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Fly By Night: Do Your Gummies Take the Red-Eye?

By Douglas Rohrer
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The global vitamin supplement market is projected to grow at 6.2% compound annual growth rate (CAGR) to $71.37 billion by 2028 with the most rapid growth now occurring in the gummy vitamin segment. Gummy supplements are expected to have the fastest CAGR at 12.6% to exceed $33 billion by 2028. Initially developed for youths, gummies are now preferred by all age segments as an alternative to tablets, capsules and pills.

As one might expect, cannabidiol (CBD) gummies are also projected to grow rapidly at a 30.7% CAGR to $13.9 billion by 2028. In terms of actual number of CBD gummies produced last year, a rough estimate would be at least 1.7 billion. For perspective that equates to 53 gummies produced every second, 24 hours a day, 365 days per year. One might reasonably ask, “So where do all these gummies come from?” and “Who makes them and under what conditions and quality assurance standards?”

There is no short answer to these questions nor confidence that all cannabinoid gummies are manufactured with adherence to a minimum set of safety and quality standards. Gummy recipes and ingredients are readily available online and there is no shortage of hobbyists who make small batches for family, friends and to sell at retail pop-ups and farmers’ markets. There are a number of well-known brands that started out in home kitchens and garages. In terms of production scale, on the other end of the spectrum are companies like Bloomios, Inc. (OTCQB: BLMS), that operates a 51,000-square-foot Current Good Manufacturing Practices (cGMP) compliant facility in Florida.

The Hobbyists

A variety of CBD products on the market today

For the hobbyist producer, they often begin to scale out of their home kitchen and take over part of their garage or basement and while the entrepreneurial spirit is admirable, most consumers wouldn’t be comfortable with their pharmaceuticals, supplements or even grocery items being manufactured under these conditions which often lack:

  • Rigorous sanitary practices
  • Measures to mitigate contaminants entering the production areas
  • Quarantine, chain-of-custody audit and testing of active ingredients used in production
  • Standardized and rigorous quality assurance testing of finished product
  • Certificate of Analysis (COA) for active ingredients in finished product for certainty of dosage levels
  • Labeling and packaging standards to ensure product information and volumes are correct
  • Batch record data collection, retention and audit procedures.

However, the hobbyists constitute only a very small fraction of gummy production today, and they typically take great pride in their work and show a high degree of care in production practices. Thus, when demand begins to outpace the artisanal home production capacity, many growing brands turn to contract manufacturers to assist with scaling the production side while the brand focuses on the sales, marketing and distribution side of the business. This is an ideal solution as high quality product can be produced at volume in cGMP facilities which enhances the consumer experience, confidence in the product and further grows brand value. This is a best-case scenario of small emerging brands that care deeply about their reputations and their customers’ experience scaling production and growing responsibly.

The Opportunists

The real underbelly of commercial gummy production is characterized by the pure profit seeking producers that set up semi-permanent production lines in flex-industrial spaces not suitable for food handling, with limited buildout for isolation of each production stage. This process includes: materials storage, weight/measures prep, ingredient mixing, molding, dehydration, coating, sorting and filling, labeling and finish packaging. Lacking cGMP compliant facilities and practices, they neglect or fail entirely to maintain batch records, COAs or chain-of-custody practices and have limited ability to address defective product once in the stream of commerce. Let’s refer to these manufacturers as the “Opportunists.”

Opportunists see the current cannabinoid gummy market for what it is. It is an emerging market really taking form only since the 2018 Farm Bill legalized hemp derived cannabinoids. As such it is very much in its “gold rush” phase with many of the participants having just entered the sector. Many participants have adopted ad hoc practices with no standardization and no explicit federal oversight because the FDA has yet to acknowledge any cannabinoids under its generally regarded as safe (GRAS) standard.

FDAlogoIn addition, the FDA has excluded CBD products from the dietary supplement definition of the Food, Drug and Cosmetics (FD&C) Act. Under the FD&C Act, if a substance is an active ingredient in a drug product that has been approved or has been authorized for investigation as a new drug, then products containing said substance are excluded from the definition of dietary supplement. So far cannabinoid gummy demand has continually outstripped supply supporting attractive margins and with little oversight. The Opportunist mindset has focused on maximizing profits while they can before regulation increases costs, compresses margins and reduces profits.

The Opportunists have more cover to seek profit maximization as opposed to incurring the cost of setting up cGMP facilities and adhering to rigorous standards due to the fact that the brands consumers recognize are often manufactured by one or more third-party contract manufacturers. Some brands also want to maximize near-term profits and manufacturers with a lower cost structure can more effectively compete on price as opposed to quality.

As demand surges, some brands will supplement their third-party cGMP produced product with additional product sourced from Opportunists and “recycle” the valid COAs from their cGMP product without the cGMP manufacturer or consumers even knowing. With lax regulatory oversight, these brands are inclined to look the other way on their contract manufacturer’s production practices so long as the large volume orders are delivered on time and at lower cost.

GMPFor gummies produced by Opportunists, if there are product defect issues, the consumers likely won’t be able to rely on the batch record data and purported COAs linked to/from QR codes on the container, many of these COAs have been recycled from legitimate batches or simply doctored up and reproduced rather than generated on a per batch basis. There is limited to no audit trail and recalls are unlikely to be effective, if even initiated. A refund is the most likely solution a consumer has which leaves perhaps a much larger run of defective product in the market still unaddressed. Moreover, brands that suffer reputational harm due to quality issues can simply launch a substitute brand with a similar look through its same distribution channels and maintain much of its market share.

Best Practices

If today’s CBD gold rush sounds much like the Wild West, you would be correct. However, as more consumers become aware of cannabinoids’ health and wellness benefits in addition to the recreational uses, this larger and more diverse consumer base is raising the bar and demanding more transparency and certainty on manufacturing practices than ever before.

americana dummies
A roughly estimated 1.7 billion CBD gummies were produced last year

How are the leading cannabinoid nutraceutical manufacturers proactively addressing consumers’ desire for high quality, rigorously tested products manufactured in accordance with standards already imposed on mainstream nutritional supplement and prepared food manufacturers? Although the answer may be simple, the implementation and ongoing compliance is not.

The answer is voluntary adoption and compliance with the same regulations applicable to non-cannabinoid dietary supplement manufacturers. Given that the FDA has not recognized cannabinoids as dietary supplements quite yet, certain aspects of dietary supplement regulation can’t be adhered to such as notifying the FDA of structure/function claims as new products are brought to market or notice of new dietary ingredients. On the other hand, many of the regulations can and should be adhered to by cannabinoid nutraceutical manufacturers to ensure its safe, transparent orderly growth.

Chief among the FDA requirements that Bloomios and other leading manufacturers adhere to are:

  • Register with the FDA as a food handling and production facility.
  • Adopt Current Good Manufacturing Practices for dietary supplements which establishes uniform standards needed to ensure quality throughout the manufacturing process and verification of the identity, purity, strength and composition of their products.
  • Undertake at least annually an independent third-party cGMP audit of their facility and procedures.
  • Comply with Code of Federal Regulations (21 CFR 101.36) supplement label requirements to ensure that the ingredients list is accurate, and the content matches the amount declared on the label among other disclosures.

The most significant challenge in adopting all of the above best practices is cGMP facility qualification and ongoing compliance. The cGMP standards require specific facility build-out features, equipment, and of course standard operating procedures. There are significant additional costs to bring a cGMP facility on-line, additional time and required experienced personnel that can implement the operating procedures and recertification every time a production line’s configuration is changed or augmented with additional equipment.

Bloomios annual cGMP audit was conducted in August and over 130 specific requirements were evaluated and graded. While Bloomios passed the audit and evaluation, what is of far greater significance is that cGMP practices become part of a company’s culture so that these high standards are maintained year-round and not rushed into practice just for the audit.

The New Delta 8 THC Market: A Q&A with the Founders of DeltaVera

By Cannabis Industry Journal Staff
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Delta 8 THC (delta-8-tetrahydrocannabinol) sprung onto the scene late last year in a big way. While similar to the much more widely-known delta-9-tetrahydrocannabinol that produces a lot of the psychoactive effects associated with ingesting cannabis, delta 8 THC can be derived from hemp with less than 0.3% delta 9 THC. Given the legality of hemp-derived products following the 2018 Farm Bill, delta 8 THC can be produced in some states where delta 9 THC still remains illegal.

While delta 8 is considerably different in its psychoactive effects from its cousin, it does overlap in some ways. It can still produce some more manageable, less “heady” versions of delta 9’s effects like euphoria and relief found in the many medical applications of cannabis. DeltaVera, a company that launched less than six months ago, aims to share that more manageable THC experience with the masses.

The sharp rise of the delta 8 market means that DeltaVera is poised for growth. With distribution contracts inked, exciting partnerships in the works and a large surge in consumer demand, the founders of DeltaVera are at the ready to capitalize on this lesser-known molecule and bring it to the forefront of the nascent hemp industry. Starting out as a small family business, Sam and Craig Andrus launched DeltaVera with their third founder, PK Isacs.

We sat down with Sam Andrus and PK Isacs, two of the founders of DeltaVera, an award-winning brand, to ask them about their plans for expanding, how they became entrepreneurs and why they think delta 8 is the next big thing in cannabis.

Cannabis Industry Journal: Tell me about your company. How did you get started in the cannabis space?

Sam Andrus, cofounder of DeltaVera

Sam Andrus: I had an early start in the Delta 8 THC industry on the sales side. We knew we wanted to get into the market, but observed a number of aspects in the space that needed to be addressed: the most important being quality control, transparency and brand trust. With this as a backdrop we launched DeltaVera. Highly curated, approachable, transparent and value-oriented with a strong focus on reliability and trust. The DeltaVera family is made up of three operating managers and the sales team. We are three founders with complementary skill sets: Craig, who has domain expertise in finance, governance and startups, PK who has experience in business and marketing and my sales experience round out the management team.

We have yet to solicit outside capital and have funded ourselves internally as we create our brand and refine our product offering. That said, we are seeing numerous opportunities in strategic partnerships and expansion, which will require additional capital. And we are excited to start this expansion process.

CIJ: What makes the Delta 8 space so remarkable? Why are your SKUs primarily formulated with Delta 8?

Sam Andrus & PK Isacs: Delta 8 THC is an alternative/complement to delta 9 THC, CBD and other cannabinoids. Its status as non-federally scheduled and its less potent psychoactive effects make it appealing in its own right. Delta 8 THC can help with healthier sleep patterns and with pain management in a way that CBD can’t, without a strong “head high” that many of our customers like to avoid. Additionally, it’s shorter lived and doesn’t give you any negative residual effects, which makes it beneficial for people on tighter schedules. These factors make it easier for us to approach markets that are inaccessible to both delta 9 THC and CBD, such as older demographics. In a world where delta 9 is legal, there will still be a place for delta 8.

PK Isacs, cofounder of DeltaVera

While we are very proud of our suite of smokable products, we are currently focusing our efforts on edibles: our Delta Discs are our mainstay, though we are expanding our product line to include nano-emulsion products such as liquid shots and nano gummies. They strongly appeal to our target demographics; additionally, the edible market is growing very quickly in states that allow the sale of hemp-derived consumables.

CIJ: Continuing on the delta 8 front – right now it is considered a cannabinoid legal for interstate commerce, much like CBD, correct? Do you think that will change? 

Sam & PK: That is currently the case. Delta 8 THC is newer, and as such, it has even more ambiguity in regards to its legal future. But what’s most exciting (and our most challenging task right now), is informing consumers about the benefits of delta 8. We are one of a few companies solely focused on the consumption of delta 8, because of its similar benefits to delta 9 and CBD – our products are the perfect happy medium: a high with less psychoactive effects and all the health benefits of both, making it a desirable alternative to all consumers.

In addition, we are looking at some combinations of delta 8/CBDA, delta 8/CBN, delta 8/THCV and are very excited to begin test marketing these combinations. These proprietary blends of minor/major cannabinoids can cater to a niche target demographic as they can be curated to have very specific and unique effects when combined in the right quantities with the right delivery system. They will also be able to serve a larger customer base as these cannabinoids can all be derived from hemp.

CIJ: How do you think the FDA would regulate your product? Do you welcome federal oversight?

DeltaVera gummy products

Sam & PK: Regardless of whether or not we are regulated we are committed to a high level of transparency and trust. As noted in unregulated markets, like the supplement market, you don’t always know what you are getting in terms of purity and potency. We are changing that paradigm by adding unique QR codes to our sustainable containers which reference COAs [certificates of analyses] specific to the contents of the case. A lot of the space is naturally trying to avoid that kind of regulatory interference, but we are currently doing our best to self-regulate and make sure that our consumers are fully informed about what they’re receiving.

We will be the first to say that there aren’t as many laws governing delta 8 THC as there could be, and that’s why we’ve spent so much time and money on self-regulation. All of our products have very clear nutritional information in addition to test results down to one hundredth of one percent. As for what category these products should fall under: we have a wide range of products, and each one has its place under a different umbrella of regulation. We hope that the federal government will take advantage of the vast array of studies that have been conducted on delta 8 THC since it was first extracted in 1942 to step up to this product that is, in our experience, helping so many people.

CIJ: Tell me about how your business has grown so far.

Sam & PK: When we sell to a retailer, we try to provide them with as much material as possible on what delta 8 THC is and what differentiates DeltaVera’s products. Still, we’ve had some difficulty in places with limited delta 8 THC exposure. That being said, when someone tries our product, there is a high likelihood that they become a repeat customer (and they tell their friends). Given our newness to the market (Our brand launched in January 2021) initial indications are – we have a good rate of repeat orders, and we’ve heard the same from our brick-and-mortar partners.

The DeltaVera Delta Discs

Our distribution network has grown tremendously; we’ve taken a three-pronged approach to distribution: partnerships with like-minded companies in compatible spaces, an e-commerce market on our website, and a commission-based sales structure to reach brick-and-mortar establishments. To date, most of our distribution takes place in the latter two spaces, due to the added time and commitment involved in forming partnerships. As a company we are taking a more creative approach on how we present our product and alternative ways to consume it. We have some exciting collaborations in the works; follow us on social media to stay up to date with everything on the horizon. We are very enthusiastic about our partnerships however, with our first collaboration with WaxNax, a Denver-based company revolutionizing the cannabis dabbing experience, hitting the shelves this week.

CIJ: What is your marketing plan?

Sam & PK: We are working on building a social media presence. Natalie, who is leading the charge on social media, recommended we take an organic approach to build our base. We want to avoid falling into the “paid ad”, “spam” vibe as long as we can. We are currently focused on building a community through delta 8. Our mission is making DeltaVera a brand for all lifestyles, athletes, creatives, travelers or business professionals. We’re confident in our product, and have faith that it can speak for itself.

CIJ: How do you ensure quality in your products?

Sam & PK: Our products are of guaranteed quality with our licensed growers and manufacturers. We provide COAs, informing the retailer & consumer about each product, displaying full panel tests on cannabinoids and heavy metals. These preliminary and secondary lab tests ensure our product is below 0.3% delta 9 THC in all our products. Through third-party labs, we run full panel tests which pick up a variety of cannabinoids; for most of our products we focus on the level/purity of delta 8. Our products are screened for both contaminants and heavy metals.

All this information is housed conveniently on our website that can be reached through our QR codes.

CIJ: What are your plans to grow the business in the future? 

Sam & PK: We feel very confident in our three methods of distribution: partnerships, e-commerce and a commission-based sales structure. We’ve made tremendous ground on partnerships, and are very excited about numerous partnerships we have in the pipeline. We’ve reached out to some incredible groups in the CBD space, the THC space and a few groups that you wouldn’t normally associate with cannabinoids, but with whom we’ve workshopped some really creative ideas that we’re really looking forward to bringing to market.

Readers can use promo code “CIJ” to get 15% off their first order here. 

Leaders in Infused Products Manufacturing: Part 5

By Aaron Green
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Cannabis infused products manufacturing is quickly becoming a massive new market. With companies producing everything from gummies to lotions, there is a lot of room for growth as consumer data is showing a larger shift away from smokable products to ingestible or infused products.

This is the fifth and final article in a series where we interview leaders in the national infused products market. In this final piece, we talk with Lisa McClung, CEO, and Glenn Armstrong, senior advisor at Coda Signature. Lisa got started with Coda in 2019 as a board member after transitioning from an executive role at Wrigley. She now heads up the company as CEO and President. Glenn has deep experience in product development and innovation with brands such as General Mills, Whirlpool and Wrigley.

Aaron Green: Okay, great let’s get started here. So we’ll start with Lisa. How did you get involved at Coda?

Lisa McClung, CEO of Coda Signature

Lisa McClung: I was lucky. Based on my experience, I was originally asked to be on the board of Coda. I’ve served on nine company boards in addition to my career as an executive at General Electric and at the Wrigley Company where I was heavily involved with innovation. The Board then asked me to consider stepping in as CEO after I’d been working there for six months. I was just overwhelmingly complimented that they considered me and I feel incredibly lucky to be here.

Aaron: Okay, great. Glenn, how did you get involved in Coda?

Glenn Armstrong: We’ve known each other for a long time at Wrigley. I was in innovation for the confectionery side and worked very closely with Lisa. When she became a board member, she asked me to do some advising for her. I’m new to the cannabis industry so, I was really excited about doing something different. When Lisa became CEO, she asked me if I would help her.

Aaron: How do you think about differentiating in the market?

Glenn: I spent 90% of my career on the innovation side working with companies like General Mills, Quaker Oats and Amway. When I think about how to differentiate almost any company I always focus on innovation. In the cannabis industry, everybody’s got gummies and chocolates but you’ll hear people talking about “gummies are going away.” No, you’ve just got to innovate, right? It’s like the carrot peeler from 20 years ago. It used to sell for about 25 cents, and it was all steel and now they sell for $10.99. Who would have known?

Glenn Armstrong, Senior Advisor at Coda Signature

I believe anything can be innovative. When I looked at the gummies I asked, “what we learned at Wrigley, can we bring into Coda that currently is not in this industry?” Think about various gums and how they can change flavors over time like Juicy Fruit which dissipates really quickly and that’s just how the flavor is.

Or, there are other ways like spearmint. You can get an initial boost and then extend that flavor by encapsulations. I don’t see much of that in the cannabis industry. It’s just taking what’s out there from flavor companies that people like and getting them into this market.

Aaron: Awesome. Do you have any particular technologies or work or products from other industries that really interest you?

Glenn: I would say it’s going to be from the pharmaceutical industry. You think about THC and CBD being so hydrophobic. With chocolate, it’s not such a hard thing to get into. If you try to get those kinds of compounds into aqueous solutions though it can be a challenge, the drug industry has been doing it for years! So, to me, delving into some of their patents and some of their ideas, that’s one of the most powerful industries I see where we could utilize their technologies to advance the industry. I expect big pharma to get into this. We can start looking at what they’re doing that we can leverage quickly to get into Coda products.

Lisa: We’re not necessarily a pharmaceutical brand, but we are committed to helping people live and feel better. It really is about how you weave cannabis into everyday life?

Coda’s line of chocolate bars

We have a platform of very indulgent products, which is our chocolates ranging from truffles to bars. We also are building our non-chocolate portfolio to include other ways to enjoy cannabis in their daily life. And then to Glenn’s point, I think there’s ideas and technologies from the pharmaceutical area, there’s also things that have been in the food industry for years that provides sensations and experiences.

I think part of our goal is “how many of the five senses can we touch from people in creating product?” The feel of something in your mouth heating, cooling. Not just the psychoactive aspect of it, but the complete end-to-end experience.

These are all dynamics of us delivering the “live and the feel” piece of it. Then people can either use them from a lifestyle perspective for enjoyment, or a medical perspective. Our job is to provide consumers choices and options that provide those type of experiences.

Glenn: If you have a product that’s supposed to “reduce anxiety” why not start with the slight warming of the mouth? Something that feels calming long before the THC or CBD kicks in? Then have a flavor come up that just feels warm and comfortable. By combining all five senses, you have a product that really does something for your consumer.

Aaron: Thanks for that! What’s your process for creating a new product at Coda?

Lisa: Well, I think everybody talks about brainstorming sessions like innovation is something that just pops up. I think innovation has three legs to it. One is really customer-driven. So, we have to produce products that help our retailers make money, and that deliver really good experiences to consumers that we jointly serve.

The second piece of it is thinking about the discipline of innovation. So, when we make a product, what technologies do we bring to bear, can we scale them, and can we produce them at the right price point and delivery?

Coda Signature Fruit Notes

Then the last piece is the fun piece, trying to listen to what is and isn’t being said in the market to really try to be a solutions company.

We spend a lot of time listening and watching the market to figure out where we can anticipate things. We used to call it “problem detection” at Wrigley.

One project that Glen and I worked on was a mint that was designed really around adult usage in more professional situations. So, meaning the shape of the mint needs to be tucked in your cheeks so you couldn’t see it. And the packaging of it was something you could surreptitiously pop underneath the desk because we were designing it for people to use as really a business tool. You don’t think of mints as a business tool, but they really are, they give you more confidence with breath-freshening and you don’t necessarily want to hold that out with everybody else.

Some problems are about how to make a product more fun with our fruit. I can put pineapple jalapeño in my mouth and have a literal popping experience, which adds to my enjoyment of that experience.

The last piece is not to do too many products. One of the things that I think of in cannabis is that everybody’s still learning. It’s such a wide-open space, in some cases, that you also have to kind of pick what you do well. So, sticking close to our brand and what we stand for is also something that we’re trying to do. We’ve actually pulled in our SKUs recently and are trying to focus on a platform of indulgent experiences and of lifestyle products. We try not to do everything that we see out in the market and focus only on the things that we do well that solve problems for our consumers.

Glenn: From my perspective — I am not a big process person — I think the best way to do it is to say, “okay, we’ve got these products. We could look at technology, we could look at something else, but let’s just go scour what’s out there. And let’s get outside of our industry.” Look outside your own game, and see what you can use.

Discovering how to use these technologies in a gummy or chocolate as opposed to just drugs isn’t rocket science. My biggest avenue is looking outside and finding what you can apply as opposed to trying to reinvent everything.

Aaron: We’ve focused on the front end of innovation. Can you articulate on the back-end how that moves into product development, manufacturing and commercial launch?

Lisa: We have a new product pipeline with a Stage-Gate process where we will have a number of ideas and whittle them down on certain criteria.

Sometimes the ideas start with the technology and not the market. Glenn will find something and say, “Hey, this is going on, should we be thinking about this in cannabis?” It allows our each of our teams to come up with how they can make it work.

Then, as that product passes through the next stage-gate, we’re looking at the actual economics of the product, and how it fits relative to our other products all while we’re getting consumer input.

We get to that point in the process when we start trialing with consumers to help decide. And sometimes you get the best idea in the world, and then it’s not going to work so in some cases so you put it back in the pantry.

I never like to say that we don’t take an idea forward, even products that we may have taken off the market, we say “we freeze products, we don’t cut products!” because our goal is to have options. Our discipline is around a Stage-Gate process tied to our business goals and objectives. It’s also about playing around with concepts and seeing what materializes.

Glenn: There is this whole notion of a process, there’s a Stage-Gate, but before that, it’s a lot of playing around. What Lisa and I’ve recently worked on was making innovation a way of life so that every time you see something, you say something.

“We don’t think of innovation solely as the next flavor that’s going to be on the shelf.”We always gave people permission to play in the web.The reason brainstorming sessions don’t tend to work, is we expect people to become innovative in these next five hours.

So, if you think of innovation as a way of life, then it becomes what you do daily, and you look at things differently. I like to say when you’re driving home, go a different route, because you never know what you’re going to see. When you get out of that habitual mindset, you’ll think about your business differently, almost naturally. Innovation — this way of life — is one of our buzzwords.

Lisa: I think building that innovative culture is a responsibility, but also a challenge for a company like Coda. I mean, we’re not new. We’ve been around five, six years and we have some of the leading chocolate bars out there. We’re known for flavor systems.

Where our goal is to create a culture of innovation, you get these little pockets of creativity and innovation, and then it starts snowballing. You build on it, get people excited about it, and move it forward. That’s how everybody gets involved in innovation.

One of the goals of that pipeline process is to combine inspiration and discipline. But you don’t just want to be innovative in the next flavor. That isn’t doing enough for our consumers. We’ve educated them on the potential flavors could bring. But now we really want to be much more innovative across the board and see what kind of culture of innovation Coda can do.

We’re looking at the packaging, how we interact with retailers, how we use digital messaging to support our retailers and support our products. We don’t think of innovation solely as the next flavor that’s going to be on the shelf.

Aaron: From a supply chain perspective, how do you go about sourcing ingredients?

Lisa: We have some wonderful partners that have been with us at Coda. People that bring us chocolate from other parts of the earth.

We continue to keep building our ecosystem of partners. We look at different flavor houses and different food type researchers to be partners with us to broaden our ecosystem. It’s something that’s very much top of mind, even more so during COVID, because we’re feeling  very fragile about our supply chains.

Glenn: Yeah, I think Lisa, that’s one thing you and I bring, not only to Coda, but I think to the cannabis industry, is the whole CPG discipline of how we look at suppliers and procurement. We need to go out there find some smaller flavor labs with incredibly creative folks.

I think the whole notion of expanding the supplier and vendor base, is pretty unique in this industry and that’s one of the strengths we bring to Coda.

Lisa: Our goal is to really create an ecosystem of different suppliers. I just think that that’s something other industries — you talked about pharmaceuticals earlier — have done. Cannabis is just starting to get there, but that’s where you get exponential opportunities.

We’re really looking at cross-functional and interdisciplinary teams with outside partners. Cannabis is at the stage now where I think it’s looking for more sophisticated technologies and new ways of deploying. We’re also really interested, as Glenn said, in some of the younger, more entrepreneurial firms that want to possibly expand their reach into cannabis as well.

Aaron: Okay, great. So my next question is can you give me an example of a challenge that you run into frequently? And this can be either a cannabis challenge or a business challenge?

Lisa: I think one of the challenges that cannabis faces in general is educating consumers about our market. One of the opportunities we have is to bring people into the market. We’re at the same time developing products for people who are in the cannabis space and are active users and have varying degrees of understanding of how they’re using the category in their daily lives.

We’re also trying to create products and education to invite people into the cannabis market. That’s a different challenge than if you’ve had an Oreo cookie, and people kind of understand cookies. They understand Oreos, and then they understand organic Oreos and all the other permutations of two chocolate cookies with a vanilla thing in between. Our goal is to expand the ability for people to access cannabis in their lives.

That is a very unique business problem. And it does represent a bit of a screen, are you going to do some of your products for more sophisticated users and others for less sophisticated users?  Cannabis has consumers that have been taught essentially to think about milligrams; there’s one of the key components of choice. People will look at the product and flavor, and then they look at the milligrams and the price point.

That’s very unique to what we would find on CPG. You don’t necessarily look at dollars per milligram when you buy a cookie. So, if you’re trying to make a premium product with premium flavors, how do you say, “Well, yeah, there’s dollars per milligram, but this product has all these other technologies to create the warming or whatever.” “Innovation in products and new categories is critical to get the industry beyond common confections.”

So you kind of have a dual issue. You’re trying to get people educated on a new category and how they use it. But the education of the consumer in terms of the potential and the possibilities that they can access is going to be very important.

Aaron: What trends are you following in the industry?

Lisa: Beyond paying close attention to legalization progress across the country and monitoring how states are setting up their regulatory standards, we’re focused on which consumer demographics are incorporating cannabis into their wellness and self-care practices—and how Coda Signature products fit into their daily routines.

Glenn: For edibles, “fast acting” is probably beyond a trend and it will be interesting to see where this nets out. Consumers appear to be balking at the slightly higher price point for fast-acting gummies, but there may be a market for after-dinner dessert items. In other trends, use of minor cannabinoids and terpenes for specific benefits appears to be a solid consumer need, but this is going to require solid science to see if these products truly work. Innovation in products and new categories is critical to get the industry beyond common confections.

Aaron: Okay great! Lastly, what would you like to learn more about?

Lisa: We’re fascinated by the technological advances being made in the cannabis industry, and how those achievements may enrich the consumer experience moving forward. We’re also interested in the growing body of scientific research around how cannabis products can enhance people’s health and wellness.

Glenn: U.S. legalization and the constant changes in regulations require someone to distill the information and do a weekly report on changes.

Aaron: Thank you both! That concludes the interview!

Leaders in Infused Products Manufacturing: Part 4

By Aaron Green
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Cannabis infused products manufacturing is quickly becoming a massive new market. With companies producing everything from gummies to lotions, there is a lot of room for growth as consumer data is showing a larger shift away from smokable products to ingestible or infused products.

This is the fourth article in a series where we interview leaders in the national infused products market. In this third piece, we talk with Stephanie Gorecki, vice president of product development at Cresco Labs. Stephanie started with Cresco in 2019 after transitioning from an award-winning career in traditional foods CPG. She now heads up product development where she manages R&D for Cresco, a multi-state operation with tremendous SKU variety.

Next week, we’ll sit down with Lisa McClung and Glenn Armstrong from Coda Signature. Stay tuned for more!

Aaron Green: Stephanie, how did you get involved at Cresco Labs?

Stephanie Gorecki: A few years ago, CBD became the most talked about ingredient in the food industry. CBD-infused food headlines appeared in most of the trade magazines. I have always been curious about working in the cannabis space, and not just with CBD, but THC and other cannabinoids. I researched technical seminars and came across the cannabis infused edibles short course put on by the Institute of Food Technologists.

Stephanie Gorecki, Vice President of Product Development at Cresco Labs

I attended the short course in April of 2019. I realized that to be hands-on with cannabis in the near future, I would need to join an organization that was already in the space. The space was highly regulated which meant that research in the mainstream food and beverage space was limited.

Immediately following that seminar, I began to look for opportunities near where I lived. That’s when I came across the Cresco Labs career opportunity. The Director of Food Science position appeared to be a good match. I applied for the position and went through the interview process. Approximately two months after attending that seminar, I joined Cresco Labs.

Aaron: Awesome! It’s a cool story. In your role, how do you think about developing products that differentiate in the market?

Stephanie: There are many opportunities for brand differentiation in cannabis right now. There is a focus on high bioavailability and water solubility and how that translates to onset times once consumed. Many of these technologies utilize ingredient technologies and systems that I have experience with from my past work in the flavor industry.

Gummies and jellies are a great infusion matrix to start with because of their shelf-life stability. There are a variety of formulation techniques that can be used to deliver on product differentiations. There is an abundance of flavor varieties, colors, processing steps and cannabinoid ratios that can be baked into a formula to make that product line unique.

Here in the cannabis space, SKU variety is essential. It’s exciting to be a part of a company where we develop products that appeal to a variety of customer wants and needs.

Aaron: In that vein, what’s your process then for creating a new product?

Stephanie: I’ll start with how we develop an edible. Most of my background is in this type of product development, but the same process is applied to how we develop and extract vape, topical, flower SKU, or ready-to-smoke type products. We follow a similar stage/gate process utilized by most CPG companies.

Marketing typically presents our product development team with a brief on a new concept based on how they’ve read the needs of the market. There are opportunities for us to come to marketing with ideas for innovation, too. The product development team regularly works in our processing facility, so we as a team are aware of the different capabilities of each state and production line. During the briefing phase, we determine what is needed to be achieved and the parameters that the team would like the new product to deliver on.

For edibles, we begin our development work at The Hatchery. The Hatchery is our non-infused product development space that we utilize outside of our processing facility. In this space, we have several pieces of pilot equipment that allow us to scale and create prototypes that are highly representative of what our finished product will look like. For vapes, flower SKUs and RTS (ready-to-smoke) products, development and processing trials happen within our cultivation center.

All infusions are conducted in our licensed processing center. We also conduct stability testing and analytical testing in-house on our products. Our analytical lab is amazing – we have talented chemists and the ability to run GCMS, HPLC, microbiological testing, and many other analytical tests that are important for ensuring consistency and product uniformity.

Aaron: Can you expand on a point about testing? How do you think about testing at the different points in your manufacturing or production process?

Stephanie: Testing comes in several forms. We focus heavily on analytical testing since that does not involve product consumption. Potency uniformity and consistency is critical for edibles. For infused products, we have one shot at hitting our potency – infusion science is extremely important for us. Our gummies and chocolates cannot be re-worked, so hitting our potency range on the first attempt is important. If we miss the target, the product has to be destroyed.

We have methods developed to conduct in-process potency testing where we can. With the processes and infusion methods that we have implemented, we are rarely outside of our targeted potency ranges.

Aaron: Okay, awesome, then, can you walk me through your experience with one of your most recent product launches?

Stephanie: We recently launched Mindy’s Dark Chocolate Peppermint Bark, a limited time offering for our Mindy’s chocolate line. There’s a series of commercialization trials that we will conduct prior to launch. We use these trials as an opportunity to train our production teams on the new manufacturing instructions and processes.

When it comes to launching products, our technical teams are very hands on with new product introductions. Since we cannot manufacture product in one state and ship it to another state, we have to build processing centers and secure the proper licenses in every state that we’d like to operate in. When we have a new product ready to launch in a new state, our team works with Operations on the tech transfer piece. We’re there on-site during launches to oversee and train on the entire process until our teams are comfortable with manufacturing and packaging the new SKUs.

We monitor launches carefully to ensure product looks as it should before and after leaving our facility for sale in licensed dispensaries across the state. When there are opportunities to optimize a process post-launch, we will do what we can to make the process work as well as possible for the teams producing our products.

Aaron: Okay, so next question is, how do you go about sourcing ingredients for your infused products?

Stephanie: We manufacture our oils and extracts in house, and then source other ingredients externally. We have a supplier quality assurance process for new supplier approval, and we have documentation needs that we need each supplier to be able to deliver on.

Several of our suppliers have invested in research and development of products that will help us to meet our deliverables in the cannabis industry. Our suppliers, at times, have provided applications support in order to help with our speed to market and early phase prototyping. These types of partnerships are essential to us being able to make quick modifications and decisions on ingredients such as flavors and colors.

Aaron: Can you give me an example of a challenge that you run into frequently? This could be a business challenge or a cannabis-related challenge.

 “I’m a scientist at heart. I look forward to more spending on cannabis research to show how THC and other cannabinoids can be used to treat a variety of conditions.”Stephanie: A big challenge for us and other multi-state cannabis operators are the variations in compliance regulations state-to-state. We have compliance managers in every state who work to ensure we are meeting all of the state regulations. Our packaging reviews are in-depth because of all the language that needs to be included on our packaging.

Each state needs its own packaging with proper compliance labeling. Some states require a cannabis warning symbol of a certain type. If we sell Mindy’s Gummies in 8 flavors and THC mg SKUs in four states, that is 32 different pieces of artwork that need to be managed and cross-checked for accuracy. We have 32 separate pieces of packaging for this one line of products. We have many lines of products with multiples strains (flower and vapes) and flavors (edibles).

Aaron: You mentioned packaging, do you do all of your packaging in house?

Stephanie: We design our packaging artwork in-house. We have a creative team who works on our product artwork, and then a team of cross-functional members tasked with packaging editing and review. Packaging reviews go through multiple rounds before being released for printing. We source a variety of packaging depending on the needs of the product going into the packaging. For edibles, our packaging has to be opaque. Product cannot be seen through the packaging in most states. This is great for our products that are made with natural colors that may be light sensitive.

All of our packaging needs to be child resistant. This limits the amount of packaging variety that we have, but this is a big opportunity for packaging developers. We want and need more sustainable forms of packaging that are differentiated from other packaging forms currently on the market.

Aaron: What trends are you following in the industry personally?

Stephanie: Cannabis trends that are of interest to me personally are fast-onset and water solubility technology. There have also been many discussions surrounding minor cannabinoids and how those can be blended together to drive customer experience.

There are traditional food trends that also impact how we formulate. Our Mindy’s Edibles line is flavor forward. The flavors are sophisticated. In the Mindy’s line, you won’t find a generic orange or grape flavor. Instead, you’ll find a Lush Black Cherry or Cool Key Lime Kiwi Flavor. This flavor development work starts with Mindy Segal, who is the face and talented James Beard award-winning chef behind our Mindy’s Edibles line of products.

Aaron: Okay, so the last question I have for you is, what are you interested in learning more about?

Stephanie: I’m a scientist at heart. I look forward to more spending on cannabis research to show how THC and other cannabinoids can be used to treat a variety of conditions. People use cannabis for many reasons: to relax, to ease aches or pains, etc. It’s exciting to lead part of our technical team during a period of time where cannabis is rapidly growing and is of great interest and increasing acceptance across our country and in the world.

Aaron: Okay. So that’s it. That’s the end of the interview!

Leaders in Infused Products Manufacturing: Part 2

By Aaron Green
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Editor’s Note: Part 3 will be an interview with Liz Conway, Regional President of Florida at Parallel. In part 4 we’ll sit down with Stephanie Gorecki, vice president of product development at Cresco Labs. 

Cannabis infused products manufacturing is quickly becoming a massive new market. With companies producing everything from gummies to lotions, there is a lot of room for growth as consumer data is showing a larger shift away from smokable products to ingestible or infused products.

This is the second article in a series where we interview leaders in the national infused products market. You can find the first piece here. In this second piece, we talk with Mike Hennesy, vice president of innovation at Wana Brands. Mike started with Wana in 2014 after moving to Colorado and leveraged his science background to transition into product development and innovation where he has helped develop one of the best-known brands in Colorado.

Next week, we’ll sit down with Liz Conway, Regional President of Florida at Parallel. Stay tuned for more!

Aaron Green: Thank you for taking the time today. Just to start off, can you walk me through how you got involved at Wana Brands?

Mike Hennesy: Thanks Aaron. I got involved in the cannabis industry pretty intentionally. After graduating college in 2012, I was determined to get involved. I moved to Colorado from the east coast. I’m originally from Virginia. I moved out here in 2013 and started with Wana in 2014.

Mike Hennesy, Vice President of innovation at Wana Brands

I got involved in the sales side of the business originally – as the company was just starting to emerge into the legal recreational market – and oversaw growth here at Wana during significant changes in the industry. Over time, my role transitioned into innovation and R&D where I am leaning on my background in science.

I now lead new product development and education as Vice President of Innovation, and I’m also completing a master’s degree in cannabis science and therapeutics.

Aaron: So, what does innovation mean to you?

Mike: Innovation for the cannabis industry is pretty unique and interesting. We are just beginning to unpack the pharmacopeia of the cannabis plant as well as starting to understand our own bodies endocannabinoid system.

Innovation spans from genetics of plants and how they are grown to how you deliver cannabinoids to the body and what different ratios and blends of cannabinoids and terpenes you are actually putting in there. So, innovation is not a one size fits all category for cannabis.

Aaron: Sounds like an interesting role! At Wana Brands, and in your role in innovation, how do you think about differentiating in the market with your products?

Mike: I would describe the way we perceive differentiation as going beyond simple developments, such as product forms or new flavors. We see the future of product development trending towards what active ingredients and in what ratios we are putting into products. For example, what kinds of cannabinoids and terpenes are we using? What kinds of drug delivery systems might we be harnessing? How do we put all of these ingredients and technologies into a product to make it more effective?

A simple way to think about all of this is: how is our product going to work better for the consumer? Because that is really the key here. Tasting great is important, but we are delivering a product that provides an experience. We want to continue to make a better experience and a better way for customers to enhance their life.

Aaron: I think that leads nicely into our next question, which is, when you’re thinking about creating a new product for the consumer, what’s your process for creating a new product?

Mike: We have a very full pipeline of new products, and many of these ideas come from networking and speaking with innovators and following the research and science for inspiration and direction. We take this information and start brainstorming as a team. We have a decade of experience in the cannabis space that provides us with a unique lens on how we apply new research to our product development.

From there, we build a product development pipeline of potential ideas and start to prioritize, looking at the feasibility of each of these ideas and their market readiness. Sometimes we have a great idea for a product, but a lack of consumer knowledge may mean we don’t move forward with launching.

Aaron: Can you expand a bit on what you mean by education and how you guys think about education to the end consumer?

Mike: Since product innovation must move with consumer knowledge and cannabis is so new, education is critical. We have a very robust education platform with topics that range from cannabis 101 to the endocannabinoid system, to lessons on terpenes and CBD, as well as trainings on our products themselves. We have both bud tender-facing and consumer-facing trainings. The consumer trainings are on our website, and bud tender trainings are hosted through dispensaries.

Aaron: Is that training electronic training or written material?

Mike: Both, but the primary platform is online in the form of interactive training courses. We also have printed flip book training material in dispensaries and offer in-person presentations, but with the pandemic, we’ve been heavily leaning on the online training content.

Aaron: Alright. So, we’re going to take a different direction here on questions. From your perspective, at the innovation level, can you walk me through your experience with your most recent product launch?

Mike: Most recently, we launched the line of Wana Quick Fast-Acting Gummies. I am extremely excited and proud of this line. They have absolutely exploded in popularity!

The idea for these products started a few years ago as we were learning cannabinoids are not very bioavailable. This means most of the cannabinoids that you consume from an edible do not end up in the bloodstream. Edibles also have a delayed onset and undergo a conversion of THC in the liver, called first pass metabolism, that gives a heavier sedating high. This slow onset and difference in effects with edibles can be a turn off for some consumers, leading us to the idea of developing a fast acting gummie that works differently.

It was about two years of research looking at technologies developed by pharma and nutraceutical companies to improve bioavailability and bypass first pass metabolism. We started looking into nano-emulsions and encapsulation of cannabinoids that help with bioavailability and reduce the onset time. These technologies envelop the cannabinoids like a disguise that tricks the body into absorbing the oily compounds more easily. The encapsulation bypasses the liver and is absorbed into the bloodstream quickly, so their effect starts within five to fifteen minutes. Since they are not processed in the liver, they deliver delta-9 THC instead of 11-hydroxy-THC, giving an effect I describe as a “smoker’s high.”

We trialed and tweaked many technologies before we landed on one that is truly effective and worked with our line of gummies. With this revolutionary technology inside, we then crafted delicious flavors and a new triangular shape to differentiate them from our classic gummies. Because they take effect so quickly and only last about three hours, we thought the Quick Fast-Acting Gummies were the perfect product to use during happy hour. So, we have Happy Hour inspired flavors like Pina Colada, Strawberry Margarita and Peach Bellini.

We launched in March, and already right now, these SKUs in Colorado are #4, #7 and #11 out of all edibles sold in Colorado. And overall, Wana produces eight out of the ten top SKUs in Colorado. That’s according to BDSA, so a pretty impressive achievement!

Aaron: Okay, great, I’d say so! The next question here goes deeper in the supply chain. How do you go about sourcing for the ingredients?

Mike: I am going to start with the cannabis side of things. As I mentioned earlier, cannabis is unique. It is not just one ingredient. It’s many different compounds like the cannabinoids THC, CBD and others, but also terpenes and other beneficial compounds. To make the most effective edibles we partner with growers that care about their genetics, how they are growing, and how they are extracting to create high quality cannabis extracts.

We also understand terpenes are so important in the entourage effect, and that different terpene blends synergize with cannabinoids to produce different effects. Some can be energizing while others are more relaxing. Wana has innovated the terpenes we use by formulating proprietary blends of thirty terpenes or more that replicate indica, sativa and hybrid strains.

We did this by strain hunting the best cannabis in each class and analyzing the strains to understand their profiles. Then using organic, botanically derived terpenes, we build blends in the ratios they are found in the plant and reintroduce them into our edibles. This means Wana edibles match the terpenes that you will find in cannabis, unlike other products that just use distillates where the terpenes are degraded and lost in extraction. This also means we can replicate these blends with our partners in other states, so when you consume a Wana indica or sativa product you’re going to have the same terpene blends and the same experience and feeling every time.

Beyond cannabis and terpenes, we are extremely selective in all of our ingredients. And in the near future we’re implementing an optimized recipe that is all-natural, with no high-fructose corn syrup, as well as moving towards organic ingredient sourcing.

Aaron: Can you give me an example in your role of a challenge that you run into frequently?

Mike: I think that is the exciting thing about working in R&D and new products: there is always a new challenge. I guess I would say if you are not making mistakes, you are not really trying to push the envelope in product development.

We are working with plant matter, terpenes and encapsulation technologies, things that don’t always taste good, and putting them all into edibles. That means we frequently run into the challenge of figuring out how to put the right ingredients for effect in a product, but still make it taste delicious. We are very selective in what ingredients we use and how we’re introducing them to make sure the product still tastes good. We oftentimes come across a great technology—such as a terpene blend or a quick onset delivery system—that does the job, but is not optimal for a gummie recipe, such as the resulting consistency or taste.“These developments are all heading in the direction of delivering consistent repeatable experiences for consumers, which is what I see as the future of cannabis.”

Aaron: Would it be correct to say that formulation is a common thing you run up against in terms of challenges?

Mike: Yes, especially because a lot of the ingredients and technologies we are working with are new. There isn’t a guidebook for how to incorporate encapsulated cannabinoids into a gummy, for example.

That’s the novel aspect of a lot of this: how do you take a terpene blend that’s designed to mimic the cannabis plant and put it in your gummies? What’s the right way to introduce it so they’re not degraded by heat? Formulating with cannabis is about problem solving, and is the backbone to what we do in R&D

Aaron: We’re getting towards the end of the conversation here. And these questions are more geared towards you individually. So, what trends are you following in the industry right now?

Mike: I’ve got to have my eyes on a lot of things. That’s how you innovate in this industry!

I would say No. 1 is still terpenes. We are already innovating there, but I think we’re just scratching the surface of where we’re going to go. I think terpenes are going to unlock a lot of potential in cannabis products in the future, and Wana is going to be innovating there, leading the pack.

Next is minor cannabinoids. Through decades of an illicit black-market, the genetics have skewed towards high THC strains, but the cannabis genome actually allows for many other cannabinoids to be formed. Through the right cultivation and breeding programs, we are going to see a lot more CBG, CBN, CBC, and even more rare cannabinoids like THCV and others.  These currently rare cannabinoids are going to be important for new product development as we learn more about their therapeutic effects.

Then there is continued innovation on delivery systems and bioavailability, functional ingredient blends and more natural products. These developments are all heading in the direction of delivering consistent repeatable experiences for consumers, which is what I see as the future of cannabis.

Aaron: Awesome. What are you interested in learning more about? This could be cannabis related or business related.

Mike: Well, fortunately, I am working on a master’s degree right now and so I get to learn a lot every day. I am most curious to see where science takes us with the endocannabinoid system. It was pretty much unheard of until a few decades ago, and now we understand that it interacts with almost every other system in the body. It is like missing the elephant in the room when you are talking about human biology. The amount of information that we’re going to unlock about how the ECS interacts and regulates our body is going to continue to revolutionize the industry There’s a lot more to be understood around how different compounds interact with the ECS and affect us, and I think we are going to learn how we can use it to tailor other products for  outcomes such as sleep, pain, anxiety, energy and focus.

Aaron: Just a clarification there. What are you working on for your master’s?

Mike: I’m getting a Master’s in Medical Cannabis Science and Therapeutics from the School of Pharmacy at the University of Maryland. It is the very first master’s level program of its kind, and is taught by doctors and pharmacists, so we discuss cannabis as a drug and how it effects the brain and the body. It has been really exciting and I’m looking forward to continuing learning more about this amazing plant!

Aaron: Okay, that concludes our interview!

Leaders in Infused Products Manufacturing: Part 1

By Aaron Green
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Cannabis infused products manufacturing is quickly becoming a massive new market. With companies producing everything from gummies to lotions, there is a lot of room for growth as consumer data is showing a larger shift away from smokable products to ingestible or infused products.

This is the first article in a series where we interview leaders in the national infused products market. In this first piece, we talk with Keith Cich, co-founder of Sunderstorm, Inc. and the brand Kanha Gummies. Keith and his business partner, Cameron Clarke, started Kanha Gummies in 2015 after long careers outside of the cannabis industry. In 2015, they went all in and started the brand, which grew to be a major player and driving force in the California market.

Next week, we’ll sit down with Mike Hennesy, director of innovation at Wana Brands. Stay tuned for more!

Aaron Green: Keith, nice to meet you. Thank you for taking the time today. Tell me about how you got Sunderstorm off the ground and how you got involved in the company?

Keith Cich: Absolutely. So, my business partner, Cameron Clarke, is a lifelong friend. We met as undergraduates at Stanford University. I went on to work on Wall Street and did commercial real estate. Cameron has been a serial entrepreneur, from a much more technical side working in software. He was actually one of the first people to bring the Açai Berry to market and put it on the shelves of Whole Foods. So, he’s kind of the science and operations guy and I’m the finance and business guy.  It’s been very synergistic.

Keith Cich, co-founder of Sunderstorm, Inc.

By 2015 we had both traveled extensively and were big advocates of plant medicine and cannabis as another form of plant medicine. We also have a 15-year track record of going to Burning Man together. Really, explorations in consciousness and plant medicine were what tied us together. When cannabis came up as a business opportunity, we just kind of looked at each other and said, you know, we have a lot of business experience to bring to the table. We have a love of the plant and an appreciation for how it will impact society. So, we kind of went all in in 2015 under proposition D, and set up operations in Los Angeles at that time.

Aaron: How did you decide to get into infused products from the list of choices?

Keith: Yeah, we initially set up extraction, but we felt that cultivation and extraction would ultimately be commodities.  However, if you could develop popular brands you could carve out valuable shelf space and have longevity.

We acquired a small gummy company in February 2016. In the beginning of it all – I call it “Cannabis 1.0.” At that time, a lot of the packaging was really oriented around men in their 20s focused on “high consumption.” The packaging was a lot of black and skull and crossbones, and it didn’t really represent who Cameron and I were as people. You know, we were a little bit older and well-traveled. And we just felt like when adult use would come in that brands would take a different pathway. So, we hired a branding person to come in and help with packaging.

We really focused on a product that would appeal to females because it was clear they were going to be 50% of the market – and packaging that would really appeal to older people, which we thought would come on board once the stigma of cannabis was reduced. And so, we really set up Kanha gummies, at that time in early 2016, to be this adult use product that would appeal to a wide spectrum, both medical users as well as adult users in the time that would come in the not too distant future.

Aaron: Yeah, that’s interesting. You talked about how you thought about differentiating in the early days getting off the ground. How do you think about differentiating today?

Keith: The two things that really set Sunderstorm apart from the crowd is automation and innovation. We were the first gummy company to invest hundreds of thousands in European confectionery equipment, which allowed us to scale our business, but more importantly, produce an identical product every time. The reason we hear people come back to Kanha gummies is that they have the same replicable experience every time, which is really the key to CPG companies. So, it’s really stringent automation that allowed us to develop precise dosing. In fact, in 2019, we won the award from CannaSafe, which is the largest lab in California, for the most accurately formulated edible. We dialed in manufacturing and that’s what set us apart in the early years.

My partner is really geared towards science and implementing new delivery systems for cannabinoid products. We were the first company to come out with a nano edible about a year ago in 2019 and we are still the leader in offering consumers nano-molecular delivery systems. What does that mean? One of the common problems with edibles is that it takes 45 minutes to an hour for it to kick in. We all know friends who take a cookie and double up on the cookie and end up having too big of an experience. Rapid onset curbs that risk. Our nano gummy kicks in about 15 to 20 minutes, and it’s got just this really nice journey to it. We’ve separated the audience between the people that have our classic gummies, which takes longer to kick in, maybe a little bit stronger and the nano technology, which has a really fast onset, and really kind of a discrete journey. We stay ahead of the competition today, because of the nanotechnology that we’ve implemented in gummies.

As I always say, it’s not about how much vitamin C you take – it’s more about how much vitamin C gets in your blood stream. And it’s the same with cannabis, right? It’s how much THC and CBD or other molecules get in your system. So it’s about really having the highest bioavailability and the best performing products. And that’s what our customers have come to believe about Sunderstorm.

Aaron: You’ve talked about a couple new products from Kanha. At a high level, can you talk about your process for ideating and creating a new product?

Keith: Sure. I could use an example of a product that we’ve just kind of relaunched. It’s called the Tranquility gummy and it’s targeted for sleep. What we’ve discovered is there’s a whole host of medical reasons why people take cannabis – as well as the adults who take cannabis for entertainment – but sleep is a major issue for Americans of all ages. It’s surprising. It impacts 20 year olds and it impacts 60 year olds.

Part of the process of coming up with a product is trying to figure out what’s the need in the marketplace. So in this case, we really looked and said, hey, let’s target sleep and see if we can experiment and come up with a product. Our first round of Tranquility had a mix of CBD and THC in it because both of those are valuable for sleep. CBD is a chill-pill that kind of makes you calm so you can go to sleep. THC is often something that helps people stay asleep.

“We go through many iterations of a product before it actually hits the marketplace.”In that product, we also added 5-HTP, which is a serotonin booster, which once again, people take when they have anxiety or stress. So it’s kind of a stress reliever, and it helps you be calm, which again, I think a lot of the problems for people who have an issue with going to sleep, it’s having so much on their mind that they can’t stop the monkey mind to actually enter into sleep to begin with.

We also added just a small amount, one milligram, of melatonin. We know that Melatonin is a sleep aid, but you don’t want to take so much melatonin that your body stops producing melatonin because you’re taking the supplements. So at the end of the day, you want to just encourage and coax your body into healing and not overkill it with a pharmaceutical. Right?

So that was our first generation and we worked with that but my partner looks through a lot of research that’s occurring on different cannabinoid particles, and it became clear that CBN, which is kind of a new cannabinoid that’s hitting the press, actually had really strong properties for sedation and keeping people asleep. So, we added the largest dose of CBN in any gummy, and then re-launched that product a month or two ago. And we’re getting incredible feedback from shops that they’re selling out. It’s awesome, because people are actually taking the gummy and having the effect of falling asleep and staying asleep.

It’s the combination of the different factors. No one factor is so overwhelming like a pharmaceutical drug. But it’s the combination of the different factors together that make for a great product. And we fortunately have dozens of people in our company who are happy to do R&D for our new products. We also have some people outside the company that are consultants and experts as well. We go through many iterations of a product before it actually hits the marketplace. And that’s the second thing: it’s a lot of rigorous R&D testing of products before we launch it for the end consumer.

Aaron: Yeah, so if we can touch on that, can you tell me about your experience with your most recent product launch? Whether it’s the NANO5 or the Tranquility gummies? How did you think about preparing the market for the launch? Preparing your team for the launch? And then how did it go?

Keith: I’ll talk about our sublingual line called NANO5. Again, it’s a nano product where every molecule of CBD or THC is wrapped in a molecule of fatty lipids, so that when you spray it on your tongue, it tricks your body into absorbing it directly into the bloodstream and doesn’t actually go through the digestive tract and the liver. The bioavailability of these sublinguals is high and 70 to 80% of the cannabinoids actually get into your bloodstream.

We’ve done blood sampling tests versus your standard tincture. Your standard tincture is just MCT oil and cannabis, it’s pretty crude, kind of caveman-ish, quite frankly, when compared to the delivery of pharmaceuticals are today. NANO5 is a much more advanced delivery system.“We’re here to really try to educate people the best that we can.”

Now we have the product… right? This is a sophisticated product that’s challenging for bud tenders to explain when consumers come in with their medical needs. We had to create a lot of written brochures about how the product works, what the dosages are and that sort of stuff. Then our sales people go in and actually train the shops. They’ll pull bud tenders out and do training sessions and talk about NANO5, what makes it different from other tinctures, what medical conditions is it good for, etc. It’s kind of old fashioned, in-store training.

Then we finally have implemented a new piece, which is digital bud tender and consumer training. We are leveraging a platform for bud tender training, we talk with the shop, talk about the product and if the shop manager agrees we send a link out to all the bud tenders who take a quiz. The bud tenders get educated on an online platform, take a quiz, and then when they pass the quiz, they get a licensed sample of the product to try themselves so they have firsthand experience.

What we find in many shops is that the consumer is still not that educated about cannabis, particularly for medical uses, and particularly what I call the “new consumer” that hadn’t used cannabis in their lives, because it had such a high stigma to it and now with the reduction of the stigma it means a 40 or 50 year old woman might go into a store to find something to help with pain, or help with anxiety. Now, the bud tender can use the training that they’ve learned on NANO5, and understand that this could be a good product for them, and then talk about it intelligently and give some materials to the consumer before they walk away.

It can be intimidating for consumers to go into a shop, you know, it’s a new experience. It’s like going to the doctor’s office, you don’t always hear what they say, because you’re kind of nervous. So giving them the written materials, and even a test to follow up on online really allows for a form of education that is in tune with the user needing to learn at their own speed and really to just take away what’s important for them.

Aaron: Did I hear you correctly? The user – the end consumer – can also do a quiz?

Keith: Yes. Sunderstorm is about science and education. There’s a lot of assumptions in the marketplace that may not be correct. So, we’re here to really try to educate people the best that we can. And we really believe the rest of the world acts in a digital manner for education. In some ways, cannabis is a little bit behind the times because it’s difficult to advertise on Facebook and traditional venues. So we have one hand tied behind our back when we’re dealing with the digital world. But we at Sunderstorm are big believers that digital will be the way that cannabis consumers learn about brands, learn about products and learn about cannabinoids, and we want to be at the forefront of that education process.

Aaron: OK, we talked about some challenges. One of the challenges I hear a lot is about sourcing ingredients for infused products. How do you go about sourcing ingredients in your infused product lines?

Keith: Our primary ingredient that we source is distillate. And starting back in prop 215 days, we have a zero parts per billion policy on pesticides. What we discovered is before lab testing and licensure came in place is that 80 to 90% of the oil out there actually had pesticide levels that were way beyond safe. It really took licensing and the implementation of lab testing to change that regime. We now buy distillate from third party extractors and we have a handful of really big, really solid players onboard who provide that oil to us. The key is that if there’s any detectable trace of pesticides, we send it back and they replace it with a not-detect batch. So for us, that’s really the key to the whole supply chain: starting with oil that’s clean and really good quality.“Delivering the product in a compliant manner has been one of our logistical challenges, but one that I think we’ve done quite well at day in and day out.”

Fortunately, we’re one of the bigger brands in the industry so we have a little clout to make sure that the people that give us our oil are giving us their top shelf, and not their bottom shelf. We then have also made it a point to use only natural flavoring and natural coloring in our gummies. Believe it or not some of the red coloring actually is derived from beets and beet juice. We use spirulina as a source for our blue green colors. All of the gummies that we produce, not only have no pesticides, but they have no artificial flavors and no artificial coloring, which is of course standard in mainstream gummies that you buy at CVS or the local drugstore. So we really feel like we want to put out a healthy product and Cameron and I always look at each other, like, ‘we wouldn’t sell a product that we wouldn’t put into our own bodies.” And we’re very health conscious, you know, buying organic produce and not wanting pesticides to be inside us.

Aaron: Can you give me an example of a challenge you run into frequently, and this could be a business challenge, a marketing challenge, financials… something that you run into frequently?

Keith: Yeah, so we not only manufacture our products in California, but we also do self-distribution to over 500 retailers, meaning in store dispensaries and delivery services throughout California. With these 500 customers, we have two distribution points, one in LA and one in the Bay Area where I’m located. It’s an amazing challenge logistically. Not only are we running a manufacturing operation that requires precision – and it’s highly regulated – but we run a distribution company that’s highly regulated. For us the challenge is how do we efficiently deliver product to the Oregon border when we’re manufacturing in LA? We’ve had to spend a lot of time developing protocols for logistics and distribution to be able to basically meet demand throughout the state. And we’ve been growing like crazy. We add 10 new shops probably every week.

Delivering the product in a compliant manner has been one of our logistical challenges, but one that I think we’ve done quite well at day in and day out.

Aaron: What kind of trends are you looking at in the industry? And what keeps you excited?

Keith: I think COVID-19 has touched every aspect of our lives and it is impacting how we consume cannabis. Because it’s a respiratory disease, I think people have been wanting to shy away from smoking flower or vaping to keep their lungs healthy as a precaution in case they get it. So edibles have been kind of a natural choice for that. As well as the simple act of sharing something; sharing a joint raises a lot of safety risks, especially during the pandemic. It’s a lot easier to share a single gummy out of a bag safely.

Secondly, what I’ve noticed is that parents have their kids at home and yet they still want to consume cannabis as they did before. Edibles have been big because of discretion. So mom or dad can pop a gummy and have a spritzer before dinner and enjoy the night and my theory is happy parents make happy kids. So discretion has been critical.

Then I think there’s a whole round of new entrants that I mentioned before. These are people that maybe smoked weed in college or high school and haven’t touched it for 20 years and now that the stigma has been reduced, they’re coming back to the marketplace and wanting to explore. They may try a vape product, but very few of them want to smoke, as the country is generally pretty anti-smoking.

I think edibles and gummies have been a way for new cannabis consumers, particularly those who are older, to come and enjoy the positive effects, the medical effects and the social lubricant that cannabis offers, while being safe and discreet at the same time. I think COVID has definitely changed the way that that people think about consuming cannabis.

Aaron: Okay, awesome! Lastly, what would you like to learn more about? What are you interested in?

Keith: I have a degree in philosophy and religion. I’m a big fan of the evolution of consciousness. I think that is the container of the story through which we view human civilization and I honestly think we’re at a turning point for how humans in Western society view plant medicine.

I think cannabis is just the first to come along and be legalized. They’ve been doing phase II and III clinical trials on psilocybin and end of life anxiety. People, particularly war veterans, are using ecstasy or MDMA for depression.

What we’re discovering is that what we think we know about the mind is only the tip of the iceberg on how the mind works. I’m interested in exploring how these plant medicines impact individually with our psyche. Secondly, what happens to society when we reach a tipping point and a majority or at least some significant portion are taking these plants and medicines on a regular basis? It opens us up to a whole new perspective on ourselves, on society and on the universe that we live in. So I read a lot in those fields. And that’s what really excites me.

Aaron: Great. So that’s the end of the interview. Thank you for that.

Leaders in Extraction & Manufacturing: Part 1

By Aaron Green
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Cannabis extraction and manufacturing is big business in California with companies expanding brands into additional states as they grow. This is the first article in a series where we interview leaders in the California extraction and manufacturing industry from some of the biggest and most well-known brands.

In this week’s article we talk with George Sadler, President and Co-founder of House of Platinum. George and his son Cody started their cannabis journey in 2010 when they sold their dirt bikes and set up a 10×10 garage. They have since built the business into a $70 million dollar cannabis empire across California, Michigan and now Oklahoma. The interview with George was conducted on July 31, 2020.

George Sadler, President and Co-founder of House of Platinum

Next week, we’ll interview Matthew Elmes, Director of Product Development at Cannacraft. Stay tuned for more!

Aaron Green: First off, George, congratulations on your recent announcement on the LOI from Red White & Bloom!

George Sadler: Thanks! The deal isn’t done yet but we’re looking at a sixty-five-million-dollar deal. Cody and I will be staying on as officers to oversee growth as we expand into new markets.

Aaron: That’s great news! I hope it all works out well for you and best of luck closing the deal. Now on to the interview questions we had planned. So first off, how did you get involved at House of Platinum?

George: My son Cody and I wanted to do extraction and have a vape company. Five or six years ago we climbed on a plane to China to speak with manufacturers. We started off with extraction equipment in a small room with a table top machine. After a time, we took year and a half off to get our licensing and do our buildout. We opened up again two years ago in June. At the time, China was the main resource for packaging, and everything really. We got hardware from another company and had our Chinese partners rework the hardware to address some of the issues we had. Cody and I spent a week in Shenzhen where we met with our Chinese partners. They first did cartridges, packaging and batteries.

Aaron: Thanks for that, George. The next questions will focus on product development and manufacturing. What is your decision process for starting a new product?

George: In the beginning, Cody and I would both be a part of new product development from beginning to end. Cody has taken lead now on the beginning phases so our new product development really starts with him. We collectively come up with the concept. Cody does the market research. The concept then goes to our design team for visuals and to do the artwork- this usually takes some time. After we are satisfied with the branding, we start the manufacturing process. We do everything start to finish and can go from design to package in less than two weeks. The only thing we still manufacture in China is hardware these days, so cartridges and batteries.

Aaron: Are you personally involved in manufacturing? Tell me about your process

George: Cody and I are both involved in manufacturing. In California, we have about a hundred employees at our facility. In Michigan we have another hundred, and Oklahoma has about thirty. In Michigan, we do carts only right now and are getting ready to launch chocolates and gummies. Oklahoma is also getting ready to do edibles and gummies.

Aaron: What is your process for developing new products?

George: In manufacturing, when we start a new line of edibles, we’ll first do a full test batch of products before committing to full-scale manufacturing. We start small at first then scale into larger batches. If everything looks good, we’ll decide whether or not to invest in larger equipment.

Aaron: Are you developing new products internally?

George: Our California and Michigan production is done 100% in-house. In Oklahoma we have a licensing deal with a manufacturing partner.

Aaron: Do you ever bring in external product development consultants?

George: No. We do all of our product development internally.

Aaron: In product development or manufacturing, what does being stuck look like for you?

George: That depends on what phase of the process we’re talking about. One challenge is getting the recipe dialed and then figuring out how to move into large scale. Take chocolate for example: going from a one spout pour on chocolate to a three-spout pour. That process can take a while to figure out. Any time you are trying to move forward in your manufacturing process, if there isn’t existing equipment available you may need to purchase it. There isn’t a lot of information out there to gauge on the cannabis side what is relevant.

Aaron: How about source materials for your products?

George: We pride ourselves on doing a deep dive on all of our suppliers.  That includes packaging, chocolate, sugar, and flower.  The advantage of longevity in this industry, we have keen radar on those doing premium work.

Aaron: What’s the most frustrating thing you are going through with the business?

George: I think a majority of people would agree that there’s lack of understanding of what’s happening with licensing. Legacy market products and unlicensed stores are frustrating. Inconsistency on testing is also frustrating. The states aren’t really doing anything to correct inconsistent testing. But banking is the number one industry pain point. We have a handle on the rest. Banking we don’t have any help.

Aaron: Feel free to answer the next question however you like. Imagine you could have someone come in and wave a magic wand to solve your problems. What does your magic helper look like?

George: Hah! Not sure what a magic helper would look like. Distribution is our biggest headache. Distribution is a different animal that is outside cannabis product development. We do all of our distribution in-house and it can be a pain.

Aaron: Now for my final question: What are you following in the market and what do you want to learn about?

George: We’re semi-new in the CBD space. Anything up and coming is something we are looking at. We’re focused on going big and multi-state. Arizona is the next state we are looking at. Nevada is after that. The partnership with Red White and Bloom is going to grow the brand into other states with them. Growth continues in that direction. Recently we’ve been going back to cultivation and doing cultivation deals. We started as cultivators and a lot has changed in the past several years. We are trying to pick up new knowledge.

Aaron: Well, thanks for that George, this is all awesome feedback for the industry. That concludes the interview! Thanks so much for your time and congrats again on your recent announcement with Red White & Bloom.

George: Thanks.

Wana Brands Dominates Oregon Market, Expands to East Coast in 2018

By Aaron G. Biros
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Wana Brands launched their products in Oregon’s market in July 2016, about a year ago. Since then, their brand presence has grown considerably and their products are now in 240 of Oregon’s 375 dispensaries, according to a press release issued this morning.

Wana Brands is an infused products company; they make sour gummies, hard candies and caramels. The business originally launched in Colorado back in 2010 and as of 2016, they own 23% of the market share and had the most sales revenue of any edibles company in Colorado, according to BDS Analytics. The next closest competitor owns 12% of the market share.

Nancy Whiteman holding a batch of cannabis gummies

According to Nancy Whiteman, co-founder and co-owner of Wana Brands, becoming a market leader in Oregon is a result of their product’s consistency and taste. At the end of last year they launched in Nevada and this year they will launch in Arizona and Illinois. In 2018, they expect to make a big East Coast push, expanding into Massachusetts and Maryland as well.

Election Day last year legalized recreational cannabis in a number of states, including Massachusetts, Maine and Nevada. About a week before Election Day, we interviewed Whiteman about those states coming online and her drive to expand. She said she saw a lot of potential in those markets and she was right. Nevada witnessed a massive surge in demand with the opening of recreational sales in the beginning of July and Massachusetts is expected to be another huge market potential.

In that interview, she explained a bit of their growth model: “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.”

Now that her company has found enormous success in established markets like Oregon, Nevada and Colorado, they want to make a big push in those fledgling markets on the East Coast. “In both markets [Massachusetts and Maryland], we will be working with a partner who will be licensing our products,” says Whitman. “I think the East Coast is a huge opportunity.  There are major population centers in New England, New York and Florida and the markets are almost completely undeveloped at this point.” Wana Brands is also currently entering talks with partners in California, Florida and Maine.