The Brand Marketing Byte showcases highlights from Pioneer Intelligence’s Cannabis Brand Marketing Snapshots, featuring data-led case studies covering marketing and business development activities of U.S. licensed cannabis companies.
Here is a data-led, shallow dive on GrowHealthy:
GrowHealthy – Basking in Sunshine
Although Florida may only have a medical market and a relatively restrictive regulatory framework, a handful of companies are leading the pack in dominating the new market. Even though the medical cannabis market is fairly young and the state has not adopted adult use yet, the market’s growth trajectory is very encouraging.
GrowHealthy (GH) is one of those companies capitalizing on market growth with a number of expansion plans. They already have 16 dispensaries open for business throughout Florida and have plans to add to that considerably.
In the past few months, GH has taken a number of steps to enhance their web presence. Perhaps as a reaction to the COVID-19 crisis, GH, along with many other companies in the cannabis space, have started aggressively improving their websites.
With the pandemic wreaking havoc on the national economy, cannabis companies are not immune. However, in the early days of the health crisis, Florida deemed the medical cannabis market ‘essential.’ That proved to be a boon for cannabis companies in the state like GH, who pivoted to curbside pickup and delivery quickly.
In order to capitalize on curbside pickup and delivery, a strong web presence is very important. GH saw a solid rise in web traffic in the past few months, thanks in part to their continuing expansion of brick-and-mortar dispensaries. Adding to their boost in web traffic, GH saw increased strength in their backlinks profile, indicating further increases in future web traffic.
In May, GH shot up to the 20th hottest brand in the United States, up from the 38th slot in April, according to the Pioneer Index. We can attribute this jump to the brand’s performance in web-related activities. The trend continued into the first week of June, as GH’s web activities were the 2nd best nationwide, with the company becoming the 4th hottest brand in the Pioneer Index.
According to a press release published back in September, Steep Hill announced their expansion to the state of Oklahoma. Steep Hill, a cannabis science company that started with cannabis testing labs in California, has been on an impressive expansion trajectory over the past few years.
Kandice Faulkenberry, co-owner and CEO of Steep Hill Oklahoma, says they hope to raise the bar for cannabis lab testing in Oklahoma. “With Oklahoma being one of the fastest-growing medical markets in the nation, we are excited and honored to be a part of our state’s growth,” says Faulkenberry. “We hope to be a valuable resource in our community and Oklahoma’s cannabis industry. Through our partnership with Steep Hill, the world’s leading cannabis science company, we aim to raise the bar in laboratory services, education, and product safety for the medical cannabis industry in the Sooner State.”
Dr. Chris Orendorff, the other co-owner of Steep Hill Oklahoma, is a family physician based in Sallisaw, Oklahoma. “As a physician, I understand that safety and regulations are critical to patient outcomes and I look forward to providing the same assurance for my patients and fellow Oklahoma residents in the cannabis industry,” says Dr. Orendorff. “I am excited to partner with Steep Hill to provide the highest quality testing in the State of Oklahoma.”
Cannabis businesses have become a driving force for economic growth in the United States. We’ve all heard the statistics. In 2018, the industry accounted for approximately $10.4 billion in revenue and is slated to grow to $21 billion by 2021.
But with growth comes pressure to produce more, enhance quality and optimize operations. However, managing a cannabis business without modern, capable tools can hinder growth and leave opportunities on the table. That’s why fast-growing cannabis businesses are looking to the proven benefits of a true cloud Enterprise Resource Planning (ERP) platform to help manage production, provide insights and improve business operations. When we add in the complexity and ever-changing nature of regulation, the need for a robust operational system becomes even more critical.
David Stephans will be speaking during CIJ’s October 9th webinar, “Driving Strategic Advantage for your Cannabusiness through Process Efficiency, Quality & Compliance” Click here to learn more and register for free.Cannabis business leaders may want to develop their own “playbook” to differentiate themselves in the market. But before they start to engineer their forward-thinking approach, they should start with a cloud ERP as their foundation. This can help with everything from the most basic of needs to more sophisticated strategies. In this article, we’ll review some key cannabis business goals and tactics, and how ERP can help lay the groundwork for success.
Drive growth and expansion.
Business growth often translates into operational expansion, meaning more facilities, staff and compliance requirements to manage. A cloud ERP supports these functions, including the launch of new products, expanding pricing schedules and increasing production to meet demand. Having the ability to track and manage growth is crucial, and a cloud ERP can provide the real-time reporting and dashboards for visibility across the entire business. This includes not just operational visibility, but also a look into a company’s sales, finances and supply chain.
Foster exemplary customer experience.
Cannabis companies need to streamline processes from the moment an order is placed to when it arrives at the customer’s door. In the mind of consumers, cannabis businesses compete against the likes of Amazon. They must be able to provide a similar experience and level of service, with customers receiving orders in a couple of business days. Cloud ERP can help automate processes. And when things go wrong, it can also help with resolution, especially when it’s paired with a customer relationship management (CRM) system on the same cloud platform. For the B2B market, cloud ERP empowers account management to review past orders to better meet future customer needs.
Stay a step ahead of the game.
In the industry, change is a constant. The future will likely bring about shifts in products, regulations and suppliers. A cloud ERP can modify workflows, controls and process approvals on the fly, so companies can adapt to new requirements. It offers security against emerging risks and easy integration with other systems cannabusinesses may need. An advanced cloud ERP will also provide cutting-edge capabilities, such as AI insights and data-capture from Internet-of-Things (IoT) devices.
Ensure quality product for raving fans and avoid flags on the field through airtight compliance.
Many cannabis companies are passionate about delivering the highest-quality cannabis products. Auditability is key to both quality and compliance. Complete traceability, with lot and serial number tracking, will record comprehensive audit trails from seed to sale. A cloud ERP will incorporate RFID tags down to the plant, lot and product levels to assist in this process. As cannabis goods move through their lifecycle, the cloud ERP will append appropriate tracking to purchasing receipts, inventory as it moves between locations, products as they’re packaged and sales orders as they’re fulfilled.
As a heavily regulated industry, cannabis business is also subject to burdensome compliance standards. A cloud ERP can support the rigorous testing that’s required to assure potency and safety. It easily facilitates Good Manufacturing Practices (GMP) and Good Production Practices (GPP), which ensures products are consistently produced according to quality standards. Many regulatory agencies require digital reporting; cloud ERP can facilitate this requirement through integration with Metrc, Health Canada and the FDA. Compliance can be a costly endeavor, and this type integration saves time, money, and effort.
As you can see, a cloud ERP helps efficiently balance compliance and regulatory requirements, with operational efficiency and customer service – key strategies in any cannabusiness playbook.
As Europe swooned under record-breaking heat this summer, the cannabis industry also found itself in a rather existential hot seat.
The complete meltdown at CannTrust has yet to reach a conclusion. Yes, a few jobs have been lost. However, a greater question is in the room as criminal investigatory and financial regulatory agencies on both sides of the US-Canada border (plus in Europe) are getting involved.
As events have shown, there is a great, big, green elephant in the room that is now commanding attention. Beyond CannTrust, how widespread were these problematic practices? And who so far has watched, participated, if not profited, and so far, said nothing?
Who, What, Where?
The first name in the room? Canopy Growth.
Why the immediate association? Bruce Linton, according to news reports, was fired as CEO by his board the same day, July 3, 2019, that CannTrust received its first cease and desist notice from Health Canada.
Further, there is a remarkable similarity in not only problematic practices, but timing between the two companies. This may also indicate that Canopy’s board believed that Linton’s behaviour was uncomfortably close to executive misdeeds at CannTrust. Not to mention, this was not the first scandal that Linton had been anywhere close to around acquisition time. See the Mettrum pesticide debacle, that also broke right around the time Canopy purchased the company in late 2016 as well as the purchase of MedCann GmbH in Germany.
Reorg also appears to be underway in Europe as well. As of August, Paul Steckler has been brought in as “Managing Director Europe” and is now based in Frankfurt. Given the company’s history of “co-ceo’ing” Linton out the door, is more change to come?
Video showing dead plants at Canopy’s BC facility surfaced. Worse, according to the chatter online at least, this was the second “crop failure” at the facility in British Columbia. Even more apparently damning? This all occurred during the same time period that the second round of lawsuits against the reconstituted German cultivation bid surfaced.
Canopy in turn issued a statement that this destruction was not caused by company incompetence but rather a delay in licensing procedures from Health Canada. Despite lingering questions of course, about why a company would even start cultivation in an unlicensed space, not once but apparently twice. And further, what was the real impact of the destruction on the company’s bottom line?
Seen within the context of other events, it certainly poses an interesting question, particularly, in hindsight.
Canopy, which made the finals in the first German cultivation bid, was dropped in the second round – and further, apparently right as the news hit about the BC facility. Further, no matter the real reason behind the same, Canopy clearly had an issue with accounting for crops right as Canadian recreational reform was coming online and right as the second German cultivation bid was delayed by further legal action last fall.
Has Nobody Seen This Coming?
In this case, the answer is that many people have seen the writing on the wall for some time. At least in Germany, the response in general has been caution. To put this in true international perspective, these events occurred against a backdrop of the first increase in product over the border with Holland via a first-of-its kind agreement between the German health ministry and Dutch authorities. Followed just before the CannTrust scandal hit, with the announcement that the amount would be raised a second time.
German health authorities, at least, seem doubtful that Canadian companies can provide enough regulated product. Even by import. The Deutsche Börse has put the entire public Canadian and American cannabis sector under special watch since last summer.
By the turn of 2019, Canopy had announced its expansion into the UK (after entering the Danish market itself early last year) and New York state.
Yet less than two weeks later, Canopy announced not new cultivation facilities in Europe, but plans to buy Bionorica, the established German manufacturer of dronabinol – the widely despised (at least by those who have only this option) synthetic that is in fact, prescribed to two thirds of Germany’s roughly 50,000 cannabis patients.
By August 2019, right after the Canopy Acreage deal was approved by shareholders, Canopy announced it had lost just over $1 billion in the last three months.
Or, to put this in perspective, 20% of the total investment from Constellation about one year ago.
What Happened At CannTrust And How Do Events Line Up?
The current scandal is not the first at CannTrust either. In November 2017, CannTrust was warned by Health Canada for changing its process for creating cannabis oil without submitting the required paperwork. By March of last year however, the company was able to successfully list on the Toronto stock exchange.
Peter Aceto arrived at CannTrust as the new CEO on October 1 last year along with new board member John Kaken at the end of the month. Several days later the company also announced that it too, like other major cannabis companies including Canopy, was talking to “beverage companies.” It was around this time that illegal growing at CannTrust apparently commenced. Six weeks later, the company announces its intent to also list on the NYSE. Two days later, both the CEO and chair of the board were notified of the grow and chose not to stop it.
Apparently, their decision was even unchanged after the video and resulting online outrage about the same over the destroyed crops at the Canopy facility in BC surfaced online.
On May 10, just over a week after the Bioronica purchase in Germany, the first inklings of a scandal began to hit CannTrust in Canada. A whisteblower inside the company quit after sending a mass email to all employees about his concerns. Four days later, the company announced the successful completion of their next round of financing, and further that they had raised 25.5 million more than they hoped.
Six weeks later, on June 14, Health Canada received its warning about discrepancies at CannTrust. The question is, why did it take so long?
Where Does This Get Interesting?
The strange thing about the comparisons between CannTrust and Canopy, beyond similarities of specific events and failings, is of course their timing. That also seems to have been apparent at least to board members at Canopy – if not a cause for alarm amongst shareholders themselves. One week after Health Canada received its complaint about CannTrust, shareholders voted to approve the Canopy-Acreage merger, on June 21.
Yet eight days after that, as Health Canada issued an order to cease distribution to CannTrust, the Canopy board fired Bruce Linton.
One week after that, the Danish recipient of CannTrust’s product, also announced that they were halting distribution in Europe. By the end of August, Danish authorities were raising alarms about yet another problem – namely that they do not trust CannTrust’s assurances about delivery of pesticide-free product.
Is this coincidence or something else?
If like Danish authorities did in late August 2019, calling for a systematic overhaul of their own budding cannabis ecosystem (where both Canadian companies operate), the patterns and similarities here may prove more than that. Sit tight for at least a fall of more questions, if not investigations.
Beyond one giant cannabis conspiracy theory, in other words, the problems, behaviour and response of top executives at some of the largest companies in the business appear to be generating widespread calls – from not only regulators, but from whistle blowers and management from within the industry itself – for some serious, regulatory and even internal company overhauls. Internationally.
And further on a fairly existential basis.
EDITOR’S NOTE: CIJ reached out to Canopy Growth’s European HQ for comment by email. None was returned.
Correction: This article has been updated to show that the Danish recipient of Canntrust’s product announced they were halting distribution one week after Bruce Linton’s firing, not one day.
While it is news that Wayland Group has just signed a definitive production agreement in Italy with a local CBD producer (Factory S.S. – a subsidiary of Group San Martino), it is not that Wayland has been establishing itself in Europe for the past two years.
Nor is it surprising that the new Italian plant (named CBD Italian Factory) will feature world-class cleantech production technology (fuelled by biogas). Even more intriguingly the joint venture also includes a relationship with the University of Eastern Piedmont, which is developing a research center to study the development of cannabinoid products for both animals and people.
Why not?Europe is far from the only region on Wayland’s global expansion map.
Wayland has been establishing itself in an interesting way as the company expands globally that distinguishes its corporate strategy from its other cannabis competitors. It was only April of this year, after all, that Wayland received its ex-im license to ship dried cannabis flower from Canada to Germany. At a time when the company also used to be known as Maricann. That corporate name change happened this year too, as the company continues to build its global brand in very interesting if far-flung markets.
A Busy Fall So Far
Europe is far from the only region on Wayland’s global expansion map. In the first week of November, in fact, the company also signed an agreement to buy 100% of Colma Pharmaceutical SAS, a Columbian-licensed producer of THC. This will be an outdoor THC play, and produce two crops a year. They also just announced a land acquisition in Argentina to begin cultivating cannabis there as well.
In October, the company announced not only plans to raise $50 million, but also brought on three new board members with significant European legal and business experience (including M&A and access to equity markets). This includes the company’s first female board member, Birgit Homburger, based in Berlin.
And this is on top of its record-breaking hemp harvest in Germany, which outperformed internal forecasts by a factor of 2. This is an important benchmark domestically, as German cultivation licenses will require successful firms to prove they can bring large quantities of flower to market successfully and repeatedly.
A Marked Interest In Cannatech
Like many firms, Wayland is already showing a marked interest in new cannabis technologies, in particular, innovative cultivation solutions, but not limited to the same. In August, the company unveiled its first product launch in Europe – a soft gel with 25mg of CBD that utilizes multi-patented technology allowing optimum absorption and bioavailability. Its German unveiling is significant because the insurance and medical industries here are unclear about dosing. That lack of clarity is also now holding back policy and underwriting issues, including the approval of medical cannabis in the first place.
These capsules, a non-medical product and marketed under the name “Mariplant” were first shipped to pharmacies in both the Munich and Cologne area in the late summer.It has continued to expand both its Canadian and foreign as well as tech expansions ever since.
The Road So Far
The company, which started with a facility in Langton, Canada in 2013, earned a license from Health Canada to sell cannabis extracts in early 2016. By December of that year (a good four months before the German cultivation bid was announced) Maricann GmbH was formed in Munich. By March, the month before the cultivation bid was first announced, the company began retrofitting the Ebersbach facility, near Dresden.
In April of 2017, Maricann went public. It has continued to expand both its Canadian and foreign as well as tech expansions ever since.
While not a “high flier” on the stock market (like competitors Tilray, Canopy and Aurora), the company is carefully plotting its position in a global market that is still very much a “blue ocean” opportunity.
It is also carefully plotting a path into both production and delivery systems that are optimized by tech in a universe that is rapidly upgrading not only its image, but finding ways to prove if not justify medical efficacy.
It is old news that Canadian companies are entering the European market. And it is also no stop-the-presses flash that Germany is a big prize in all of this. But there are other Euro markets to watch right now. Switzerland is one of them.
Look for the Canadian influx here too.
One of the more interesting entrants this month? Green Relief – a Canadian LP with a really unique twist. They are the only company in the world to produce cannabis oil from flower grown with aquaponics. This unique method creates unbelievably “clean” cannabis with no pesticides – and no residue of them.
It also sets the company up for a really unique market opportunity on the ground outside Canada. Especially as they have now just announced a partnership with two Swiss companies– Ai Fame GmbH and Ai Lab Swiss AG. Both companies have been leading European pharmaceutical companies since the turn of the century. The idea is to leverage all three company’s intellectual capital with Green Relief’s additional and first international investment with an eye to the entire European cannabis market. Ai Fame specializes in cultivation, manufacturing, sales and distribution to both the food and medical sectors. Ai Lab Swiss AG operates as a laboratory and testing facility.Less than three weeks before Green Relief publicized their European announcement, there were also strategic developments afoot at home.
From this unique perch in the Swiss canton of St Gallen, the three companies are setting up to conquer Europe.
Why Is Switzerland So Strategic?
Switzerland has been on the legalization track since 2011. As of this date, the Swiss government began allowing adults to buy and use CBD-only cannabis. Shops were allowed to obtain licenses. A trickle of sales began. However, rather suddenly, as reform hit Europe, the craze took off. Last year, for the first time, the industry generated a significant amount of revenue (close to $100 million). That is $25 million for the government via taxes- just on CBD sales. Even more intriguing for those looking for market opportunity across borders? Less than a week ago, the German-based budget discount store Lidl just announced they were carrying smokeable CBD – in Swiss grocery stores. The leap across the border is imminent.
That has opened up other conversations, including the “legalize everything” push that makes an awful lot of sense to the ever tax-aware Swiss. This is a push afoot just about everywhere across the continent, including, of course, just across the border in Germany.
The cities of Zurich and the cantons of both Winterthur and St Gallen (home of the Swiss companies behind the new venture with Green Relief) have already indicated that they will not pursue possession fines for those busted with 10 grams or less– no matter what kind and even of the THC variety.
Read between the lines, and it is clear that the cannabinoid conversation locally has begun to attract the Canadians. And not just because of the many opportunities of the Swiss CBD market – but the huge medical and THC German and European opportunities now opening beyond that.
No matter which way Green Relief and their new partners slice it, they are now in the game – and across Europe – with a unique new play and product, and further one set to enter both the medical THC and “consumer,” albeit still CBD, market now burgeoning.
A Cross Market Play
Here is the truly interesting part about this new announcement. Less than three weeks before Green Relief publicized their European announcement, there were also strategic developments afoot at home. Cannabis Growth Opportunity Corporation also just announced an investment in Green Relief. The share purchase agreement netted Green Relief $750,000 in both cash and common shares.
With this, Green Relief seems to have set sail on its European expansion. Look for more interesting turns to this developing saga soon!
Today, Tikun Olam announced their expansion into the Washington, D.C. market. Partnering with the cultivator, Alternative Solutions, they will license them to grow, manufacture and distribute Tikun-branded products.
Tikun Olam is an international cannabis company with roots in Israel, where they are working in clinical trials to produce strains targeting a handful of medical conditions. The company has made serious investments in the United States market previously, with operations in Delaware, Washington and Nevada, and has plans to enter the Rhode Island, Maryland, Massachusetts and Illinois markets in 2018.
The five-year licensing deal signed with Alternative Solutions is the latest development in their expansion plans in North America. They also have similar partnerships developing around the world, including in Canada, Australia, United Kingdom and South Africa.
Tikun plans on having their full line of products ready for distribution with Alternative Solutions in the Washington, D.C. market some time in 2018. “Alternative Solutions is thrilled to be Tikun Olam’s exclusive partner in DC,” says Matt Lawson-Baker, chief operating officer of Alternative Solutions. “We look forward to making Tikun’s products available at all DC dispensaries, giving access to these clinically proven strains to the more than 5,600 registered MMJ patients in Washington DC.”
Bernard Sucher, chief executive officer of Tikun Olam, says he is excited to get working with Alternative Solutions. “Its cultivation and manufacturing operations will make it possible for Tikun to serve every single patient in a single jurisdiction–a first for us and something we hope to accomplish within every U.S. state. “
Last week, Steep Hill announced they are expanding into Oregon with a laboratory in Portland. According to the press release, the company has licensed its testing technology to Dr. Carl Balog, a renowned pain and addiction physician.
Steep Hill has expanded significantly over the past year, including new laboratories in Pennsylvania, Maryland, Washington D.C. and Hawaii, among other states. The Berkeley-based company works in lab testing, research and development, licensing, genetics and remote testing. In 2008, Steep Hill opened the first-ever commercial cannabis-testing laboratory in the country.
Jmîchaeĺe Keller, president and chief executive officer of Steep Hill, says this is a development that will help them better understand cannabis chemistry and its medical applications. “We are pleased to announce our expansion into Oregon and especially pleased to partner with Dr. Balog, a physician who brings years of pain and addiction experience to the Steep Hill body of expertise,” says Keller. “In addition, Dr. Balog plans to use his specialized knowledge to aid Steep Hill’s research and development efforts to broaden our understanding of cannabis chemistry and to explore its wider medical applications. In partnering with Dr. Balog, we hope that Steep Hill will be able to help physicians around the United States to curb the opioid epidemic by offering Steep Hill Verified™ medicinal cannabis as an alternative to a crisis that plagues this country.”
Dr. Balog, now owner and medical director of Steep Hill Oregon, says medical cannabis could be an excellent harm reduction tool, and hints at it being a possible tool in the opioid crisis. “I deal with the consequences of the opioid epidemic on a daily basis as a pain and addiction specialist,” says Dr. Balog. “The growing trend of using cannabis products as an alternative to opioids highlights the need for regulated testing. Because of the variability of marijuana preparations, testing ensures that scientific rigor is applied in a standardized way. I am dedicated to ensuring that patients have access to safe, tested cannabis, free from contaminants and to verified labels that can be trusted for their content.”
They expect Steep Hill Oregon to be open for business in the second quarter of 2018.
Formed in 2015, Outco is a vertically integrated, licensed producer of medical cannabis in Southern California. Outco manages Outliers Collective, the first licensed dispensary continually operating in San Diego County. They operate the first licensed cultivation on Native American land in Southern California, the first cultivation building permit in Southern California and the first licensed extraction facility in San Diego County. Outco is on track to be the largest licensed producer of medical cannabis in Southern California.
The company prides themselves on attention to detail; the well versed team implements real science in their cultivation and extraction processes. Lincoln Fish, co-founder and chief executive officer of Outco, has more than 30 years of experience as an entrepreneur. Before entering the cannabis industry, Linc started and sold companies in the healthcare technology and nutraceutical spaces.
Fish’s experience with FDA regulations in nutraceuticals prepared him for running a business in such a tumultuous, highly regulated environment like cannabis. “One thing I took from the nutraceutical industry is how to present products to consumers and letting them know it is safe, effective and consistent,” says Fish. He says he noticed a serious lack of consistency in products. They tested 25 different vape cartridges, with their own oil, to find a consistent product they can use and know that consumers will safely and consistently get the same results. “There is a lot of room for more professionals and a lot of room for more science,” says Fish. “We try to position ourselves in a way that is consistent with where we think policy will go so we are very careful with recommendations from a scientific standpoint, patient information and product safety.”
According to Fish, they currently distribute cannabis products to about 75 licensed dispensaries in Orange County, San Diego and Los Angeles. With construction underway at their cultivation facility on Native American land, Fish says they plan to generate roughly 2600 pounds of cannabis each month. Gearing up for that in addition to the expanding recreational market requires some planning in advance, says Fish. Part of that plan is making sure quality controls are in place to keep consistency in the product quality and dosage. They are also actively seeking to open their distribution channels further.
“We are building out a full lab of our own in addition to third party testing to perform internal quality controls,” says Fish. Equipped with their own laboratory instrumentation like HPLC and GC, they hope to establish proper in-house quality controls as well as provide that resource to younger startup companies. As one of the founding partners of Canopy San Diego, an ancillary startup accelerator, Fish sees great potential in working with younger companies to get them off the ground. Fish met Outco’s vice president of extraction, Dr. Markus Roggen, at a Canopy San Diego event. It was there that they had the idea to build a startup accelerator for companies that actually touch the plant- extractors, cultivators and infused-product manufacturers, as opposed to a startup accelerator that would only help ancillary businesses.
Dr. Roggen, who is an organic chemist by training, heads up Outco’s supercritical CO2 extraction operation. “I came to the ‘art’ of cannabis extraction with an open, yet scientifically focused mind,” says Dr. Roggen. “My approach was to look past the myths and stories about extraction methods and focus on finding data, as there really wasn’t much available. I therefore, from the beginning, started to study the capabilities of our extraction equipment by chemometric methods.” Chemometrics is the science of relating measurements made on a chemical system or process to the state of the system via applications of mathematical methods. “Already the first sets of experiments showed that long-held beliefs in the cannabis community were inaccurate,” says Dr. Roggen. “For example the particle size of extracted material matters. Or that it is possible to preserve and even isolate terpenes by CO2 extraction methods.” With plans to have a full plant and analytical chemistry laboratory on site, they hope to perform more research that focuses on optimizing extraction processes.
Dr. Allison Justice leads their cultivation team with a background in greenhouse management and commercial horticulture. Dr. Justice says plants are grown, starting at a young age (seed or vegetative cutting), with the protection of biological control agents. “Biological control is a management strategy that entails the release of beneficial insects or fungi, such as parasitoids and predators, in order to suppress or regulate insect populations in greenhouses and grow rooms,” says Dr. Justice.
When implemented properly, this eliminates the need to use synthetic pesticides. “Biological control agents are not put in place to eradicate pest populations yet are applied as preventives to minimize plant damage and maintain their own populations.” They are constantly evaluating light types, spectrum and intensity to determine optimal ranges, according to Dr. Justice. They don’t use any pre-mixed “cannabis” nutrient supplements for their plants, instead they design an experiment to determine the desired levels and ratios of essential plant nutrients. “We have found it crucial to determine what ratios of nutrients the plant actually needs and by knowing this, we know how to manipulate the recipe determined by the plant’s given nutritional symptoms,” says Dr. Justice. Every type of adjustment in cultivation and extraction is based on results from experimentation rooted in legitimate science. Instead of guessing when it might be time to harvest, they use a water activity meter, logging and recording all the data to determine the appropriate time to trim and cure plants. Performing analytical testing at every step is key, says Fish.
Looking toward the recreational market, Fish sees an obvious opportunity to expand their wholesale operations substantially, with several larger new cultivation projects planned. “The key though is to produce flower and concentrate offerings with the same standards we employ for medical cannabis,” says Fish.
This November 8th, voters in five states will head to the polls to decide on legalizing recreational cannabis and another three states have ballot initiatives that would legalize medical cannabis. If any of those five states pass a measure for recreational legalization, including Massachusetts, Maine, Nevada, Arizona and California, (which are all leading in the polls) they could potentially create massive new market opportunities for cannabis brands that have their eye on expansion.
Nancy Whiteman, co-owner of Wana Brands and chair of the Cannabis Business Alliance Infused Product Committee, sees great potential in capitalizing on those markets early. Whiteman has been working with Wana Brands since 2010 in Colorado, starting out in the young medical market there.
After expanding to the recreational market, Wana Brands saw its sales skyrocket. From January to August 2016, Wana had the best-selling candy brand in Colorado with 21% dollar share, according to BDS Analytics. Wana Brands has already expanded to Oregon and will launch in Nevada on November 15th, with agreements signed to expand in other states as well. “The model we are pursuing is a licensing agreement where we partner with existing or new license holders in their state,” says Whiteman. “In many ways they are doing the heavy lifting, but we are providing an enormous lift by licensing our intellectual property to them.” That model for growth is becoming increasingly common in some of the more established brands, like Steep Hill Laboratories, GFarma Labs, Dixie and others. Whiteman says that Wana Brands also has a partner in Illinois, Massachusetts and a number of other states they hope to reach.
According to Mark Slaugh, executive director of the Cannabis Business Alliance and chief executive officer of iComply, a compliance services provider, brands from Colorado expanding to other states need to ask themselves if their reputation is on the line with these new operators. “If you are licensing to companies that are not compliant, the penalties could be huge and they vary state to state- that could potentially hurt the overall brand image nationally,” says Slaugh. “People doing the licensing that are operating with full compliance really need to look at controlling that risk and mitigating that as much as possible.” With brand trust on the line, there are substantial risks that come with expansion. “We help clients ensure quality is consistent so, for example, an edible product would taste the same in Colorado as it would in Nevada or Arizona. They need to follow the intellectual property consistently but more importantly follow those specific regulations in that state to stay afloat.” Managing ongoing compliance in different states requires monitoring regulatory updates across multiple markets, which can get incredibly complex.
“Six years ago, it was much easier to get into the market in Colorado,” says Whiteman. “There were no capital requirements, no limits on the number of licenses, but there was still a lengthy application and vetting process- as long as you met those minimum requirements you could get a license.” Other new states put stringent limits on the number of licenses granted and some have extraordinarily cost-prohibitive capital requirements, up to a million dollars, as is the case for New York. “Anyone who becomes a license holder in Massachusetts has to be prepared to embark on three separate business models, which is a massive undertaking,” says Whiteman. Massachusetts requires license holders to cultivate, process and dispense in a vertically integrated model.
In other states, Wana Brands is working with exclusive partners who will have the capabilities to manufacture and distribute throughout the entire state, but in Massachusetts that won’t be the case. “To cover the state, we need several partnerships; the partner we are working with is a little south of Boston,” says Whiteman. But all that could change if voters in Massachusetts legalize it recreationally, opening a much larger market than the current medical program. “With no legislation drafted yet, the regulatory environment is still up in the air in Massachusetts so there is no way of telling what the recreational market will look like.” In terms of ongoing regulatory compliance, Whiteman believes that Colorado still has some of the most stringent rules. The universal symbol printed on every individual edible product serving is one example. “Every state has different lab testing and licensing requirements, but Colorado looks like the most stringent currently,” says Whiteman. “Colorado requires a full gamut of lab testing including homogeneity, potency, residual solvents, contaminants and soon pesticides too.” According to Mark Slaugh, Nevada’s lab testing regulations are fundamentally different from Colorado’s with regard to sampling procedures, but the broader inconsistencies in lab standards need to be addressed. “The lack of laboratory standardization state to state with regard to methods creates a big challenge to get consistent, proficient lab testing across the board,” says Slaugh.
A big differentiator between Colorado and other states is that it was a first mover. “When Colorado came online there were not any established brands to speak of anywhere in the country- we were all pioneers,” says Whiteman. “Because it is so difficult to get a license in another state, either the organization or investor groups are looking to partner with established brands.” The advantages to this business model are many. Expediting your entry to market gets you the advantage of being a first mover. Working with an established brand also minimizes risks and the learning curve. “Bigger players understand that building a brand from scratch is time consuming and expensive so I think we will see a lot of these partnerships.”
As those new states come online, similarities in their regulations might appear in the form of standard operating procedures (SOPs) or good manufacturing practices (GMPs). “We might start to see a standardization from state to state that models FDA GMPs or USDA GAPs, [good agricultural practices] moving toward a framework that is more consistent with the possibility of federal regulation,” says Slaugh. Another commonality among a number of states is the implementation of a statewide tracking system. According to Slaugh, California has no such mandated system in place yet. “They will probably have one eventually but the market is so localized there- we will see if California will be ready with a statewide compliance system for tracking by 2018,” says Slaugh. “With such a weird patchwork of local governments allowing or not allowing certain operations to exist, it is a tough business to be in and it’s getting tougher every day.”
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