Tag Archives: future

Soapbox

Tips to Shrink your Shrinkage

By Carl Silverberg
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I had dinner last night with a friend who is a senior executive at one of the largest automobile companies in the world. When I explained the industry-accepted rate of 25-30% shrinkage in horticulture he said, “Are you kidding me? Can you imagine the story in the Wall Street Journal if I gave a press conference and said that we were quite content to throw away three out of every ten cars we manufactured?”

Yet, for all growers, operators and investors who complain about shrinkage, it’s an accepted part of the business. What if it wasn’t; what if you could shrink your shrinkage by 60% and get it down to 10% or less? How much more profitable would your business be and how much easier would your life be?

Let’s take the floriculture industry as our first example. You propagate chrysanthemums in February, they get repotted at the end of April and by the end of June, you might start to see some buds. In a very short time span your job changes from being a grower who manages 10,000 square feet of chrysanthemums to being an order taker. Over a period of eight weeks, you have to unload as many of those mums as possible. The sales team at Macy’s has more time to move their holiday merchandise than you do.

If you’re like most operations, your inventory tracking system consists of Excel spreadsheets and notebooks that tell you what happened in previous years so you can accurately predict what will happen this year. The notebooks give you a pretty accurate idea of where in the greenhouses your six cultivars are, how many you planted and which of the five stages they are in. You already have 30 different sets of data to manage before you add on how many you sell of each cultivar and what stage they were in.

The future of the industry is making data-driven decisions that free up a grower to focus on solving problems, not looking for problems.Then your first order comes in and out the window goes any firm control of where the mums are, what stage they’re in and how many of each cultivar you have left. A couple of hours after your first order, a second comes in and by the time you get back in touch, check your inventory, call back the buyer and she’s able to connect with you, those 2837 stage 3 orange mums are moving into stage 4. Only she doesn’t want stage 4 mums she only wants stage 3 so now you frantically call around to see who wants stage 4 orange mums very soon to be stage 5 mums.

And, the answer is often no one. What if you didn’t have your inventory count exact and now you have 242 yellow mums that you just found in a different location in your greenhouse and had you known they were there, you could have sold them along with 2463 other mums that you just located in various parts of your greenhouse.

It doesn’t have to be like that. We had a client in a similar situation, and they are on track to reduce their shrinkage to just a shade over 10%. The future of the industry is making data-driven decisions that free up a grower to focus on solving problems, not looking for problems.

And don’t think that shrinkage is an issue only in the purview of floriculture. It’s an even bigger problem for cannabis because of the high value of each crop. The numbers don’t sound as bad because unlike floriculture, you don’t have to throw out cannabis that’s not Grade A. You can always sell it for extract. But extract prices are significantly less per pound than flower in the bag.

Here’s how one grower explained it. “Because of the high value of the crop, and the only other crop I’ve worked with that high is truffles, you’re playing a much higher stakes game with shrinkage. Even if you try and salvage a bad crop by using all of the parts of the cannabis plant. Listen, the difference between Grade A and Grade C could be $1,000 for A while a pound of B/C is less than $400. If you produce a standard 180 to 200 pounds in your grow rooms, you’ve really screwed up. No operator is going to keep you if you just cost them $120,000.”

Soapbox

Medical Cannabis in Georgia: Federal Policy Effects on State Industries

By Reggie Snyder
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Under the U.S. Drug Enforcement Administration’s (DEA) Controlled Substance Act (CSA), drugs are classified into five distinct schedules depending upon their acceptable medical use and their overall potential for abuse or dependency. The DEA currently lists cannabis as a Schedule I drug, which the CSA defines as drugs having no currently accepted medical use and a high potential for abuse. It appears, however, that the DEA may soon reconsider its current Schedule I classification of cannabis.

This article considers how the DEA’s potential reclassification of cannabis potentially could affect Georgia’s medical cannabis industry. Specifically, the article discusses: (1) how Georgia medical cannabis distributors would operate within this new regulatory framework; (2) how this change would affect registered Georgia patients who are either currently purchasing medical cannabis or are planning to do so; and (3) whether this reclassification would cause big pharmaceutical companies to enter Georgia’s medical cannabis market, and if so, how.

The DEA’s Reclassification of Cannabis Would Likely Affect the Regulatory Framework of Georgia’s Medical Cannabis Industry

On April 2, 2019, Georgia became the 34th U.S. state to legalize cannabis for medicinal use when the Georgia Legislature passed House Bill 324 (“HB 324”), which recently took effect on Monday, July 1, 2019. In Georgia, medical cannabis is defined as a “low-THC oil” that contains 5% or less of tetrahydrocannabinol (THC)—the psychoactive chemical in cannabis that causes a “high.”

Georgia State Flag

If the DEA reclassifies cannabis, the regulatory framework of Georgia’s medical cannabis industry under HB 324 would likely be affected. For instance, depending on how the DEA elects to reclassify cannabis, low-THC oil products manufactured and sold in Georgia could become subject to the U.S. Food and Drug Administration’s (FDA) costly, complicated and time-consuming drug approval process. Then, any low THC oil products that the FDA approves will be subject to federally mandated quality, efficacy and potency standards for FDA-approved drugs. Also, any federal standards that stem from the DEA’s reclassification of cannabis will trump any conflicting provisions in HB 324 or any other conflicting rules, regulations or procedures established by the Georgia Access to Medical Cannabis Commission (GAMCC), the seven member state agency responsible for promulgating and implementing the state-based rules, regulations and procedures necessary to produce and distribute low-THC oil in Georgia, and the Georgia State Board of Pharmacy (Pharmacy Board). However, even if the DEA reclassifies cannabis, the following state regulatory framework established by HB 324 will remain unaffected:

  • The GAMCC will likely continue to oversee the state’s medical cannabis industry.
  • The following two different types of dispensary licenses issued under the legislation will still likely remain: retail outlets (issued by the GAMCC) and pharmacies (issued by the Pharmacy Board).
  • Licensed dispensaries will still likely not be located within a 1,000-foot radius of a school or church, and licensed production facilities will still not be located within a 3,000-foot radius of a school or church.
  • Pharmacists who dispense low-THC oil will still likely have to review each registered patient’s information on the state’s Prescription Drug Monitoring Program (PDMP) database to confirm that they have been diagnosed with one or more of the 17 approved conditions and diseases. The legislation does not require retail outlet dispensaries to review patient information on the PDMP database or employ a pharmacist to dispense the drug.
  • Registered patients will still likely be prohibited from vaping low-THC oil or inhaling it by any other electronic means. The legislation does not expressly prohibit the use of other, non-electronic delivery methods of low THC oil such as pills or nasal spray.
  • All licensed dispensaries (and all licensed production companies) will still likely be subject to an “on-demand” inspection when requested by the Georgia Bureau of Investigation (GBI), the GAMCC, the four-member Medical Cannabis Commission Oversight Committee (MCCOC), or local law enforcement. The GAMCC and the Georgia Drugs and Narcotics Agency (GDNA) will also still likely be able to conduct one, annual inspection of dispensary locations. And, upon request, licensed dispensaries will still likely be required to immediately provide a sample of their low-THC oil for laboratory testing to the GBI, GAMCC, MCCOC, GDNA or local law enforcement.
  • All licensed dispensaries (and all licensed production facilities) will still likely be required to utilize a GAMCC-approved seed-to-sale tracking software.
  • All licensed dispensaries (and all licensed production companies) will still likely be prohibited from advertising or marketing their low-THC oil products to registered patients or the public. However, they will still likely be allowed to provide information about their products directly to physicians, and upon request, physicians will still likely be allowed to furnish the names of licensed dispensaries (and licensed production companies) to registered patients or their caregivers.

The DEA’s Reclassification of Cannabis Would Likely Affect the Availability of Low THC Oil

To date, approximately 9,500 Georgians are registered with the state’s Low-THC Registry, which allows them to purchase low-THC oil from licensed dispensaries. Since the legislation’s passage, the number of registered patients has increased significantly and continues to steadily rise. If the DEA reclassifies marijuana, this patient number will likely increase at an even faster rate because the public will likely perceive reclassification as an acknowledgement by the federal government that marijuana possesses health and medicinal benefits. If that occurs, statewide demand for low THC oil could quickly outstrip the supply.

Georgia Gov. Brian Kemp
Image: Georgia National Guard, Flickr

Under HB 324, the GAMCC is tasked with ensuring that the state has a sufficient number of retail outlet dispensaries across the state to meet patient demand but is limited to issuing only six production licenses. As the number of registered patients continues to grow, the GAMCC may be forced to recommend amendments to the statute allowing it to issue additional production licenses to increase the state’s supply of low THC oil, and depending on how many additional patients are added to the state’s Low-THC Registry, the GAMCC may also have to issue additional dispensary licenses to keep up with patient demand by relaxing the geographic limitations on locating dispensaries.

Thus, the DEA’s reclassification of cannabis likely would affect the amount of low THC oil available to registered patients in Georgia.

The DEA’s Reclassification of Cannabis Would Likely Cause Large Pharmaceutical Companies to Enter Georgia’s Medical Cannabis Market

Large pharmaceutical companies typically manufacture, market, sell and ship their products on a national and international scale. Given cannabis’ current status as a Schedule I drug under the CSA, these companies have largely steered clear of the burgeoning medical marijuana industry because of the inherent risk of violating federal law. If the DEA reclassifies cannabis, that risk will be diminished greatly, and the companies therefore will likely decide to enter the market by acquiring existing medical marijuana companies with established national or state-level medical cannabis brands.

If the DEA reclassifies cannabis, Georgia’s medical cannabis market will likely be affected in multiple ways.Depending on how the DEA reclassifies cannabis, low-THC oil in Georgia could be subject to stringent federal standards, including the FDA’s complex and expensive drug approval process. Georgia medical cannabis companies will likely not be accustomed to complying with such federal regulations. Large pharmaceutical companies, on the other hand, are very accustomed to dealing with the federal government, including FDA drug approval. So, if the DEA reclassifies marijuana, pharmaceutical companies will likely view reclassification as a tremendous opportunity to enter the Georgia market by leveraging their experience and institutional knowledge dealing with federal law to acquire or partner with a licensed Georgia cannabis company that has an established brand of low -HC oil.

Entering Georgia’s medical cannabis market won’t be easy, however, because HB 324 prohibits licensees from transferring their licenses for five years and requires that the original licensee be a Georgia business. But, HB 324 does not prohibit them from selling their businesses, which necessarily includes any licenses the business owns. Purchasing a licensed Georgia medical cannabis company requires payment of a production license business transfer fee. The fee for the first sale of a business with a Class 1 production license is $100,000 and the fee for a Class 2 license is $12,500. The fee for the second sale is $150,000 for a Class 1 production license, and $62,500 for a Class 2 license. The fee for the third and fourth sales is $200,000 for a Class 1 production license, and $112,500 for a Class 2 license.

Conclusion

If the DEA reclassifies cannabis, Georgia’s medical cannabis market will likely be affected in multiple ways. Specifically, depending on how the drug is reclassified, the regulatory framework for medical cannabis companies likely will change to include both state and federal requirements, potentially including the FDA’s complex drug approval process. Also, the amount of low-THC oil available for registered patients to purchase likely will be diminished precipitating the need for the GAMCC to modify the statute to allow for issuing additional production licenses and relaxing the geographic limitations on locating dispensaries. Finally, large pharmaceutical companies likely will attempt to enter Georgia’s medical cannabis market by purchasing existing, licensed Georgia companies that have established low-THC oil brands.

Jennifer Whetzel

Branding for Cannabis Companies 101: Part 1

By Jennifer Whetzel
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Jennifer Whetzel

Busy entrepreneurs often skip steps in their business development process, particularly in the cannabis space. Since this is a new industry, there isn’t a long history of marketing/advertising efforts to look back on; the standards are still being developed. But more often, businesses simply may not have a budget large enough to pay an agency, and they may not feel confident executing these efforts on their own.

Fortunately, you can do a lot independently to get your name out there. This three-part series will give you a quick primer on branding – what it is, why it’s important and how to do it. But first, we need to discuss the differences between branding, marketing and advertising so that you know what kind of tools you have at your disposal.

What is Branding?

Branding should be considered a prerequisite to marketing and advertising.

Branding: Who
Marketing: What & Why
Advertising: Where & When

Branding is simply thinking about your company from the inside-out. It’s asking yourself questions about the kind of person your brand would be, down to its beliefs, personality and sense of style. Ultimately, we do this to build a deep emotional connection with potential customers. When you know who you are and put yourself out in the world, you’re signaling to them that you are a good match for each other.

When you have a brand that consistently forms emotional relationships with customers, that bond converts to both income and long-term company value, making your spending on marketing and advertising go further. It gives you a competitive advantage over companies with weak or non-existent branding (and in the U.S. cannabis industry, there are plenty of those). Moreover, it’s a key factor that venture capitalists and friendly Fortune 500s look for in potential investments.

So, what should you be asking yourself when it comes to branding? Start with exploring the fundamentals. Decide on the philosophical, emotional and visual characteristics of your brand.

As far as the philosophical questions go, it’s important to codify your mission, brand values, customer promise, core competency and future vision to build a strategic brand. Think about what you’re offering, how it will change lives, and what unique qualities will help you make it all happen.

The Four Ps: Product, Price, Place and Promotion.The philosophical characteristics help you decide who you are. Your emotional characteristics are the ones that connect you with the world. These would include your creation story, your brand personality and tone of voice. How does your brand see and respond to the world? Why? People love consistency. Having a consistent presentation makes your brand feel more authentic; in turn, people are more receptive to you.

The visual qualities are how the world should see you. These assets should include your color palette, fonts, imagery and logo. Making decisions about your brand’s appearance may feel subjective and overwhelming to people, but it doesn’t have to be. Basically, evaluate these ideas and assets in terms of how your audience is likely to respond to these elements. For example, how does your happy-go-lucky audience feel about a logo that is lime green versus corporate blue? Which color best reflects your brand sensibility? You know who you are; the visual characteristics are how you plan to show it.

Marketing

As a discipline, marketing traditionally involves making strategic decisions about the four Ps: Product, Price, Place and Promotion. These decisions become significantly easier once you have defined your brand.

Essentially, marketing addresses the way your brand lives in the world. It tells potential customers what you sell, and why they should choose your brand. It involves making thoughtful decisions and having a strategy for decisions such as product names and your corporate culture.

You also need to think about your pricing strategy and how that manifests in front of customers. For example, are you a high-end product with a premium price or the Walmart of weed? What’s your customer service strategy? Are your budtenders in flannel or lab coats?By now, you know who your brand is and how you want to present it to the world. Now you need to get consumers to see it that way. That’s where advertising comes into play.

Marketing also involves decisions about collateral—namely, your product packaging, brochures, signs and trade show booths. It also impacts your brand’s in-person presence. That could include experiences like events your company attends, trade shows where you have a booth or table, sensory experiences or even AR/VR experiences with your product.

By now, you know who your brand is and how you want to present it to the world. Now you need to get consumers to see it that way. That’s where advertising comes into play.

Advertising

Generally, advertising relates to paid campaigns that are carefully written and designed to tell potential customers where, when, why and how to connect with your brand and buy your products and services.

Fortunately, you have the tools to thrive by putting in the work to get to know your brand.These campaigns are often launched within the space of owned media, such as television commercials, radio and print ads and billboards. There are tons of digital and social media options. Your job is to find the ones that your customers interact with and decide what you want to say about yourself. For example, what kind of sites would you want to place ads on? What state of mind are customers in when they go to those sites? And what message do you want them to get from you in that moment?

Normally, answering these questions would be daunting. But since you’ve already decided who your brand is, you may already know what colors you want to use for this ad. You’ve already considered what your mission is. You know how your brand should appear to the world. And since you’ve unlocked these truths, you’ll be able to develop campaigns that feel genuine, unique, and memorable.

Connecting with consumers and making them remember you isn’t optional. It’s what will ultimately decide whether your business survives or not. Fortunately, you have the tools to thrive by putting in the work to get to know your brand. It’s tough, and it may not come easily at first. But we don’t start a business because it’s easy. We accept the risks and frustrations because we love what we do. Tell everyone why they should too.