategies to combat counterfeiting.

Typically, companies use trademark laws to combat counterfeiters. However, brand protection for cannabis companies is difficult because trademark laws do not provide the breadth of protection needed to successfully protect and enforce a cannabis company’s brand. Currently, U.S. trademark laws prohibit the registration of cannabis trademarks because selling cannabis violates federal law.5 While the 2018 Farm Bill amended this steadfast rule slightly, it only applies in limited circumstances, i.e., when the cannabis product contains less than 0.3% THC.6 As a result, cannabis companies are forced to seek protection through indirect registration, namely filing for goods and services that are not cannabis-related, such as clothing, publications or medical services. Indirect registrations are not enough to combat counterfeiters successfully.

Fortunately, there is another avenue that cannabis companies should be using to protect and enforce their brands against counterfeiters — obtaining copyright registrations for the company’s logo, product packaging and, if appropriate, company name. Copyright protection extends to a protectable work regardless of whether the copyright is in an illegal work or the copyright owner uses its copyright for an illegal purpose.7 Moreover, if there is pending or prospective litigation, a brand owner may request special handling of a copyright application to obtain expedited processing.8 If the application meets all the requirements for registration, special handling will result in the brand owner obtaining a copyright registration in about a week.9 Trademark registrations, on the other hand, typically take at least five months to obtain.

Once a company receives a copyright registration, the Copyright Act provides unique and important avenues for relief against counterfeiters.10 For example, a brand owner may obtain an ex parte seizure order, which allows the company to enter the counterfeiter’s premises, without notice, and seize the counterfeit products, business records, financial information relating to the counterfeit operation, customer and vendor lists, and bank account information.11 A brand owner may also obtain injunctive relief — a court order prohibiting the counterfeiter from buying, selling, and advertising counterfeit products — and freeze the counterfeiter’s bank accounts.12

People often say that imitation is the sincerest form of flattery. However, in the counterfeiting context, imitation can be lethal to your company.A cannabidiol (CBD) company recently used its copyright registrations to stop counterfeiters from advertising and selling counterfeit CBD gummies and oils. The CBD company obtained an ex parte seizure order, injunction and asset freeze, and obtained a $5 million judgment against the counterfeiters.13

Litigation is a valuable and effective tool in fighting counterfeiting. It helps protect the company’s goodwill, enhances consumer confidence and increases the company’s revenues. There are other tools that should be used to combat counterfeiting.

Companies must diligently watch their vendors, distributors, and customers for bad actors. Your vendor agreements should include provisions allowing regular audits and inspections. Your distribution agreements should prohibit distributors from selling outside their territory and engaging in price arbitrage. Your customers should be prevented from selling your products in smaller units. Having unique packaging with holograms will also assist in reducing counterfeits as the packaging is harder to replicate. An effective public relations campaign that includes educating your customers and the industry on the harmful effects of buying counterfeit cannabis products is also a very effective tool.

People often say that imitation is the sincerest form of flattery. However, in the counterfeiting context, imitation can be lethal to your company. Counterfeit cannabis products can be subpotent, superpotent or contaminated. Having these dangerous products advertised under your brand in identical packaging can have dire consequences.

If you are not currently experiencing a counterfeiting problem, you likely will. It is important to be proactive and find attorneys that have experience combatting counterfeiters in the cannabis industry to help protect your brand and company.

References

  1. Global Brand Counterfeiting Report 2018-2020 – ResearchAndMarkets.com, AP News (May 15, 2018), https://www.apnews.com/ef15478fa38649b5ba29b434c8e87c94.
  2. Colleen Jordan Orscheln, Bad News Birkins: Counterfeit in Luxury Brands, 14 J. Marshall Rev. Intell. Prop. L. 249, 259 (2015).
  3. Id. at 260.
  4. Id.
  5. Examination of Marks for Cannabis and Cannabis-Related Goods and Services after Enactment of the 2018 Farm Bill, USPTO (May 2, 2019), https://www.uspto.gov/sites/default/files/documents/Exam%20Guide%201-19.pdf.
  6. Id.
  7. See, e.g., Flava Works, Inc. v. Gunter, 689 F.3d 754, 756 (7th Cir. 2012); Dream Games of Ariz., Inc. v. PC Onsite, 561 F.3d 983 (9th Cir. 2009); Mitchell Bros. Film Grp. v. Cinema Adult Theater, 604 F.2d 852, 855 (5th Cir. 1979); Big Daddy Games, LLC v. Reel Spin Studios, LLC, No. 3:12-cv-00449, 2013 WL 12233949, at *16–17 (W.D. Wis. Apr. 10, 2013).
  8. Special Handling, U.S. Copyright Office, https://www.copyright.gov/help/faq/faq-special.html (last visited November 20, 2019).
  9. Id.
  10. See 17 U.S.C. § 503(a)(3).
  11. Id.
  12. Id.
  13. See Global Widget, LLC v. A.R.T. Wholesale LLC, No. 1:19-cv-02136, 2019 WL 3281321 (N.D. Ga. May 16, 2019); Global Widget, LLC v. A.R.T. Wholesale LLC, No. 1:19-cv-02136, 2019 WL 3244489 (N.D. Ga. July 18, 2019).