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The Beginner’s Guide to Integrated Pest Management

By David Perkins
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Formulating a Plan

In this article you will learn how to control pests and improve the health of your cannabis plants using integrated pest management, commonly referred to as IPM. This involves a multi-point strategy – there is no quick fix, nor is there one solution that will wipe out all your pest problems. Proper pest management requires patience, consistency and determination.

It is important to understand that not all pesticides are bad. While many are incredibly harmful not only to pests, but also humans, in this article I will educate you about some of the safer alternatives to traditional pesticides. It is possible to safely control unwanted pests in your cannabis garden without harming yourself, your employees or the natural habitat around you.

Every cultivation facility should have a well-thought-out plan for their pest management program. This program should account for the prevention, and if necessary, eradication of: spider mites, russet mites, fungus gnats, root aphids, thrips and caterpillars. These are just a few of the more common pests you’ll find in a cannabis garden. There could also be many other less commonly known bugs, so you have to be vigilant in looking closely at your plants, and the soil, at all times. Complete eradication of a targeted pest can be difficult. Once a pest has established itself, decimating or decreasing the population will require an aggressive regimen that includes spraying daily to control populations and prevent other pests from getting established.

Spraying or applying pesticides to the foliage of plants isn’t the only way to control or eradicate pest populations. There are many other ways that you can minimize the spread of pests without the use of pesticides. In greenhouse and outdoor grows, growing specific types of plants around the cultivation area will attract both beneficial and predator bugs that will naturally control pest populations. Some plants that attract these bugs are: mint, peppers, and marigold. Beneficial and predator bugs, such as ladybugs, predator wasps and predator mites, can control unwanted pest populations in the area before they even have a chance to become a problem in your garden. Plants and flowers that attract bees, birds and insects will also create helpful bio- diversity, making it more difficult for the unwanted pests to thrive.

For indoor cultivation, it is imperative that you have your cultivation facility set up for a proper workflow. If you already have pests, you need to make sure you are not contaminating the rest of your facility when going from one area to the next. Make sure that you only go to contaminated areas at the very end of your day, and when you’re done working in that area, you must immediately exit the building. Do not ever walk back through the uncontaminated parts of your facility or the pests will spread quickly.

An aphid on a plant in a greenhouse

When most people think of pests in their cannabis garden they think of the more common varieties: spider mites, russet mites, aphids and thrips. However, there are also soil-dwelling pests that can exist, without your knowledge. These will decrease the health and vigor of your plants, without you even knowing they’re there, if you’re not careful to check for them. Some of the soil dwelling pests that plague cannabis plants are: root aphids, fungus gnat larvae and grubs. It is just as important to control the pests below the soil, feeding on your roots, as it is to control the pests that feed above soil on your plants.

Maintaining healthy plants is essential to controlling pest populations, both on the foliage and below the soil. Healthy plants will have an easier time fighting off pests than unhealthy plants. Plants have immune systems just like humans, and the stronger the plant’s immune system, the more likely it will be able to ward off pests and diseases. Allowing a plant to reach its full potential, by minimizing pests, means your plants will also have a better quality, smell and flavor, not to mention a bigger yield.

Worker Safety, Regulation and REI times

The application of pesticides requires certification from the state agricultural department. In certain situations, depending on the type of pesticide and method of application, a license may even be required. The application of pesticides without proper certification is against the law. Applying pesticides in a manner that is not in accordance with the label and instructions is also a violation of law.

The proper personal protective equipment (PPE) is required for anybody handling, mixing or applying pesticides. Employees can be a liability to your company if they are applying pesticides improperly. Make sure you and your entire staff are well educated about pesticide use requirements and limitations, prior to usage, and that only a properly certified person is handling the mixing and application at your facility.

The author, David Perkins, In his greenhouse after using insect killing soap.

After a pesticide is applied, you must abide by the re-entry interval (REI). This is the required time period limiting all workers from re-entry into areas where pesticides have been applied. This time period will vary depending on the type of pesticide used and the method of application. In some instances, pesticides applied in the last 30 days may require employee training before work can be done in those areas.

The misuse of or improper handling of pesticides is not only unlawful and dangerous to human health, but can also cause environmental damage to waterways and wildlife. The direct effects of pesticides on wildlife include acute poisoning, immunotoxicity, endocrine disruption, reproductive failure, altered morphology and growth rates and changes in behavior. Pesticides can indirectly impact wildlife through reduction of food resources and refuses, starvation due to decreased prey availability, hypothermia and secondary poisoning. Section 1602 of the California Fish and Game Code governs requirements for permitting of any project where pesticides will be used, and strictly regulates the disposal of all waste and run-off. It is imperative to know the regulations and to abide by them, or heavy fines will ensue!

Using Pesticides in a Regulated Market

Knowing which pesticides you can’t use, to avoid failing mandatory state testing, is just as important as knowing which ones you can use safely to pass required testing. Most states with regulated markets have strict limitations on the pesticides that can be used in cannabis cultivation. Pesticide use in the cultivation of cannabis is the most strictly regulated in the agriculture industry; the pesticides allowed for use in cannabis cultivation are far more limited than any other crop.

Photo: Michelle Tribe, Flickr

Just because a product is certified organic does not mean that it can be used, or that it is safe to be consumed or ingested. Oftentimes when cannabis flower alone is tested it will not fail or show a detectable amount of pesticides or heavy metals. However, when that flower is turned into concentrates, banned substances are then detected in testing, leading to test failures.

Cannabis cultivation facilities that are located on land that was previously used for conventional agriculture, or located near vineyards or other agricultural crops that are heavily sprayed with harmful pesticides, run a very high-risk failing testing. This is because of either spray drift from nearby agriculture, or residual pesticides and heavy metals left in the soil from previous crops that were using pesticides banned for cannabis cultivation. Accordingly, if you’re going to be growing outdoors or in a greenhouse, it is imperative that you get a soil and water test prior to cultivation, so you can determine if there is any potential for test failures due to pesticides or heavy metals in the soil or water in that area. 

Proper Application – Using the Right Tools in the Right Way at the Right Time

One of the most important factors in pest management is proper identification of pests and proper application and coverage of pesticides. It does not require an entomology degree to identify insects, these days there is a lot of information online that can help you identify cannabis pests. Proper identification of insects can make the difference between success and failure. With a good eye and a microscope, if you do your research, you can control most insects in your garden.

In order to control pests in your garden you must get proper coverage of the foliage of the plant when you are applying pesticides. There are different types of equipment that are commonly used to apply pesticides in cannabis cultivation: backpack sprayers, foggers, and airless paint sprayers are the most common. An alternative method involves using an automated dosing system such as a dosatron, which injects fertilizer or pesticides at a specific ratio into your water lines, allowing you to use only the exact amount of pesticide you need. That way you avoid wasting money on unused pesticides. It is also safer for employees because it minimizes employee exposure, since there is no mixing required, and it allows for a large volume to be sprayed, without refilling a tank or a backpack sprayer.

No matter what you are using you must ensure you get the proper coverage on your plants in order to control pests. The temperature and humidity of your cultivation area, as well as the PH and temperature of the pesticide solution, all factor into the success of your IPM. For example, PFR 97 needs to be applied at a higher humidity range, around 70% to be most effective. In some areas this is not possible so repeated applications may be required to ensure the application is effective. A high PH or alkaline PH can cause alkaline hydrolysis which will make your pesticide solution less effective and will dictate how long your pesticides remain effective after they are mixed. It is therefore important to use your pesticide solution as soon as you make it; don’t let it sit around for long periods of time before use or it will be less effective.

In cannabis cultivation there are two different primary growth cycles: vegetative and flower. These cycles require different IPM strategies. In general, during the flowering cycle, pesticides should not be applied after the second week, with some limited exceptions i.e. for outdoor cultivation there is a longer window to spray since the flower set takes longer than a plant being grown inside, or in a light deprivation greenhouse, where there is a 12/12 flowering cycle.

Starting with an immaculate vegetation room is crucial to maintaining pest and mold free plants in the flowering cycle.

For the vegetative (non-flowering) cycle, a strict rotation of foliage spray applications targeting not only pests, but also molds and pathogens, will be necessary to avoid a quick onset of infestation. Starting with an immaculate vegetation room is crucial to maintaining pest and mold free plants in the flowering cycle. Preventative sprays that are safe for use include: safer soap (contact kill) for soft bodied chewing insects; Regalia (biological control) for powdery mildew; and PFR 97 (biological control) for soft bodied chewing insects. It is also helpful to spray kelp, which strengthens the cell walls of plants, making the plant healthier, and thus enabling the plant to better defend itself from pests and diseases. Also, Bacillus thuringiensis (Bt) is useful to prevent or kill caterpillars.

The best way to control a pest infestation in the flowering cycle is at the very beginning on day one. You must start aggressively, with a three-way control consisting of a contact kill and preventative during days 1-14; preventative and biological control during days 10-18; and then release predator bugs on day 25, for optimal results. Knocking back the population with an effective contact kill pesticide early on is essential to ultimately lowering populations throughout the grow cycle, so that you can spray a biological control to preclude them from returning, before you release the predatory bugs at the end of the cycle.

Biological controls can take anywhere from 3 to 10 days before they are effective. Biological pesticides are selected strains of bacteria or fungus. When the plant tissue is eaten by a targeted pest, the bacteria kills the pest from the inside providing control without having to spray pesticides repeatedly. Predator bugs are the last line of defense, used in late flowering. They can be used indoors, outdoors and in greenhouses. An example of a common predator bug is Amblyseius californicus used to control low populations of spider mites, but there are many different varieties and they are specific depending on the type of pest population you seek to control.

A common concern with the use of predatory bugs, is whether they will be present when the flowers are harvested. However, if there is no food for the bugs (i.e. pests) the predator bugs will leave in search of food elsewhere. Further, indoor predator bugs are usually very small in size and difficult to see to an untrained eye. It is very unlikely to see any signs of predator bugs near the end of the flowering cycle, or in the finished flower product. Even when using bigger predator bugs, the bugs will leave the plants when harvested and dried.

Having pests can be very stressful. It is not uncommon to have bugs, pests, rodents, animals and birds cause damage in cannabis gardens. Making an informed decision based on science and not on unproven assumptions can determine how successful you are at pest management. There are many factors that go into pest management and no one situation is the same. You must be dedicated and consistent; pest management never stops. You will always have something ready to invade your garden. Prepare, plan, prevent and repeat!

Custom Designed Packaging: Is it Right for Your Cannabis Product?

By Danielle Antos
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There are numerous plastic bottle and closure manufacturers in the cannabis industry today. And, there is a significant quantity of common bottle and closure styles as well. Many companies manufacture the same or similar products as their competition. But what if you’re searching for something different? Something unique that no one else has? A plastic bottle that will make your cannabis product stand out from your competition. Where can you find that package that is truly “something special?” Something that will elevate your brand?

It doesn’t matter if your cannabis business is a start-up in its infancy or a mature company with an established loyal customer following, creating attention-grabbing packaging is essential to your success. The packaging is the all-important and critical first impression. While the primary function of any packaging is to contain, protect and market your cannabis products, your packaging is a reflection of your company in the eyes of the consumer. In many ways, the package is the product. Using creative plastic packaging is a great way to differentiate your cannabis products from those of your competitors.

Finding the right manufacturing partner is the first step. Look for a company that has custom design capabilities and understands your vision for the perfect cannabis packaging.

When is Custom Bottle Design the Right Choice?

Sometimes, an off-the-shelf stock bottle and closure will work just fine. But if you are introducing a brand-new product that is unique to the industry, or if you are using a new product to introduce the fresh new look of your brand, it makes sense to develop plastic packaging that is distinct and eye-catching. You want your brand and products to look special and stand out on the shelf. There could also be filling equipment, regulatory, labelling, light sensitivity or other packaging requirements you must address as well.

Start every custom cannabis bottle project with a trusted manufacturer who thoroughly understands how you want the plastic packaging to look and the specifications it must meet. Ensuring that these qualitative and quantitative details are discussed will lead to on-time, on-budget and on-target custom cannabis packaging solution.

Achieving the Look You Want

Depending on your requirements, there could be several solutions to achieving the special look and specifications of your custom packaging. Discuss all of the design options that meet the needs of your product with your manufacturing partner; they should help you decide on the best direction for your packaging.

Selecting the right materials for your custom plastic bottle and closure is a big part of the process. Select materials that will provide the necessary aesthetics, chemical resistance, light transmission, bottle capacity and weight requirement that will protect your product.

Your manufacturer should also be able to guide you through the production process: should the bottle be blow molded or injection molded? Should it be made on IBM (Injection Blow Molding) equipment or EBM (Extruded Blow Molding) equipment? Answering these questions will ensure that the plastic bottle will be made efficiently and to the correct specifications.

Flawless Closure Integration for Your Cannabis Packaging

Designing the bottle is important, but you must also consider what type of closure will work best. Both items must be engineered to work seamlessly with each other. If the closure doesn’t work properly with the bottle, it can compromise the product it contains. Closures must always seal perfectly to ensure the integrity of the product inside. They must also be designed to function efficiently and meet the requirements of your filling operation.

A detailed CAD drawing should be provided, outlining every critical dimension of your HDPE or PET bottle and plastic closure. The CAD drawing provides the direction needed to create the manufacturing mold for your custom design. It also serves as a reference check to ensure that the product is produced according to your specs.

Ensure Quality through the Manufacturing Process

Ensure that your packaging partner has quality checks in place throughout the manufacturing process. Error detection systems, random sampling and testing will safeguard 100% conformity. It’s also important that manufacturers adhere to cGMP best practices and certifications under a globally recognized accredited program. This represents their commitment to continuously improving manufacturing processes and quality systems. It also helps minimize waste and manufacturing errors while increasing productivity. Risk of product contamination and other errors will be alleviated, and product efficacy and shelf life expectancy will be met.

Responsive Customer Service and Support

Many packaging manufacturers claim to provide exceptional customer service, but few actually rise up to that level. This is an important aspect of your project and you need to know that your questions will be answered and that your producer will keep you informed of any changes. Knowing that you can trust your supplier allows you to concentrate on other aspects of your business, like growth and profitability.

Reinforce Your Brand with Customized Packaging

In today’s competitive cannabis market, it’s more important than ever to have your product stand out from the competition. Your brand should help build awareness and develop consumer loyalty. When you deliver a consistently reinforced message, consumers will instantly recognize your brand. This consistency is a key factor in encouraging consumers to purchase your product over the competition — even when they want to try something new. Consistency makes your brand feel more dependable and people gravitate towards things they trust.

Your brand consists of more than just your logo and company name. Your brand identifies who you are, what your company stands for and the integrity of your product. Customized cannabis packaging will reinforce your brand and attract consumers to your products. Take time to find the right cannabis packaging partner who can help differentiate your brand and products from your competitors with special, eye-catching plastic packaging.

Canopy_Growth_Corporation_logo

Constellation Has A Moment Of Reflection But Not Sour Grapes Over Canopy Investment

By Marguerite Arnold
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Canopy_Growth_Corporation_logo

Constellation Brands, the beer brewer behind Corona and Modelo, has finally admitted the obvious. Its four-billion-dollar bet on the Canadian cannabis company Canopy Growth in 2018 was a long-term play for market share, not immediate profitability. Indeed, Canopy has yet to turn a profit and its shares are down 30% from this time last year. So far Constellation has lost $71.1 million of its investment in the cannabis industry company leader. That is 19.25% of its total investment in 18 months. In other words, hardly insignificant.

That said, Canopy is not, by any stretch of the imagination, “down for the count.” If their overexpansion plans and statements over the last three years have been, at best, optimistic, they have not done anything broadly different than any of their other major competitors (see Aurora for example). And have still emerged, financial bloodbath although it has been so far, four years after entering the European market at least, with global presence that is not going anywhere. Even if in some markets overall sales are lower than hoped or anticipated.

At least two quarters of real reorganization and reshuffling in every office on every continent the country does business in have at least resulted in a major victory in Luxembourg at least that will bear fruit for years to come. That is a strategic victory worth a few dings along the way.

Starting, almost certainly, in 2021, when changing laws in Europe will also allow the company to bring together its background and reach in the spirits industry to a world that is finally opening to the blending of the cannabis world into the same.

This year, in other words, will almost certainly see the company continue to service its existing steady business in multiple countries – however unfancy that may be. And it is decidedly not glam here. In places like Germany the company is essentially only holding onto market share in the medical market by its purchase of the largest dronabinol maker in the country.

Canopy_Growth_Corporation_logoThat said, beggars cannot be choosers. Aurora in contrast, is looking at a serious review of its cultivation licenses and practices. In the meantime, Canopy snagged a lucrative contract for a strategic, central country in the European debate – Luxembourg – that no matter how small, that will create at least a trickle of medical sales until the country changes its laws.

One of the things that the Canadian cannabis industry has in spades, and this is absolutely true of Canopy, is accurate business acumen about market entry timing and overall strategy.

No matter how much cannabis industry execs, in other words, have only been positive and upbeat before, this statement by Constellation also signals a change in the way Canopy presents itself externally.

Mistakes have been made. It is time to clean house and move on.

What other new industry in the lifetimes of those alive today, continues to admit its mistakes and pivots less than a decade after its global birth in continual pivot and expansion mode? The only other one that comes close is of course the internet. And these days, more specifically, Internet 2.0.

So, as the world says hello to 2020, Canopy seems to be sending its new year message. Trimming the sails after a wild, wild year, and setting course again, for a greener horizon.

Strengthen Supply Chain Management with an Integrated ERP & CMS

By Daniel Erickson
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Success in the cannabis industry is driven by a company’s ability to adapt to an ever-changing market and meet the demands of the evolving consumer. Selecting the right business management solution to handle the complexities of the growing cycle as well as daily operations and compliance requirements necessitates diligent research. Ensuring that the selected technology solution has a centralized database in a secure platform designed to reinforce quality throughout company operations is essential in today’s competitive industry. An ERP solution with integrated CMS capabilities helps businesses strengthen supply chain management by seamlessly incorporating cannabis cultivation with day-to-day company operations to efficiently deliver seed to sale capabilities and meet marketplace demands.

What are ERP & CMS?

Enterprise resource planning (ERP) is a business system in which all data is centralized – including finances, human resources, quality, manufacturing, inventory, sales and reporting. A cultivation management system (CMS) is an extension of an ERP solution to manage cannabis greenhouse operations, including growing, inventory and labor needs. A CMS maintains a detailed level of tracking to account for continuous cannabis growth periods that require extensive monitoring and incur a multitude of expenses. In an integrated solution, both the ERP and CMS data are managed under the same secure database to provide a forward and backward audit trail of all business processes. This visibility encompasses the entire supply chain from the management of supplier relationships to distribution – including growing, cultivating, extracting, manufacturing and shipping.

How do ERP & CMS strengthen supply chain processes?

Tracks individual plants and growth stages – By tracking plant inventories at the individual plant level in real-time with a unique plant identifier, greenhouse operations are optimized – monitoring the entire lifecycle of the plant throughout the germination, seedling, vegetative and flowering stages. Audit trails maintain regulatory compliance, including information such as terpene profiles and THC and CBD potency. Monitoring genealogy, mother and cloning, crossbreeding, plant genetics and clone propagation are key to success in this industry. Strain tracking is equally important, including identifying which strains are performing best, producing the most yield and how they are received by the marketplace. Tracking of the entire supply chain includes the recording of plant health, harvesting techniques, production, growth, costs, lab testing and batch yields – without any gaps in information.

PlantTag
A plant tagged with a barcode and date for tracking

Optimizes growing conditions to increase yields – By automatically documenting and analyzing data, insights into plant and greenhouse activities create streamlined processes for an optimal cannabis cultivation environment. This includes the monitoring of all growing activities such as space, climate, light cycles, moisture content, nutrient applications, fertilizer and other resources, which all have an effect on plant growth and yields. Most importantly, labor costs are monitored, as it is the highest expense incurred by growers. In an industry for which many companies have limited budgets, enabling efficient greenhouse planning, automation and workflows reduces overhead costs.

Integrates with regulatory compliance systems – Compliance is a mandatory part of the cannabis business, and many companies haven’t expended the effort to ensure their processes are meeting regulations. This has placed their licensing and business at risk. An integration that automates the transfer of required reporting information from the ERP to state government approved software such as METRC, Biotrack THC and Leaf Data Systems to ensure regulatory compliance is imperative. This streamlined process assures that reporting is accurate, timely and meets changing requirements in this complex industry.

Facilitates safety and quality control – With an ERP solution tracking all aspects of growing, manufacturing, packaging, distribution and sales, safety and quality are effectively secured throughout the supply chain. Despite the lack of federal legality and regulatory guidelines, proactive cannabis producers can utilize an ERP’s automated processes and best practices to ensure safe and consistent products. By standardizing and documenting food safety procedures, manufacturers mitigate the risk of cannabis-specific concerns (such as aflatoxins, plant pesticide residue, pest contamination and inconsistent levels of THC/CBD potency) as well as dangers common to traditional food manufacturers (such as improper employee procedures and training) for those in the edibles marketplace. Food safety initiatives and quality control measures documented within the ERP strengthen the entire supply chain.

Maintains recipes and formulations – In manufacturing, to achieve product consistency in regards to taste, texture, appearance, potency and expected results, complex recipe and formula management is a necessity – including monitoring of THC and CBD percentages. The calculation of specific nutritional values to provide accurate labeling and product packaging provides necessary information for consumers. Cannabis businesses have to evolve with the consumer buying habits and marketplace saturation by getting creative with their product offerings. With integrated R&D functionality, the expansion of new and innovative edibles, beverages and forms of delivery, as well as new extractions, tinctures, concentrates and other derivatives, helps to meet consumer demands.

Handles inventory efficiently – Established inventory control measures such as tracking stock levels, expiration dates and product loss are effectively managed in an ERP solution across multiple warehouses and locations. Cannabis manufacturers are able to maintain raw material and product levels, reduce waste, facilitate rotation methods and avoid overproduction to control costs. With the use of plant tag IDs and serial and lot numbers with forward and backward traceability, barcode scanning automatically links product information to batch tickets, shipping documents and labels – providing the ability to locate goods quickly in the supply chain if necessary in the event of contamination or recall. The real-time and integrated information available helps mitigate the risk of unsafe products entering the marketplace.

Food processing and sanitation
By standardizing and documenting food safety procedures, manufacturers mitigate the risk of cannabis-specific concerns

Utilizes user-based software permissions – Access to data and ability to execute transactions throughout the growing stages, production and distribution are restricted to designated employees with proper authorization – ensuring security and accountability throughout the inventory chain.

Manages supplier approvals – Assurance of safety is enhanced with the maintenance of detailed supplier information lists with test results to meet in-house quality and product standards. Quality control testing ensures that critical control points are monitored and only approved materials and finished products are released – keeping undeclared substances, harmful chemicals and impure ingredients from infiltrating the supply chain. When standards are not met, the system alerts stakeholders and alternate vendors can be sought.

Delivers recall preparedness – As part of an edible company’s food safety plan, recall plans that include the practice of performing mock recalls ensures that cannabis businesses are implementing food safety procedures within their facilities. With seed to sale traceability in an ERP solution, mitigating the risk of inconsistent, unsafe or contaminated products is readily maintained. Integrated data from the CMS solution provides greater insight into contamination issues in the growth stages.

An ERP solution developed for the cannabis industry with supporting CMS functionality embodies the inventory and quality-driven system that growers, processors, manufacturers and distributors seek to strengthen supply chain management. Offering a centralized, secure database, seed to sale traceability, integration to compliance systems, in-application quality and inventory control, formula and recipe management functionality and the ability to conduct mock recalls, these robust business management solutions meet the needs of a demanding industry. With a variety of additional features designed to enhance processes in all aspects of your cannabis operation the solution provides a framework to deliver truly supportive supply chain management capabilities.

2020 Financial Trends for the Cannabis Industry

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

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

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

Finding New Capital Investment Will Be Tougher

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

Image: Flickr

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

Expect More M&A and Consolidation

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

New Markets & Regulations

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

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

Image: Cafecredit, Flickr

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

Credit Card Payments

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

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

Luxembourg’s Government Triples Medical Cannabis Budget for 2020

By Marguerite Arnold
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While Luxembourg is a tiny country in the middle of Europe, it is beginning to play an outsized role in pushing all aspects of the cannabis discussion forward in the EU.

The country has steadily moved forward on integrating cannabis into the medical system. In 2018, medical cannabis was tested in a pilot project and is now available, on prescription, from a limited number of hospital pharmacies since February of this year. The program, at least from the Department of Health’s perspective, has been “very successful” so far in the words of Health Minister Etienne Schneier.

So, as a result, the next phase of the transition is going into effect. The budget for doctor training and medical cannabis purchases will be increased from €350,000 to €1.37 million next year. The drug will also be available from all pharmacies. Overall, the government has allocated a budget of €228 million for its cannabis “pilot” next year – an increase of €22m in 2019.

Canopy Growth Moves Into A Prime Position

Canopy_Growth_Corporation_logoCanopy Growth also announced last month that it has now become the exclusive supplier of medical cannabis to the country in a deal that extends through the end of 2021 (in other words presumably until recreational reform becomes legal). This is an interesting twist of events, given that Aurora announced it was the first company to import the drug into the country last year.

This is certainly a new chapter in the ongoing competition between the two Canadian companies who have, since 2017, essentially split Europe’s “first entries” between them (with the exception of Tilray in Portugal).

It also comes at a time when Aurora has just lost its third license in Italy to cultivate.

The clash of the cannatitans continues.

Why Is Luxembourg’s Cannabis Experiment So Interesting?

The increasingly strategic position of this tiny country on the cannabis discussion cannot be discounted.

aurora logoIn the summer of 2018, it was the government’s decision to change the law on medical cannabis use that preserved the ability of Germans to continue to buy cannabis stocks. Confused? The Deutsche Börse, in Frankfurt, the third largest stock exchange in the world, claimed that it could not “clear” stock purchases last summer because their clearing company, based in Luxembourg, could not close the transactions in a country where even medical cannabis was still off the table. When Luxembourg changed their law, in other words, the Deutsche Börse had to reverse course.

Since then, this tiny country has continued to challenge the cannabis discussion in the EU – also announcing that a full-boat recreational program will be enacted within the next two years (almost certainly by 2021). This aggressive timetable will also move the discussion in almost every EU regulation still on the table, and probably position the country as the only one in Europe where a fully integrated medical and recreational policy is in place. Even Holland does not cover medical cannabis these days. Dutch insurers stopped covering the drug in early 2017 – just as the German government changed its own laws.

Luxembourg, in other words, has now effectively pulled at least on par with Denmark and Germany in the cannabis discussion, with recreational now the agenda. And appears to be willing to preserve its medical program after recreational comes.

Who says size matters?

The “Colorado” Of Europe?

One of the reasons Colorado was such a strategic state in the cannabis discussion in the U.S. was undoubtedly its “purple” status – i.e. a state which politically swung both ways on a range of policy issues.

Luxembourg in fact, as the seat of the European Courts of Justice, may end up playing the same role in Europe – but on a national level.

In fact, the battle here increasingly resembles not Canada, but the U.S., as individual countries begin to tackle the cannabis question in their own way – both within and beyond the EU rubrics on the drug.

Will the United States legalize federally before the EU changes its tune? That is unknowable.

However, for the moment, the market leader in the EU to watch is undoubtedly Luxembourg, no matter its geographical size and population count.

As usual, cannabis reform enters through a crack, and widens from there. Luxembourg appears to be, if not the only crack, then certainly one of them that is turning into a decently sized crevice in the unyielding wall of blanket prohibition.

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Italian Government Cancels One of Aurora’s Licenses

By Marguerite Arnold
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Aurora has just faced a rare setback in Europe. The Italian government has cancelled one of three tender cultivation lots to supply Italian patients it granted Aurora this summer (in July).

Aurora was the only company to win the bid after other companies were disqualified.

For this reason, the high-level parliamentary attention to the bid this fall is even more interesting. Most foreign cannabis is being imported from the Netherlands and Bedrocan. While Wayland (ICC) and Canopy are in the country (Wayland has established production facilities for CBD in fact), Aurora was the only foreign Canadian cannabis company to actually win government issued, cultivation slots.

What Is Going On?

In July, Aurora won the Italian bid, beating out all other companies for all three lots.

aurora logoYet in September, the third lot, for high-level CBD medical flower, was cancelled by the Ministry of Defense which oversees cannabis importing and production, for an odd reason. Specifically, the lot was suddenly “not needed.”

As of October 31, the Minister of Health responded to parliamentarians who wondered about this administrative overrule by saying that the rejected lot (lot 3, for high-level CBD) was in fact rejected because stability studies to define the shelf life of products were not being conducted.

EU GMP Standards Are In The Room In Europe

This is not really a strange turn of events for those who have been struggling on the ground in ex-im Europe to learn the rules.

For at least the second time this year, and possibly the third, a national European government has called stability tests and the equality of EU-GMP standards into question. As Cannabis Industry Journal broke earlier this fall, the Polish government apparently called the Dutch government into question over stabilization tests (albeit for THC imports) during the February to September timeframe.

european union statesIt is still unknown if there is any connection between these two events although the timing is certainly interesting. Just as it was also interesting that both Denmark and Holland also seemed to be in sync this summer over packaging and testing issues in July.

Aurora and Bedrocan are also the two biggest players in the Polish market (although Canopy Growth as well as other international, non-Canadian cannabis companies are also making their mark).

What is surprising, in other words, is that countries all around Germany are suddenly asking questions about stability tests, but German authorities, still are notably silent.

Why might this be? Especially with German production now underway, and imports surging into the market?

Is This A Strange EU-Level CBD Recreational Play In Disguise?

There are no real answers and no company is talking – but in truth this is not a failure of any company on the ground, rather governments who set the rules. If there are any cannabis companies in the room at this point who are not in the process of mandating compliance checks including stability tests, it is the governments so far, who have let this stand.

Notably, the German government. Nobody else, it appears, is willing to play this game.

Further however, and even more interestingly, this “cancellation” also comes at a time when novel food is very much in the room in Italy. Namely, it is now a crime to produce any hemp food product without a license. There is no reason, in this environment, why a national cultivator could not also produce locally a high-quality, high-CBD product for the nascent Italian medical market.

While nobody is really clear about the details, there is one more intriguing detail in the room. The government may, in fact, allow medical cultivation now by third parties.

A Year In Review: Canadian Recreational Reform Year 1

By Marguerite Arnold
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There is certainly, in retrospect, much to be proud about in Canada – home of one of the most disruptive international cannabis industries in the world. And certainly an early mover.

That starts with having the national mojo to begin this journey in the first place, not to mention pivot and even admit faults along the way. For all the complaints and whinges, however on the ground, most Canadians are proud that they tackled the canna question at a federal level.

As the industry now does a bit of an annual review and revisit, what are some of the largest accomplishments, takeaways (and let’s be honest, major f*ckups) so far? And where is this all headed as the industry at least tries to gear up for another year, if not quite Cannabis 2.0?

The Big Bravos

Launching in the first place. Yes Full Monty Recreational was scary, and delayed a few months last year. And even though there have been many problems (retail outlets, online sales, privacy, supply chain issues in every direction, ex im, foreign markets and etc.), it is up and running.

In comparison, the Brits have been haranguing over Brexit for the last three years and are still not really there.

Further, it is also apparent that the agencies in charge of the new industry are themselves giving a bit of a shake after CannaTitanic (CannTrust). That was embarrassing for them too, although of course, while a bit of a negative compliment, the recall system seems to work.

Even if it needs a few jump starts via whistleblowing.

That in and of itself is a fact that is still in the room, although perhaps the pancaking of the stock price of most of the public industry of late was also another much needed wakeup call.

The Devil In The Details

Domestic Requirements. Health Canada is getting hip to the fact that the industry needs a bit more of a heavy hand. See the book thrown at CannTrust. No matter what, Canadians are demanding to know where their cannabis comes from, and further are also demanding that it be at least free of pesticides that can harm them.

Licensing. Many cannapreneuers are complaining, still, about the delays in licensing, particularly for retail outlets in the provinces who are taking the cannabull by the horns.  That said, there are still lots of enterprises who are perfectly happy to dodge the requirements all together and sell to the black or gray market. No licensing fees, and no taxes is a wonderful dream, but that is not exactly how regulated democratic capitalism works – at least at this level.

Supply Chain Logistics and Related Technologies. Canadians are struggling to implement a regulated industry in a country where patient home grow is constitutionally protected, and in an environment where who can sell what, and to whom including online, is still evolving. Predictably, no matter how groovy the solution works at home, (or the U.S.), no it will not fly in Europe. See GDPR regs, for starters.

Seed Culture (Aka Strain Protection). No matter how much the lawyers in the colonies are gearing up to sue each other over Huey’s Half Baked, in Europe, there are tomato and pepper farmers who are laughing, literally, all the way to the bank on this one. While hip to be a “strain defender,” the reality in a medical market looking for cheap cannabinoids is rather different. Effective, clean product, which can be reproduced reliably and cheaply, is the name of the game. Girl Scout Cookies, and such ilks will be a long time in coming as anything but highly expensive, niche products you can find in a Dutch Coffee Shop.

GMPDomestic Requirements Vs International Export. Canadian standards, so far, have been widely divergent in an environment where exports to Europe in particular are part of the story for the biggest companies. That said, GMP, and in particular EU GMP, has become at least a buzzword if not a standard to live up to.

Privacy. California might be considering its own form of GDPR (European privacy legislation) but so far, the industry has largely failed to protect consumers (from themselves). Ideas about owning huge data troves on cannabis users for someone else’s profit are still very much in the room. After all, data is the new oil, whether people know their data is being harvested or not. And just like big oil has done for most of its existence, those in the driver’s seat so far show little compunction about harvesting personal information, to become in the words of the now departed CEO of Canopy Growth Bruce Linton, “the Google of Cannabis.” Won’t happen. Starting with the fact that in not just Europe but now even California, people, far beyond pot users are tired of a world where privacy is a second class right.

While the issue first hit in Canada on the recreational side, the reality is that companies know who their clients and patients are in a way that is not only disturbing but increasingly being challenged.

A Playbook for Growth: Start with a True Cloud ERP as Your Foundation

By David Stephans
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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.

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From CannTrust To Canopy: Is There A Connection To Current Cannabis Scandals?

By Marguerite Arnold
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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.Canopy_Growth_Corporation_logo

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?

What Went Down At Canopy?

Last year, Canopy announced its listing on the NYSE in May. To put this in context, this was two months after the first German cultivation bid went down to legal challenge. By August 15, 2018 with a new bid in the offing, the company had closed the second of its multi-billion dollar investments from Constellation.

Bruce Linton, former CEO of Canopy Growth
Photo: Youtube, TSX

Yet by late October, after Bruce Linton skipped a public markets conference in Frankfurt where many of the leading Canadian cannabis company execs showed up to lobby Jens Spahn (the health minister of Germany) about the bid if not matters relating to the Deutsche Börse, there were two ugly rumours afoot.

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.

Common Territories

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.

And of course by April, the company unveiled plans to buy Acreage in the U.S.

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.