Tag Archives: distribute

September 5, 2022

Cannabis Beverage Distribution: A Q&A with Jason Vegotsky, CEO of Petalfast

By Aaron Green

The cannabis beverage market is expected to reach $2 Billion by 2026 and is growing at a rapid pace. In Canada, the market share of infused beverages grew nearly 850% since 2020, according to a recent Headset report, the trend is expected to follow in the States. Some traditional beverage companies are hesitant to jump in due to the niche branding and supply chain models needed to capture significant market share. Other adult beverage companies such as Vita Coco and Pabst are dipping their toes into the cannabis beverage market to capture early market opportunities.

Sales and marketing agencies like Petalfast, with a core team stemming from the natural foods and beverage industries, have already started cracking the code for cannabis brands by implementing systems straight out of those industry’s playbooks. This includes disrupting the CA market by becoming the first to implement a traditional three-tier distribution model.

We caught up with Jason Vegotsky, CEO of Petalfast to learn more about the cannabis beverage distribution market. Prior to Petalfast, Jason was Chief Revenue Officer at KushCo Holdings (now Greenlane Holdings), a role he took on after selling his butane supply company to KushCo.

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

Jason Vegotsky: I began my career in wine and spirits distribution, but I always knew I wanted to work for myself. My first foray into launching a business, raising capital and brand building was through my beef jerky company, Lawless Jerky, which I built and sold after five years. Drawing on my food and beverage experience, I quickly entered and understood the cannabis market. I launched a company called Summit Innovations that sold butane to producers making oil. I eventually sold Summit to KushCo Holdings, Inc. (now known as Greenlane Holdings, Inc.) and became their President and Chief Revenue Officer. Through that experience, I began to notice gaps in the cannabis distribution model. Petalfast was built to fill that gap, providing clients with exceptional go-to-market strategies, leading to increased revenue and customer loyalty.

Green: How does experience in natural foods and traditional beverages translate to the cannabis industry?

Vegotsky: The route-to-market strategy is similar to that of cannabis, and the industry can benefit from the knowledge and experiences of those who work in natural foods and beverages. The extensive regulatory history and long-standing distribution models of these industries can provide a framework that those in the cannabis industry can capitalize on.

Green: What is the current distribution model for the majority of cannabis beverage companies today?

Vegotsky: Cannabis beverage companies face significant regulatory hurdles regarding distribution. Transportation restrictions, state-by-state differences in THC serving sizes and packaging requirements, retail display and storage limitations, and consumer adoption are just a few examples of what cannabis beverage brands run into when looking to enter, compete or scale in a given market.

At Petalfast, we offer a tiered distribution model, and our clients get phenomenal distribution through our logistics partner, Nabis. Products are circulated to all of California’s dispensaries and delivery services, allowing brands to focus on what matters most: creating the highest quality cannabis products on the market.

Green: What is a three-tier distribution model? Why do you think the cannabis beverage market is ripe for this model?

Vegotsky: The three-tier distribution model is commonly deployed by alcohol and other traditional food and beverage companies as it provides each tier to scale their operations and focus on their specific services. The three tiers include the brand, the wholesaler (sales + distribution), and the retailer in this distribution model. Because cash flow is such a significant challenge in the cannabis industry, adding an extra tier by separating your distribution and sales is advantageous to brands as it decreases overhead and allows brands to have the ability to scale.

Green: What are the opportunities for smaller brands looking to carve out a niche?

Vegotsky: One of the benefits of working in an emerging market is the opportunity to get in on the ground floor, learn as much as possible about the industry and find where gaps exist. Brand building in this space requires a deep understanding of the consumer and the overall culture — something that most brands are still trying to crack. If a smaller brand can effectively target a base within a distinct product category, it can be very effective in scaling within its niche.

Green: With big players from adult beverages dipping their toes in the cannabis beverage space, is consolidation inevitable?

Vegotsky: At a certain level, yes. Well-established companies will seek out acquisitions of smaller, successful companies, especially ones that are capital constrained, but buyers need to be aware that capital alone will not be enough. The culture of cannabis is very different from alcohol or other adjacent beverage categories, so the success of these big players in adult beverages will be linked to their ability to locate and understand the consumer and implement branding strategies accordingly. Adult beverage companies entering the cannabis market must also realize that the flow of product to retailers is not the same as in alcohol, so they will need to adjust accordingly. The cannabis-infused beverage market is expected to reach $2 billion by 2026, so alcohol companies looking to join this movement should start exploring their options now.

Green: What trends are you following in cannabis beverages? What does the future of cannabis beverages look like?

Vegotsky: Canna-tourism has grown to a $17 billion industry. With the rise in cannabis-infused beverages, we’re seeing an increase in creative consumption offerings, from tastings and food and beverage pairings to dispensary tours and bud-and-breakfasts.

Cannabis beverages are attractive to newcomers as they allow for easier control of the effects. Businesses that provide an experience similar to that of a wine or brewery tour can capitalize on new consumers looking to explore the benefits of cannabis in a controlled environment.

The modern consumer is also more health conscious, and with the increased availability of legal cannabis, many are replacing alcoholic beverages with the plant. There has been a reported decrease in alcohol consumption since the 1980s, and many now believe cannabis is safer than alcohol. This belief is especially prevalent among younger generations, leading to more users incorporating cannabis-infused beverages into their daily lives. How we socialize or unwind at the end of the day will start to look different, and brands will become market leaders by speaking to the varied needs of consumers.

Green: How does the industry get there?

Vegotsky: For one, federal decriminalization and removing cannabis as a Schedule I drug on the controlled substances list would help. Cannabis companies don’t have access to the traditional marketing playbook to promote their brands due to TV advertising and social media restrictions. To build brand awareness, businesses should focus efforts on the retail level. Engaging with consumers in-store allows brands to grab their attention and drive faster sales until other avenues open up. At Petalfast, we decided to invest in field and trade marketing to bring brands to life at the retail level. We do this better than anybody else, and we do it at scale.

May 19, 2022

Canopy Growth Acquires Jetty Extracts

By Cannabis Industry Journal Staff

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Canopy Growth Corporation, one of the largest cannabis companies in the world, announced the acquisition of Jetty Extracts this week for $69 million. Jetty Extracts was founded in 2013 and is now a leading cannabis brand in California and a top 5 brand in the vape category. The two companies plan to expand Jetty’s offerings in California, Colorado, New York and across the broder to Canada, according to a press release.

Canadian-based Canopy Growth is a massive international company that has been expanding its presence well beyond Canadian borders. For years now. Their medical arm, Spectrum Therapeutics, is a leading brand in Canada and Germany.

Some of the Jetty Extracts product offerings

Back in 2018, Canopy solidified a partnership and took considerable investment from Constellation Brands on a long-term play to enter the cannabis beverage market. Then in 2019, they began their aggressive expansion into the U.S. through the multi-billion-dollar deal with Acreage Holdings who, at the time, was the largest U.S. cannabis company. In April of last year, they inked a deal with Southern Glazer’s Wine & Spirits following the launch of their first CBD-infused beverage line sold in the United States, Quatreau.

Late last year Canopy Growth announced a deal to acquire Wana Brands, the number one cannabis edibles brand based on market share in North America. The latest acquisition of Jetty Extracts this week follows the same pattern of increasing their North American footprint in the cannabis market considerably.

David Klein, CEO of Canopy Growth, says the cross-border potential excites them. “”Canopy Growth is building a house of premium cannabis brands with a focus on the core growth categories that will power the market’s path forward, now including Jetty – a pioneer of solventless vapes,” says Klein. “There are significant opportunities for Jetty to scale at the state-level across the U.S. by leveraging Canopy’s U.S. ecosystem, and we’re actively working on plans to bring the brand to the Canadian recreational market.”

October 8, 2021

Ask the Experts: The Business of Cannabis Meets the Law

By Cannabis Industry Journal Staff

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Practicing Law Institute Press’s Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is a one-of-a-kind deep dive into the many regulations governing the industry. Aimed at attorneys representing clients in this space, the treatise offers guidance on a range of interrelated topics including state regulation of medical and non-medical cannabis; federal law, enforcement and preemption and their implications for employment, taxes and banking; and the various aspects of establishing and managing a cannabis enterprise, from growth to licensing, transport and distribution. We spoke with co-authors James T. O’Reilly, professor of Public Health Policy at the College of Medicine of the University of Cincinnati and author of leading references on food and drug law, and Edgar J. Asebey, a founding partner of Keller Asebey Life Science Law and a life sciences attorney with over twenty years of experience, about the intersection of the cannabis business and the law.

Q: From the legal industry’s perspective, how has this area of the law evolved over the past few years – and what would you advise clients in cannabis to look for when engaging legal assistance for their businesses?

James T. O’Reilly & Edgar J. Asebey: Over the past few years, we have seen a growing acceptance of the idea that lawfully serving the needs of cannabis consumers is a commendable business initiative. This evolution in thinking – tied to the myriad business opportunities cannabis presents – has given large, mainstream corporate law firms the incentive to grow practices and develop specialists in this area, which is a very positive development.

But it is not enough for lawyers to know their way around M&A and the capital markets; they must also have experience with federal regulatory bodies. As regulations continue to evolve, it is essential for practitioners to be familiar with the Food, Drug and Cosmetics Act as well as the Federal Trade Commission Act. The framework for regulating cannabis products already exists, as can be seen in the Warning Letters sent to hemp and CBD companies by both the Federal Trade Commission and Food and Drug Administration (as well as, most recently, the FDA and CDC’s warning about delta-8 THC). If a client places their hemp or CBD product into the stream of commerce, that product will be subject to FDA, FTC and relevant state laws. We strongly recommend seeking out advisors who truly understand these regulations and how they align with the regulatory agencies’ procedures and agendas.

Q: What are the most urgent legal and regulatory topics the industry is watching these days?

O’Reilly & Asebey: Our treatise follows and analyzes the most pressing legal issues facing those in the cannabis and hemp space. In our most recent edition, we add discussion of the Final Rule for the establishment of a domestic hemp production program. We think this is a significant development in that it attempted to address some of the industry’s criticism of some provisions found in the Interim Final Rule, particularly around issues of sampling and testing for THC content. The Final Rule clarified issues around THC percentage testing methodologies, but disappointed many in the industry by leaving in place the low 0.3% dry weight threshold for an acceptable hemp THC level. On the other hand, The Final Rule raises the threshold for a negligent violation from 0.5% to 1.0% total THC and limits the number of violations a grower can receive in one year to one, easing potential penalties for violations.

Of course, the regulation of CBD products is on the minds of many in the industry. Key questions remain about whether cannabinoids such as delta-8 THC can be lawfully sold. Since the FDA has provided no clear guidance with regard to the sale and use of CBD and other hemp-derived cannabinoid-containing products, well-meaning businesses find themselves operating in a regulatory gray area. While some states have raced to place delta-8 THC on their controlled substances lists or otherwise regulate it, at the federal level it remains unclear. Our book provides a legal argument showing that current regulations support the lawful production and sale of delta-8 THC. To date, this and other legal arguments have not been tested in the courts and, without FDA guidance, the delta-8 THC sector will remain gray.

Editor’s Note: The Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is now available for purchase here.

About James T. O’Reilly

James T. O’Reilly of the University of Cincinnati College of Medicine is former chair of the 8,000-member Section of Administrative Law & Regulatory Practice of the American Bar Association and has been active in numerous ABA, Federal Bar Association, and state and local bar activities. He retired as Associate General Counsel of The Procter & Gamble Company to teach full-time, and served as a consultant to three federal agencies and to the Deputy Secretary General of the European Commission. He has authored fifty-six texts and more than 230 articles, and his work was cited numerous times in appellate opinions, including “The experts have written . . . ” in a March 2000 opinion of the U.S. Supreme Court (Food & Drug Administration v. Brown & Williamson Tobacco Corp., 120 S. Ct. 1291). He has received numerous honors and awards for his professional and electoral activities and has been listed in Who’s Who in American Law for twenty-five years. He is a graduate of Boston College and the University of Virginia School of Law.

About Edgar J. Asebey

Edgar J. Asebey, a partner at Asebey Life Sciences Law PLLC, is a regulatory and transactional attorney with over two decades of experience in federal regulation of pharmaceutical, biotechnology, medical device, food, dietary supplement and cosmetics companies. Since 2015, he has been working on cannabis-related matters and transactions, and since 2018, he has provided regulatory compliance, business transactional, venture finance and international trade services to hemp/CBD companies. Mr. Asebey practices before the FDA, the USDA, the CBP, the EPA, and the FTC, representing client companies on regulatory compliance, product approval/registration and FDA enforcement defense matters. He founded and served as president of Andes Pharmaceuticals, Inc., a natural products drug discovery company, from 1994 to 2000, and has served as in-house counsel to two life sciences companies. Mr. Asebey is a member of the American Bar Association (Section on Administrative Law & Regulatory Practice: Food and Drug Committee and International Committee), the Food & Drug Law Institute (FDLI), the Dade County Bar Association, and BioFlorida.

Content sponsored by Practicing Law Institute

April 22, 2021

Canopy Growth Signs U.S. Distribution Deal

By Cannabis Industry Journal Staff

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Canopy Growth Corporation, the Canadian cannabis powerhouse moving its way throughout international markets, has signaled another move into the United States to push their new CBD beverage line. The company inked a deal with Southern Glazer’s Wine & Spirits, a large U.S. alcohol distributor.

This follows the launch of their first CBD-infused beverage line sold in the United States, Quatreau. In the initial phase of the agreement, Southern Glazer’s will distribute the beverage line in seven states, with plans to expand that footprint considerably in the coming months.

Being a national distributor with a strong presence throughout the country, Southern Glazer’s will be moving Canopy’s beverage line in conventional retail stores. The press release seems to credit Canopy’s partnership with Constellation Brands as the catalyst for the new distribution deal. “The agreement also showcases the benefits of the company’s strategic relationship with Constellation Brands, the global beverage leader,” reads the release.

Back in 2018, Constellation Brands made a $4 billion bet on Canopy, but immediate profitability did not come to fruition. This new deal with Southern Glazer’s, as well as the launch of the Quatreau beverage line, seems to prove Constellation’s bet is beginning to pay off, or at least showing signs of a long term play for market share.

December 18, 2020

Aphria & Tilray Merger Creates World’s Largest Cannabis Company

By Cannabis Industry Journal Staff

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On December 16, 2020, Aphria Inc. (TSX: APHA and Nasdaq: APHA) announced a merger with Tilray, Inc. (Nasdaq: TLRY), creating the world’s largest cannabis company. The two Canadian companies combined have an equity value of $3.9 billion.

Following the news of the merger, Tilray’s stock rose more than 21% the same day. Once the reverse-merger is finalized, Aphria shareholders will own 62% of the outstanding Tilray shares. That is a premium of 23% based on share price at market close on the 15^th. Based on the past twelve months of reports, the two companies’ revenue totals more than $685 million.

Both of the companies have had international expansion strategies in place well beyond the Canadian market, with an eye focused on the European and United States markets. In Germany, Aphria already has a well-established footprint for distribution and Tilray owns a production facility in Portugal.

About two weeks ago, Aphria closed on their $300 million acquisition of Sweetwater Brewing Company, one of the largest independent craft brewers in the United States. Sweetwater is well known for their 420 Extra Pale Ale, their cannabis-curious lifestyle brands and their music festivals.

Once the Aphria/Tilray merger is finalized, the company will have offices in New York, Seattle, Toronto, Leamington, Vancouver Island, Portugal and in Germany. The new combined company will do business under the Tilray name with shares trading on NASDAQ under ticker symbol “TLRY”.

Aphria’s current chairman and CEO, Irwin Simon, will be the chairman and CEO of the combined company, Tilray. “We are bringing together two world-class companies that share a culture of innovation, brand development and cultivation to enhance our Canadian, U.S., and international scale as we pursue opportunities for accelerated growth with the strength and flexibility of our balance sheet and access to capital,” says Simon. “Our highly complementary businesses create a combined company with a leading branded product portfolio, including the most comprehensive Cannabis 2.0 product offerings for patients and consumers, along with significant synergies across our operations in Canada, Europe and the United States. Our business combination with Tilray aligns with our strategic focus and emphasis on our highest return priorities as we strive to generate value for all stakeholders.”

October 8, 2020

Washington Suspends License for Shipping Out of State

By Cannabis Industry Journal Staff

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On October 7, 2020, the Washington State Liquor and Cannabis Board (WSLCB) issued an emergency suspension for El Rey De La Kush, based in Riverside, Washington, for allegedly distributing cannabis products across state lines. This information was found in an email sent out by the WSLCB late Wednesday night on October 7. El Rey De La Kush does not have a website, but it looks like they own this Facebook page.

This picture taken from their Facebook page, appears to show an El Rey De La Kush-branded package of cannabis

Back in September, the Wenatchee Police Department told the WSLCB that they were investigating 4.3 pounds of cannabis they found shipped from a residence in Wenatchee via UPS. When they served a search warrant, they found roughly 620 pounds of cannabis with traceability tags leading them back to El Rey De La Kush.

The suspect in the case is Brandi Clardy, who is affiliated with the company in question and listed on their license. The original licensee, Juan Penaloza, passed away in July this year and Clardy had been the chief operator following Penaloza’s death.

In an interview with the police, the WSLCB says that Clardy admitted to the crime of removing cannabis from the premises with the intent to distribute across state lines.

The WSLCB says cannabis products were actively being diverted to Texas, where adult use cannabis sales is still very illegal.

The license remains suspended for 180 days, after which point the WSLCB will “pursue permanent revocation.” This marks the first and only emergency suspension issued in 2020.

June 8, 2020

The Top 4 Things Cultivation Directors Should Discuss With Their Operations Manager Right Now

By Lucas Targos

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Communication is key for efficient interaction between cultivation and business functions at any cannabis operator. So, what are the top four things cultivation directors should be discussing with their operations manager right now, as we face an uncertain Summer 2020 and unique COVID-related challenges (product demand uncertainty, reduced workforce, and immediate response to problems and issues):

Labor requirements
- Operators should be discussing “Who, and what, do I need to operate this facility and how do I make operations more streamlined without diminishing quality, consistency, and yield?”
- Efficient operations should focus on labor workflow and circulation and document a clear understanding of how employees will move through the spaces while doing their jobs.
- Having a “less labor” philosophy and understanding—a ‘first in and first out’ mentality—drives down cost of production.
- By limiting employees’ need to cross paths and segregating processes (e.g. harvest, distro, packaging) in a facility, you can maintain biosecurity and limit the risks of cross-contamination
- When working with fewer staff members, everyone should be trained to:
  A greenhouse facility that urban-gro helped bring to operation.
  - Operate all necessary equipment
  - Perform keys tasks like nutrient deliver or preventative maintenance
Supply chain
- What sort of products do I use to cultivate, process, distribute and how will potential shortages affect my use/cost related to these?
  - Consider products and supplies that you can order in bulk
  - Examine and update your chemical regime to focus on products that are cheaper to freight ship, and located within the US or even your state
  - Mitigate the risk of availability by using products that are have no shelf-life or expiration issues, and those where the supply chain has not yet had disruptions
Automation and technology
- What’s the availability to allow for remote monitoring and controls?
  - Cultivators can take some of the load off the reduced staff by automating critical tasks
  - Remote monitoring solutions will also allow for faster notification of crop issues
  - Integrating preventative maintenance tasks like equipment schedules and maintenance can increase efficiency
Yield expectations
- Ensure that conversations on yield expectations are as transparent as possible and set realistic and achievable goals
- Build business models based on the correct numbers that take into account productions numbers on ‘high yield’ genetics versus lower-yielding plants (yield versus price)
- Ensure you have a detailed plan that combines both plant density and production goals

March 12, 2020

5 Factors to Keep in Mind When Entering the Regulated Market

By David Perkins

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It’s a different world growing cannabis in California- in fact, it’s a completely different experience than it was even four years ago. It can be overwhelming to begin the process, which is where an experienced cultivation consultant can help. This article will highlight 5 factors to keep in mind before you begin growing in California’s regulated recreational market.

Start Up – Costs, needs & endless variables

So you’ve decided to begin a recreational grow, here are the factors to consider before you get started.

Permitting, the necessary pre-cursor to cultivation, can be time- consuming, extremely expensive, and overwhelming. General experience dictates that any grow will take longer than planned and cost way more money than you ever expected or anticipated. Always account for more money and time than you think you need. Working with an experienced consultant can help you plan and account for all the costs and variables you may not have considered, prior to beginning cultivation, in order to ensure your success.

Understand that growing boutique style cannabis is very difficult on a large scale, consistently.

Equipment. When choosing what equipment to use, stick to reputable equipment manufacturers. Don’t just go with the latest high-tech gear because you see it on Instagram being advertised by a big, fancy grow operation. Stick to what you know best. Do your homework and research the equipment as much as possible, prior to purchase. Use equipment that has been tested and well documented with success. Some questions to ask yourself: is this necessary? Is it cost effective? Will it help me reach my goals?

Grow your business slowly and naturally. Getting too big too quick will most likely expose inefficiencies in your operating plan, which will be further compounded when production increases. Don’t sink before you can swim and start out on a massive scale before you have perfected your process.

Cultivation – It pays to design it right the first time

Success begins in the grow room. Never forget that. A properly engineered cultivation plan can be the difference between 3 and 6 harvests per year. Again, it is imperative here to do your homework. A well-thought-out plan can make or break you, and that is where an experienced cultivation consultant can help.

Set realistic expectations. Understand that growing boutique style cannabis is very difficult on a large scale, consistently. Don’t expect to grow perfect cannabis every time – it is unrealistic and can ultimately lead to failure if your financial model depends on it. Growing a plant, while mostly in your control, involves too many variables to rely on a perfect outcome round after round. You can do everything in your power, yet something unexpected can still happen and be detrimental to your yield, and therefore your profit. You must expect and plan for this.

Automating as much of your grow as possible is always a good idea. This will greatly reduce labor costs and more importantly, minimize human error. In some instances, it will even allow you to review data and information remotely, in real time, allowing you to ensure your cultivation site is always running as efficiently as possible, even when you aren’t there.

Processing – Don’t skimp on the process

If you are going to be harvesting cannabis for flower, it is imperative to have a properly built facility for drying, curing and storing your product. You must consider that this building will need to be large enough to house and properly store all of your harvest at once. This can make or break your crop at harvest time. If you don’t have the capacity to handle your harvest properly, it can lead to disastrous issues such as mold or too quick of a cure – conditions which make your cannabis unsellable in the regulated market.

dry cannabis plants — Rows of cannabis plants drying and curing following harvest

Although costly, if done correctly, you can also design this area to serve as your propagation, trimming, and breeding areas, which will ultimately save on costs in the long run.

Also keep in mind, hand trimmed cannabis will always look more appealing to the consumer than machine trimmed cannabis. However, hand trimming can be time-consuming, labor-intensive, and therefore far more costly than machine trimming. These are factors you will need to consider and budget for when deciding how to proceed. If you use a machine, you may save money up front, but will you be able to sell your cannabis at full price?

Distribution – Have a plan

It is a good idea to have a plan for distribution, prior to start up. If you have an agreement with a retail outlet (or contract with a distributor) in writing, you will protect yourself from financial failure. Cannabis will never grow more valuable over time, therefore, you want to have a plan in place for distribution, as soon as the cannabis is harvested and processed. Just as was the case in the black-market days, you never want to hold on to your cannabis for long periods of time.

Do not distribute without agreements in writing! While some oral agreements may be enforceable, it will be extremely costly to litigate. Therefore, you should plan to hire a lawyer beforehand to create fail-proof agreements that will hold up in court, should a distributor not pay you for your product.

Sales – Build your brand, but be realistic

Building your brand is important. And if you don’t produce your own high-quality flower you cannot expect to have a product up to your standards. Your brand will not be successful if you cannot consistently provide consumers with high quality cannabis. Relying on other growers to produce your cannabis for you is risky to your brand. Even if you are a manufacturer, you may not be able to rely on other suppliers to maintain the quality volume you need in order to manufacture your products consistently.

The regulated market in California is new. Therefore you must necessarily account for a great degree of price fluctuations in the market. When creating your budget at the outset, you must account for fluctuations in profit. Knowing when prices are going to be at their lowest can help you avoid having an oversupply of inventory. It can also help you avoid such situations by planning your cultivation/harvest accordingly.

There are both consumer and government influenced market trends that can affect your bottom line. These must be accounted for at the outset.

On the consumer level, you must know what people are buying and how they are consuming. And these factors can change quickly with the introduction of new technology, methods or new devices intended for cannabis consumption. You must stay on top of these trends.

The government regulations can also affect these trends. Products used for cultivation can become banned, i.e. products you once relied on in your cultivation can be found to have contaminants known to cause test failures, even in “approved products.”

Ultimately, all of these factors can make or break your success, and therefore, must be considered, researched and accounted for prior to beginning your cultivation in the regulated market. Working with a consultant with over 20 years of grow experience, and more importantly, extensive experience in large scale cultivation in the regulated market, can help you achieve the success you desire. Cultivation in the regulated market is costly, but working with a consultant can help you cut costs at the outset, and save you from unexpected expenses in the long run.

October 18, 2019

Safeguarding Your International Supply Chain: The Brave New World Of Cannabis Compliance

By Marguerite Arnold

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The CannTrust story may have shocked the uninitiated, but it hit almost every bogeyman the legitimizing industry has both feared and suffered from, particularly of late.

Here, generally, is the issue. Especially in Europe (even more especially in places like Germany, the UK and other emerging markets), budding cannapreneurs need each other. A distributor in Germany, for example, cannot get their final (federal) licenses allowing them to do business without establishing a relationship with an existing producer. That producer also needs relationships with established distributors to get their licenses.

In a fraught world, where all parties are evolving rapidly (and this also includes the “Big Boys” from Canada and several U.S. states including California), supply chain logistics, and even contract agreements if not licensing beyond that requires a level of honesty, integrity and transparency the industry, largely has not achieved yet.

That said, there are also parties, if not individuals and companies determined to set themselves on the straight and narrow – and play by the emerging “rules” – and then there are also clearly companies which, well, do not.

Being out of compliance, at any step of the chain, including when your product is sold via government agencies, is already a recipe for disaster.What this brave new world of cannabis requires, however, and from everyone – from grower, to manufacturer, packager, distributor and service delivery – is that all ecosystem partners must be in compliance.

Ensuring that can be a full time job. But what it also means is that to have a fully compliant product, every party in the chain bears responsibility for upholding standards that so far have proved hard to reach for many.

The time has come, in other words, where that is no longer an option.

The First Step Is Certification…

In a world where every member of the diverse cannabis ecosystem requires certification, determining what, and from whom is the first hurdle – both for buyer and seller. If one has GMP-certified product, that is awesome. But there are also treaties in the room that only allow some GMP certifications to be considered equal to others. If you are in Lesotho right now, for example, far from Europe, your biggest concern is not just looking to the EU but figuring out a way to export your crop into your neighbouring (and surrounding) country – namely South Africa.

This example, while seemingly far away, in fact, is the biggest bugbear in determining who can sell to whom even within Europe (let alone countries just outside and far beyond the region).

Determining cert presence, if not validity, however, is only the tip of the iceberg. And depending on who you are, that path alone is not a one time dalliance with authorities, but multiple certifications that must all also be kept current.

But It is Not The Only One…

The second hurdle, of course, is also checking the verity of everyone you do business with. For a producer, this includes making sure that processing, packaging, and even transportation are in compliance. In Canada, of course, this has been short circuited by the ability of producers to ship directly to patients.

In Europe, however, this is far from the case. And that is also why the entire conversation is also getting not only much more granular, but expensive. Pharmaceutical regulations are actually what guide the rules of the road here.

Walking floors, and checking, in person, may or not be mandated by international treaties at this point. However, most of the young producers on the ground here are implementing policies of personal visits to their vendors. In Massachusetts of late, this is also on the drawing board. Albeit on a “state” level, the reality is that both federal, state and more local training is a watchword, if not a must, now on the roadmap.

Being out of compliance, at any step of the chain, including when your product is sold via government agencies, is already a recipe for disaster.

And while that obviously is a challenge, companies must step up to the plate internally to commit to the same. It is too dangerous to ignore such steps. Including the easy to reach ones, like staff background checks and decent cybersecurity safeguards. The former has blown several enterprising cannadudes out of the driver’s seat already in Europe over the last few years. The latter is an emerging threat in a region that is also home to GDPR regulation (and growing fines).

For that very reason, certainly on the ground in Germany if not across Europe and in those countries and companies that wish to supply the same, supply chain verification, that is constant, consistent and verifiable, is the path for the industry both as of now and in the immediate future.

September 4, 2019

Gaps in Standard Property Insurance Can be an Unknown Hazard for Cannabis Businesses

By Susan Preston, T.J. Frost

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Basic business liability coverage is not enough for those cultivating, selling and distributing cannabis. General liability, property and even commercial renter’s insurance policies all exclude aspects of cannabis operations, leading to significant gaps in coverage.

Unfortunately, many cannabis operations purchase traditional property policies, assuming they’re insured. Then, when a claim comes to light, they find out they’re not covered.Consider the following common exclusions that could lead to a costly business interruption – or worse

Although the production, sales and distribution of cannabis is legal in many U.S. states, it is still illegal federally. This disparity can cause confusion when it comes to insurance compliance. Cannabis companies will want to secure industry specific coverage for risks associated with property, business interruption, and auto as well as general liability.

Consider the following common exclusions that could lead to a costly business interruption – or worse – a shutdown of operations when not properly insured:

Property coverage does not cover crops. Cannabis crops require specific coverage for different growth stages, including seedling, living plant and fully harvested. The insurance industry has designed policies specifically for indoor crop coverage for cannabis operations. There is some market availability for normal insured perils such as fire and theft, to name a few. Work with your broker to review your property policy and any potential exclusions related to cannabis operations. There is currently not much availability for insurance for outdoor crop.
Auto policies exclude cannabis transport. Some states require separate permits for transportation. Review coverage options with a knowledgeable broker before moving forward with driver hiring. Implement driver training sessions on a regular basis, conduct background checks and review MVRs prior to hiring company drivers. Teach drivers how to handle accidents on the scene, including informing law enforcement of the cannabis cargo. Remember that transporting cannabis across state lines (even when legal in both states) is still illegal due to federal law.
Equipment damage and/or breakdown coverage may be excluded from property policies. Consider the expenses and potential loss of revenue due to mechanical or electrical breakdown of any type of equipment due to power surges, burnout, malfunctions and user error. Having the right equipment breakdown insurance will help you quickly get back into full operation, with minimal costs. Conduct an onsite risk assessment of your equipment to get a comprehensive picture of your risk exposure, and review current insurance policies to identify key exclusions.

Organizations looking for cannabis business insurance are best off working with a qualified broker who is knowledgeable in the cannabis space.As the cannabis industry continues to expand, more and more insurance options have become available. And yet as with any fast-paced industry, not every option that appears legitimate is a good risk for your cannabis business.

Be a contentious insurance consumer. Review the policy closely for exclusions and coverage features so you understand the premium rates and limits of the policy. Discuss with your broker the history of the carrier as to paying claims in a timely fashion.

Organizations looking for cannabis business insurance are best off working with a qualified broker who is knowledgeable in the cannabis space.