Regardless of their size, all consumer package brands spend a significant amount of money and resources on packaging to attract consumers’ attention. We are all very visually oriented and gravitate to items that pique our interests. Cannabis brands are no exception when it comes to branding their products. Packaging plays a big part in carrying their brand forward and standing out on the dispensary shelves. When I was in Las Vegas at a CBD tradeshow in early 2020, I visited a dispensary, and it was beautiful. I remember commenting to a colleague that was with me how spectacular the product packaging was in the glass cases. One had unique artwork on each different product they offered, and it was indeed art. Yes, I did purchase this one that pulled me in.
The cannabis industry in the United States presents a challenge to brands because there is no overall federal guidance for packaging. Each state is controlling the cannabis legislation and, with it, the packaging guidelines. So multi-state operators (MSOs) have to manage each state as a separate entity and abide by the packaging regulations, which is not very efficient and adds a cost burden. As the industry matures and becomes federally legal across the country, packaging regulations will be easier to implement.
Let’s take a look at counterfeit products across all product categories. There is a significant global problem with counterfeits, as articulated by the below statistics.
Fake luxury merchandise accounts for 60% to 70% of that amount, ahead of pharmaceuticals, entertainment products and representing perhaps a quarter of the estimated $1.2 trillion total trade in luxury goods.
Customs and Border Patrol confiscated $1.3 billion worth of counterfeit goods in the U.S. for Fiscal Year 2020. (The value of 2020’s seizures are actually down compared to the $1.5 billion worth of counterfeit goods seized by CBP in 2019).
Unfortunately, the figures above are concerning, and the cannabis industry will face the same counterfeit issues that will add to these stats in the future. What can be done to help fight the problem and alleviate the pain for cannabis brands? Smart technology.
The trend towards “smart technology” varies by sector, but the underlying concept involves building levels of technology systems designed to impede or limit the highly sophisticated counterfeiter from replicating or replacing products. These levels typically include a forensic level control on the product, digital systems to track the material and customer facing systems to articulate the underlying value to the consumer.
Building these levels of smart technology into cannabis-products and packaging allows consumers to authenticate real versus fake, and in the case often in cannabis, legal versus illegal. Molecular technology is one forensic level of control option that can be used as a unique identifier for product authentication. Each brand would get its unique identifier to apply to the raw materials that make up its product, such as oil or an isolate. Then a sample can be tested at the origin point and subsequent nodes in the supply chain using a remote testing device. All the digital data is captured in a secure cloud database for traceability and transparency to the end consumer, to show them the authenticity of the product they are consuming. The same molecular technology can be applied to the ink or varnish for packaging and labels. A great application to help combat counterfeits and product diversion across the globe.
Another engaging platform is called StrainSecure by TruTrace Technologies. Their SAAS platform allows cannabis manufacturers to track all their product batches and SKUs tied to a blockchain. It also facilitates the interaction between the manufacturer and third-party testing facilities to conduct product testing and reporting. The data is captured within the platform, and with easy access dashboard views, it provides the insights to authenticate products at any time.
A company out of Australia called Laava is producing a product called Smart Fingerprints. It’s the next evolution of QR codes. The Smart Fingerprints can be applied to each package, providing a unique identifier that consumers can read with a mobile phone application. The consumer is provided with information concerning the product’s authenticity and any additional information the brand wants to share with the user. Smart Fingerprints are a great example of customer engagement at the point of activity that is secure.
The above three solutions show the availability of advanced technologies the cannabis industry can implement on its packaging and products to ensure authentic and safe products are sold to consumers. It provides consumers with vital information and insights about products so they can make informed buying decisions. There is no one silver bullet solution that provides all the answers. As with every high value product, counterfeiters will work to create near duplicate versions of the original until it becomes unsustainable to do so. It will take a technology ecosystem to seamlessly connect and provide actuate and timely information between supply chain partners and ultimately the end consumer. As the US works to separate the legal from illegal production for both the adult use and medical supply of cannabis, the looming challenge will be on protecting and communicating authenticity, packaging will be the first step in this.
Natural cannabinoid distillates and isolates are hydrophobic oils and solids, meaning that they do not mix well with water and are poorly absorbed in the human body after consumption. By formulating these ingredients using a patented delivery system technology, trademarked VESIsorb®, Geocann has overcome common obstacles associated with fat-soluble active ingredients, including poor stability, bioavailability, absorption, and solubility. In addition, Geocann has peer-reviewed, published evidence of the dramatic improvements in Cmax, AUC, and Tmax (“time to peak absorption” directly related to “fast-acting” benefits).
Geocann is a cannabis formulation company with its headquarters in Fort Collins, Colorado, and additional offices in Chicago, Illinois and Zurich, Switzerland. The company is led by an impressive leadership team of scientists, pharmacists, researchers and natural product industry leaders. Geocann’s technology platform has been successfully applied to a wide range of cannabis product applications, including soft gel and hard-shell capsules, functional foods (e.g. gummies) and beverages, powder systems, tinctures, sublingual sprays and topically applied formulations. Brand partners in the U.S. utilizing Geocann’s technology for hemp applications include Nestlé Health Science, Cannaray and Onnit, and brand partners for medical and adult-use cannabis applications include Curaleaf, Sunderstorm and CannaCraft, among others.
We spoke with Jesse Lopez, CEO and Founder of Geocann, about their product formulation technology in cannabis and how they work with brand partners in the U.S and internationally. Lopez started Geocann in 2018 alongside the success he’s experienced at SourceOne Global Partners (founded in 2003 by Lopez), a leading formulation company in the nutraceuticals space with a reputation for pioneering innovative products that combine science-backed ingredients with patented drug delivery system technologies to address the most pressing consumer health concerns, such as heart health, cognitive function, inflammatory response, metabolic syndrome and type II diabetes, among others.
Aaron Green: Jesse, first off, how did you get involved in the cannabis industry?
Jesse Lopez: Our focus at SourceOne Global Partners has been on natural products for nearly two decades. Some of the folks involved with our natural products business decided that they would get involved in the cannabis business and they asked for my support at the Advisory Board level. I agreed to serve and figured I better learn about the cannabis industry! We realized that there was a tremendous opportunity for utilizing our drug delivery system technology to enhance the value of these cannabis-based products. Due to the regulatory environment, strategic legal counsel and new investments necessary to take an immediate leadership position in the cannabis industry we launched Geocann in 2018 with an office in a fully legal state at the time, Colorado.
Green: How do you select the natural products you work with at SourceOne?
Lopez: We really focus on science-backed natural product ingredients that may require high doses to reach therapeutic blood levels. By combining these science-backed ingredients with patented technologies – which we own the global rights to – these products offer desirable differentiation for leading brands, such as dramatically improved absorption and bioavailability, patent protection and trademarked “intel inside” branding.
Green: What are some of the other natural products you have experience with?
Lopez: We work with a range of some of the most popular nutraceuticals such as coenzyme Q10 and omega-3 fish oil to the more innovative natural products like resveratrol. We also work with vitamin D, and other immunity-based ingredients that can be enhanced using our delivery system technology to deliver greater benefits to the people that are taking those products.
Green: What is the technology and how does it work?
Lopez: I think it’s important to recognize our technology partner, Vesifact, in Zurich, Switzerland, who is the inventor of the VESIsorb® technology platform and serves as the scientific research, technical support, production, and product development arm of SourceOne and Geocann. We are very proud of this symbiotic relationship where our role at Geocann and SourceOne is to provide the commercial development, sales, marketing and strategic distribution infrastructure. We promote our partnership openly on our website and in our marketing materials because of their unrivaled leadership position in the global marketplace.
They have consistently been recognized as a top 10 global organization for health-related nanotechnology patent activity, ahead of many of the most well-known pharmaceutical companies in the world. It is an intellectual property portfolio that has been used to provide solutions to the most difficult product formulation challenges over the years in pharmaceuticals, medical devices, nutraceuticals, cosmetics, and now cannabis applications. Together, our focus has been on delivering novel solutions in these diverse fields of use and product applications based upon VESIsorb® formulation technology.
Each active compound identified with its own set of formulation, absorption and bioavailability challenges requires a customized solution that allows the full potential health benefits to be realized from success in the lab to commercial scale up. This is the process and we have successfully delivered unmatched solutions for close to twenty years from coenzyme Q10 to now both psychoactive and non-psychoactive cannabinoid product formulations in a wide range of product applications.
We saw the exploding interest in CBD with our nutraceutical partners and demanding consumers worldwide but chose to start Geocann to keep the markets served separate. We were confident that the VESIsorb® technology would provide much needed solutions for CBD as a wellness product, but also adult-use and medical cannabis products regarding “fast acting” and “product stability” needs.
Green: What’s the problem in cannabinoid bioavailability that Geocann’s technology helps to solve?
Lopez: It is well-recognized in the scientific literature that CBD, THC and other cannabinoids, in general, show limited bioavailability due to their lipophilicity, poor aqueous solubility and extensive first-pass metabolism.
Our VESIsorb® technology was designed to address the poor bioavailability of drugs and natural bioactives like cannabinoids exhibiting poor water solubility but high membrane permeability (Biopharmaceutical Classification System: Class II compounds). The VESIsorb® technology is a lipid-based formulation that self-assembles on contact with an aqueous phase into a colloidal delivery system. This colloidal solubilization improves the transport of the cannabinoids through the aqueous phase of the GI-lumen to the absorptive epithelium, dramatically improving bioavailability.
VESIsorb® is typically characterized as a SEDDS (self-emulsifying drug delivery system). What’s unique about our VESIsorb® SEDDS is the long history of safe and effective use worldwide and the large number of products that, over the years, we’ve successfully developed. With decades of experience delivering novel formulation solutions, there is significant and valuable “know how” that we bring to each formulation challenge. This “know how” allows us, for example, to develop cannabinoid formulations that provide lymphatic absorption pathway advantages in addition to standard gastrointestinal absorption, therefore optimizing therapeutic blood levels for maximum benefits.
Needless to say, there are various methods that attempt to address the poor cannabinoid bioavailability. Unfortunately, too often, companies make claims that they have water soluble cannabinoids but offer little evidence to validate their claims. The popular misconception is that some degree of water solubility will consistently translate to improved bioavailability. This is clearly not accurate. We know scientifically that pharmacokinetic performance is highly variable. A review paper I read recently comparing water soluble delivery system formulation types illustrated this fact. There was greater than an eight-fold difference in bioavailability amongst the various water-soluble formulations.
Green: Can you tell me some details about your global license with Vesifact?
Lopez: Our technology exclusivity is based upon given categories. So, when we say we have global exclusivity for nutraceuticals, that can be as I’ve already mentioned, omega-3, coenzyme Q10, or resveratrol as examples, and this business is managed by SourceOne. With regards to our global exclusivity for cannabinoids and terpenes– whether we formulate these ingredients to create a functional drink, or we’re creating a gummy, or creating a softgel capsule or powder-filled hard-shell capsule, or sublingual, or topical – all of those product applications are covered by ourexclusivity for the technology and is managed by Geocann.
The beauty of our technology is that we’ve already achieved success with all of those product applications. That’s one of the big advantages of our technology versus some other approaches trying to address the challenges of cannabinoid bioavailability.
Green: What kind of validation and clinical studies have you done so far in the cannabinoid space?
Lopez: We were the first to have stability data with creating our formulation in a soft gel capsule with CBD. We recently submitted to the European market for novel food application. We invested hundreds of thousands of dollars in proprietary safety studies that are required to achieve novel food status in Europe and FDA GRAS in the U.S. We have proprietary stability data as well as proprietary toxicology data from multiple, self-funded clinical studies. Many companies that submit for the EU novel food application are only referencing the existing scientific literature about the pharmacokinetics of cannabinoids, whereas we have our own peer-reviewed, published study. In our study, we compared our VESIsorb®-CBD formulation to the industry standard MCT Oil-CBD formulation in a crossover design where we were able to demonstrate how we could dramatically improve the bioavailability of CBD.
Green: Can you talk about the benefits of your technology with regards to bioavailability and onset time?
Lopez: When you start talking about onset time we move into a broader discussion relative to cannabinoids. We’ve been very successful with marijuana, especially as it relates to THC, because of the dramatic improvement in time to Tmax, and how much faster we reach Tmax than a standard THC formula. Our formulation is generally four times faster compared to standard formulations.
When it comes to area under the curve and Cmax, we show improvements of four to six times a standard THC or CBD product. Further, when we start looking at the differences between other studies that have been published, we show an even greater improvement based upon study comparisons to what other people have done, even compared to products like GW Pharmaceuticals’ Sativex Oromucosal Spray.
Green: Can you address the SEDDS formulation and liver metabolism?
Lopez: We’ve dramatically overcome challenges with the first-pass effect. We have also formulated our products to address lymphatic absorption. So, we’re coming at it from a number of different angles.
We disagree with people who talk about water solubility as an end-all be-all solution. When you look at the range of published studies, whether it’s nanoparticles or liposomal systems or micro-emulsions, they all are water soluble systems, but yet the data shows there’s dramatic differences in the real efficacy of those approaches, and what the actual improvement in blood levels are. Ultimately, those blood levels represent the efficacious nature of the products whether we’re talking about CBD, or talking about THC.
Green: As a Colorado-based company you work with cannabis partners across the US. Can you tell me about your relationship with marijuana product formulators and brands and how you structure your licensing agreements across state boundaries?
Lopez: In a recent article about the leading fast acting gummies, the two companies they focused on were Sunderstorm with the Kanha Nano gummies and Curaleaf with their Select Fast Acting Nano gummies. Both of those companies use our VESIsorb® technology. We’re very proud of our relationship and the success they’re having as leaders in most dominant states with that particular product application.
Onset time has always been a challenge with gummies. And we’ve dramatically improved onset. Actually, we’ve shown statistically significant improvements for all measured pharmacokinetic parameters in a recent peer-reviewed published study. We demonstrated much higher total absorption in maximum plasma concentration (Cmax), total exposure [area under the curve (AUC)]) and the time to reach the peak concentration (Tmax).
We say powered by VESIsorb® technology the product is faster, stronger, longer.
Green: How does the experience differ from a standard oil- or isolate-based formulation?
Lopez: The only way that I can answer that question is we’ve had 100% success with the companies we work with in their initial trials. When someone tells me that a group of employees are going to try the product and they’re heavy users of cannabis and they are smokers, I think, “wow, you know, gummies have to be really successfully formulated for someone like that to be pleased with the high.” Then they come back and say, “that’s the best that I’ve had in four years!” and they’re totally blown away. That’s completely different than a peer reviewed published study, but for sure, that’s the kind of feedback and anecdotal evidence that we get. I think that’s why that application is growing so much faster now because we’ve overcome this onset issue.
Green: Do you give exclusive rights on a state-by-state basis?
Lopez: We’re very selective about who we work with. Exclusivity is always part of the discussion. But at the same time, it’s really more about protecting the investment in the people that we partner with and not cannibalizing a given market. So, there are some exclusive relationships in the U.S. and internationally, like Heritage Cannabis and Pathway Health Corp in Canada, but for the most part, I would say simply, we were very selective about who we do business with and open to new partnerships.
Green: What kind of support do you provide to your licensing partners?
Lopez: We provide 100% formulation and technical support. We provide the SEDDS and then they use their own legal, licensed cannabis and their own equipment. Our system requires no special equipment or investment in changes to their process. So, not only do we provide formulation expertise, but our system is really easy to use both in a lab environment as well as producing large scale commercial productions.
Green: What geographies are you in currently with the cannabinoid formulations?
Lopez: We are global in scope. We’ve been very fortunate to have success not only in the US and Canada, but Europe, Brazil and Australia as well. Our level of participation will vary whether we’re talking about medical marijuana, adult-use or hemp extract and CBD.
Green: If somebody is interested in learning more about your product or potentially becoming a license partner, how would they how would they reach out to you to set that up?
Lopez: If they went to our website, www.geocann.com, it’s pretty easy to reach us and I am grateful that so many companies are doing that.
Green: Great, thanks Jesse that concludes the interview!
National Agriculture Day (March 23, 2021), is an annual event held by the Agriculture Council of America (ACA), a not-for-profit 501-c (6) organization, to increase the public awareness of agriculture’s vital role in our society.
The ACA believes that every American should:
Understand how food and fiber products are produced.
Appreciate the role agriculture plays in providing safe, abundant and affordable products.
Value the essential role of agriculture in maintaining a strong economy.
Acknowledge and consider career opportunities in the agriculture, food and fiber industry.
We investigated how the hemp and cannabis industry is disrupting agriculture in positive ways, from automated trimming, to controlled environment agriculture, to water conservation and beyond. We interviewed Aaron McKellar, CEO and President of Eteros Technologies, parent company of Mobius Trimmer and Triminator, Mark Doherty, Executive Vice President of Operations, urban-gro, Inc. and Derek Smith, Executive Director at Resource Innovation Institute (RII) to get their perspective on agricultural innovation.
Aaron McKellar, CEO and President of Eteros Technologies
Aaron Green: Why is hand-trimming inefficient at scale?
Aaron McKellar: Hand-trimming is inefficient at scale because it is so labor-intensive and time-consuming, not to mention repetitive and frankly boring. It’s hard to stay fully engaged as a worker trimming by hand, so the consistency of your finished product isn’t reliable with a crew of hand-trimmers.
A hand-trimmer can produce good quality trim on about 2 or 3 pounds per day. A scaled-up facility running just one Mobius M108S Trimmer can realize up to 120 pounds per hour, replacing many dozens, or even into the hundreds of hand-trimmers. The HR nightmare this presents, and all the associated costs of paying and facilitating dozens of employees (parking, washrooms, lunchrooms, PPE and gowning, etc) is simply unworkable. And that’s before COVID.
Green: How does automated trimming benefit large producers and how does the quality compare to hand-trimming?
McKellar: Not all automated trimmers are created equal. Any of the machines out there will help to reduce the need for hand-trimmers by taking off the bulk of the leaf, leaving a small team of “hand-polishers” to finish it up. The Mobius Trimmer is the only automated trimmer on the market today that leaves the technology of the original machines in the past and employs next-gen technology to truly mimic hand-trimmed quality with stunning through-put rates.
We have high-end producers using Mobius Trimmers whose own QC department cannot discern Mobius-trimmed flower from hand-trimmed flower. Hand polishing crews tend to be far smaller when using a Mobius vs first-gen machinery, and many Mobius users don’t touch up at all, instead going straight to market right out of the trimmer. For a look at how our technology differs from the rest of the field, check out this look under the hood.
Mark Doherty, Executive Vice President of Operations, urban-gro, Inc.
Aaron Green: What is controlled environment agriculture?
Mark Doherty: Cannabis cultivators understand growing indoors because, prior to legalization, they had been doing it for years in the gray market. It is by way of that experience that cultivators learned how to manipulate a highly-valuable, complex plant in an indoor setting. As cannabis legalization spread across the United States, many government regulators required that it be cultivated indoors according to strict regulatory protocols. Fast forward 10 years, and we have an industry that is keenly aware of the indoor environmental conditions required to be successful. Critical factors like heating, cooling, ventilation, dehumidification, and how to best mimic Mother Nature’s energy through lighting are all deliberately optimized.
With cannabis cultivation driving the advancements of controlled environment agriculture, market and regulatory forces demanded higher efficiency, reduced energy and resource consumption, and clean crops. In most states, cannabis crops have more stringent testing than food crops. For instance, the lettuce in Massachusetts will not pass the standards for cannabis in Massachusetts. It’s through rapid innovation and technology adoptions that the cannabis industry has paved the way for lettuce to be profitably grown indoors.
Green: How can controlled environment agriculture help alleviate supply chain stresses?
Doherty: By growing food closer to the consumer, you reduce food miles; meaning, that link in the food supply chain gets a lot shorter and is less prone to disruption. Whether you have hyper small cultivation facilities on every street corner, or a larger cultivation facility geographically close to consumers, you can grow 24/7/365. Furthermore, growing locally allows for better prediction of facility output—10 boxes of greens on Monday, 50 boxes of greens on Tuesday, and five boxes of greens on Thursday. This eliminates harvesting a large crop before it is ripe and likely requiring cold storage. The controllability of controlled environment ag is that consistent, reliable contribution to the food supply chain and shortening that path to the consumer.
Derek Smith, Executive Director at Resource Innovation Institute (RII)
Derek Smith: Until this report, if you searched for cannabis water usage, you’d basically find one cited statistic. It was “six gallons per plant per day.” We knew this was from a model based on one extreme illicit market scenario. Based on the data we were seeing and the conversations we were having, this number seemed way off. So, we pulled together a multidisciplinary Water Working Group as part of our Technical Advisory Council. The objective of the Water Working Group was to establish a scientific understanding of how, and how much, water is used for cannabis cultivation so that cultivators have confidence in taking steps to be more efficient, and so that industry leaders, governments and media can be accurately informed about the range of water practices of today’s regulated market.
Green: What key points should cannabis cultivators take away from the report? What key points should regulators and policymakers take away from the report?
Smith: As the cannabis industry matures, water use efficiency will become more important, as it has for other agricultural crops. Pressures to use water efficiently will mount from multiple channels including – reducing input and energy cost, protecting the environment, meeting regulatory standards and simply being good stewards. We recommend that industry and regulators focus efforts on the following areas:
When grown outdoors, water for cannabis production should be assessed like any other agricultural crop and be subject to state and local regulations that apply to other crops. Our research indicates that cannabis neither uses a massive share of water nor uses more water than other agricultural crops. Applying the same standards to cannabis as to other agricultural crops will correctly categorize outdoor grown cannabis as an agricultural crop.
In areas where there may be conflict between water use for cannabis and environmental concerns, regulators and the industry should focus (1) on the timing of water use and (2) the potential of storage to mitigate environmental conflict. Our results show that in many parts of the country legal cannabis farmers have ample water storage to satisfy their needs. In areas where storage is insufficient, increasing storage should be a priority for farmers and regulators.
Our research shows there are still massive differences between cannabis production techniques. As farmers continue to experiment and improve, we expect to see water use be a more important part of cannabis farming decisions and expect new plant varieties and growing techniques to be developed that increase water use efficiency. Yet more data from actual farms and facilities are needed to point the way toward the technologies and techniques that drive optimal efficiency and productivity. It is recommended that producers benchmark their performance and governments consider requiring energy and water reporting by producers. The Cannabis PowerScore can assist in these efforts.
As indoor production continues to grow, especially in areas that have unfavorable climatic conditions for outdoor growing, we expect more cannabis users to rely on municipal water sources. Yet, it is unclear if municipal water suppliers are equipped to work with the cannabis industry. We suggest outreach efforts between the cannabis industry and municipal water suppliers to incentivize efficiency where possible.
The culture of the cannabis industry is filled with passion that many envy, and for valid reasons. The roots of the cannabis plant go back thousands of years. As of this writing, there are no documented human deaths that were caused by a phytocannabinoid overdose. However, it is not all rainbows and unicorns.
Before breaking ground, fundraising, proper facility design, competitive application and permitting requirements are just the start. Once operating, businesses struggle to stay current with regulations that continue to evolve. Cannabis cultivators struggle to scale while mitigating pest infestations, which is a part of life in the conventional agricultural industry. A lack of consistent products frustrates consumers, while regulators and policy makers continue to struggle on the best way to regulate a commodity that has seemingly endless demand. The reality is dizzying!
However, amidst all of the challenges and opportunities, a continually overlooked tool stands out: a Quality Management System (QMS). Merriam-Webster defines a system as “an organized set of doctrines, ideas, or principles usually intended to explain the arrangement or working of a systematic whole.”
A QMS documents processes, procedures and responsibilities that ultimately direct an organization’s activities to meet customer and regulatory requirements as well as continually improve its effectiveness and efficiency. In other words – it steers innovation through the collection of data while ensuring products are safe for the consumer. For further reading, the American Society for Quality (ASQ), now over 70 years old, is an excellent resource and provider of resources and formal training programs that are recognized and revered around the world.
Step 1: Define your stakeholder requirements
This all starts with knowing your stakeholder (e.g., customer, regulatory body) requirements. For simplicity’s sake, let’s start with your customer; at a fundamental level, they expect safe, consistent and reliable products that impart a certain experience.
How does that translate into specifications? Let’s look at them one at a time.
What does “safe” mean? For an edible, safe means the product is free of physical, chemical and microbial hazards. Knowing what potential impurities could be in your product requires understanding your raw materials (inputs) and the manufacturing process. To take a deeper dive, some of the aspects of safety and quality, product specifications and testing considerations are discussed in this recent Cannabis Industry Journal article by Dr. Roggen and Mr. Skrinskas here.
What does “consistent” mean? This builds off and complements the safety profile. It could mean a consistent fill level, an acceptable range of cannabinoid concentration, and so on. For example, in the US Pharmacopeia’s peer-reviewed article about quality attributes of cannabis inflorescence (commonly known as flower or bud), they recommend 20% as the acceptable variance in cannabinoid content. For a product labeled as having 25% THC, the product will actually test to between 20% and 30%. This may be surprising, and discomforting for some, but the reality is that products on the market consistently fail to meet label claims.
What does “reliable” mean? That could mean that you always have inventory of certain products on the shelves at your dispensary. Defining “always” as a SMART goal – perhaps it means that you will have your top 3 products in stock at least 90% of the time. Customers need to feel like they can rely on your business to provide them with the products they want. Take the time to capture the data on what your customers want and work to satisfy their needs and you’ll watch your business really accelerate.
Step 2: Build your processes to meet these expectations
This is where your written standard operating procedures (SOPs), forms and records come into play. Your SOPs serve to memorialize your operations for consistency. Most SOPs in the cannabis industry are not written by the actual operators of a process. Rather, they are written by the legal and compliance team without review by the operators to confirm that what they are stating reflects operational reality. The audience needs to be the operators. Without effective SOPs that are utilized by your employees, your business will struggle to meet the established specifications. Cannabis businesses in Colorado, the oldest regulated adult-use cannabis market in the United States, continue to see 1 in 8 of their products fail final product testing! Cannabis businesses that understand their processes, document them in SOPs and have records to prove they follow their SOPs (see Step 3) are able to reduce errors that ultimately lead to costly rework and product failures.
Step 3: Monitor and improve
You have your requirements, you have your process, but how do you know that they are being adhered to? By the time you have results from a third-party lab, it’s too late. Look internally. Records and logs that show preventive maintenance was performed, room and canopy temperature and humidity checks, inventory reports, production records, extraction equipment report and employee training records shouldn’t be filled out only to be filed away. These records are data, which is your most valuable tool. Unfortunately, records are one of the most overlooked assets in today’s cannabis business. A team independent from operations (typically a Quality Unit) should be regularly reviewing these for inconsistencies and trends that can alert you to catastrophic failures before they occur.
Initially, the additional expenditure and learning curve may make this seem like an added burden, but keep in mind that succeeding in today’s cannabis industry requires long-term customer retention. By biting off one piece at a time, you can slowly implement a QMS that will improve your business, increase customer satisfaction, and ensure your brand is a staple for years to come. Remember, quality and compliance is a journey, not a “set it and forget it” situation.
The definition of a Quality Management System includes ‘continuous improvement’. Look forward to a future article which will discuss the importance of tools like a CAPA Program – Corrective Action Preventive Action (which all cannabis license holders in Colorado are required to have in place as of January 1, 2021) and how they complete your QMS, keeping you compliant and mitigating your business risks!
Heat-not-burn is a non-combustion technology consisting of a heating source and either an oven that the user packs cannabis into or a stick pre-filled with cannabis. The cannabis is heated to a lower temperature than a combusted joint or bowl to create an aerosol that the user inhales. Heat-not-burn in this way is distinct from traditional vaping where a liquid or oil is heated to become a vapor and inhaled.
Omura is a design company that has developed a platform product for the heat-not-burn market.
We spoke with Mike Simpson, CEO and co-founder of Omura. Mike co-founded Omura in 2018 after an international design career where he spent much of his time in Japan working with consumer products.
Aaron Green: Mike, what trends are you following in the market?
Mike Simpson: I’m always tracking trends in the heat-not-burn space. Because of my background, I know that the tobacco industry inspires a lot of the technology in the cannabis space. If you look at all the vape pens, that technology was initially developed for big tobacco, which then later was adopted by cannabis. I’m always looking to stay educated on what’s happening in the tobacco industry, as I know it’s directly tied to my work in cannabis.
I’m also looking at what’s happening all over the world with legislation. I’ve been studying it for years, but this past year has been phenomenal. Seeing five new states go to some level of legalization, the federal law and new states legalizing cannabis in the 2020 Election. I believe the Biden/Harris victory will have a major impact on the industry, however we still have to see what happens with the Senate. These next couple of years are going to be very interesting to see how things shape out for cannabis.
Aaron: What are you personally interested in learning more about?
Mike: I am interested in learning how the world is going to behave next year with this new life that’s been thrusted upon us. How effective is the new vaccine going to be? How are people going to retrospectively look at this year, and the lifestyle that they used to have before going into COVID? How much of it’s going to become permanent? How much of this Zoom life will we continue to enjoy? In the future, will office spaces become obsolete? How much will we still be using home deliveries? Do we actually want to go to restaurants again? That’s what I’m very interested in learning about is how human behavior and the world will change because of what’s happening right now.
Aaron Green: How did you get started at Omura?
Mike Simpson: Great question. I moved to Japan as a designer working for Lego and set up their design office for Lego toys. After Lego, I started working instead with Nike and Adidas designing performance sneakers and apparel for a couple of years until I found Big Tobacco — which is where my Omura story begins. I rapidly found myself in a position where I was creating new technologies, for the consumption of nicotine and tobacco. While working on an early project, I was asked if I knew any science fiction writers. Thanks to Lego, I just so happened to know Syd Mead, the designer for popular sci-fi films including BladeRunner, Tron and Aliens. So, I called him and we worked on a project which was aimed at setting the future of the smoking industry. Obviously, this was a brilliant project for someone like myself to get involved in. We came up with several scenarios that depicted the future of what tobacco consumption would look like, and each of them essentially included vaporization. This was before the vaporization days which made it kind of a difficult sell. I spent many years working on where we could use existing technologies in order to execute some of these scenarios. Ten years later, I moved to California, and I started studying the cannabis space for Big Tobacco which ultimately led me to Omura.
Aaron: Can you give me a reference point on the date when you were back in California?
Mike: I came here eight years ago, and I was in Japan pretty much 10 years prior to that.
Essentially what I realized when I got to California was that cannabis was perfect for heat-not-burn because of all the cannabinoids and the terpenes. You heat it up, and you get all of the good properties out of it without the need for combustion. There were already hundreds of products in the market, which validated that people love doing it.
However, there was a ritual: you needed to buy the flower, grind it, pack the device, select the temperature and then use the same mouthpiece repeatedly. And it doesn’t stop there. When the session is finished, you dig out the used flower with a metal spatula or brush. After every 10 or 15 times you have to clean it with rubbing alcohol to get rid of any existing residue from those sessions. This is just a big messy job with a massive amount of inconsistency and variability. For me, it was mind blowing that people would even go through this procedure. With Omura, I knew we needed to simplify that process. Our product comes with a pre-filled flower stick with an exact dose, that you place in the device very simply. You then use the stick as the mouthpiece and when you’re finished, throw the flower stick in the trash. It’s compostable and biodegradable. So we eliminated all of those pain points.
Aaron: Great! Where are you guys based out of?
Mike: Venice, California.
Aaron: So, what makes the Omura vaporizer different from other heat-not-burn products? You mentioned you have the disposable cartridge. Is there a design philosophy around it that you can talk more about?
Mike: Omura comes with 12 flower sticks in child-proof packaging. What makes us different is that we have our proprietary flower stick and device that work together. With our heat-not-burn technology, you get all the terpenes, but when you set fire to it, as you would with other products, you mask that with smoke. Our product is different from anything else in the market, because it has simplified the user experience through efficiency, user interaction and also through design as well.
The other founders come from deep design and technology backgrounds, designing technologies for Apple and Philips Electronics, so it was an important focus for us with Omura. Our newest device, the Series X was designed by Michael Young, a world-renowned industrial designer who has built an impressive portfolio of innovative products.
With Omura, we’re bringing sophistication of the design world into the cannabis world. It’s not just about simplifying the experience and making a great kind of efficient method of consumption, it’s also about creating something for everyday use that is beautifully designed and easy to use.
Aaron: The Series X is Omura’s latest device. Can you tell me what changes you’ve implemented to make it better than the first version?
There are a few differences between the Series 1 and Series X: First, the new design fits in the palm of your hands so it’s discreet. It comes with a USB-C charging base that automatically connects with magnets. We’ve also improved the efficiency of the oven. The first device boiled 94% of the cannabinoids, this one now boils 99%. We’ve increased user-efficiency, by removing the button from the Series 1 making it so all you have to do is put the flower stick in and the device starts automatically. Additionally, we wanted to give users an option between a hotter or cooler experience so we added an extra heat curve, as we recognize that some of our CBD users prefer more of a terpene experience.
Aaron: Can the user modify that with an app?
Mike: It is a very simple switch on the bottom of the device that allows you to toggle between the higher and lower temperature curves
Aaron: Okay, cool. Can we talk about your supply chain a little bit here? Do you manufacture everything in Los Angeles? Or do you have partners?
Mike: Everything is designed in the US and manufactured in China. Which is fairly common throughout the industry. Shenzhen is well known for making products for the vaping industry. We create empty tubes filled in a batch production process. All the flower is grown here in the US. To clarify, we aren’t a plant-touching company. We don’t have a cannabis license. When it comes to THC, we have partnership deals. We work with select cannabis brands which is how we are able to sell in dispensaries. On the other hand, our CBD model is split. We have two brands of our own. Libertine, which is more of a male-focused Gen Z brand. Then we have Oriel, which is more of a wellness brand, catered to women.
Aaron: So how would an aspiring brand get on your platform?
Mike: Good question. Any brand or company who is interested in partnering with Omura can contact us through our website, www.omura.com,on Instagram @Omura or via email: email@example.com. We would then assess them to see if they’re a good fit. Currently we’re looking to span quite a large kind of demographic as far as appeal. So, if these prospective partners are in a territory, whether it be California or another state, have good market share and high-quality flower, then we would be very open to having a conversation.
Aaron: That’s the end of the interview — thanks Mike!
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: 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?
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?
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?
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!
Small cannabis dispensaries face different challenges than those seen with large, multi-state operators. To this end, massive companies like MedMen and Grassroots Cannabis need to accommodate multi-state operations’ compliance challenges. Conversely, small dispensaries must learn to compete with the big box retailers of the cannabis industry.
Small cannabis dispensaries must figure out how to make their size an advantage against larger business entities to stay competitive. To this end, they must critically assess the corporate structure of large cannabis companies like Green Thumb Industries to look for operations and marketing opportunities still “left on the table” for smaller operators.
Luckily, owning and operating a small cannabis dispensary affords creativity and innovation in the workplace. Namely, because small businesses can quickly implement change and pivot to the demands of the ever-changing cannabis landscape. Conversely, due to corporate structures’ difficult navigation, their larger counterparts must go through far more effort to implement operational changes. To better understand how small dispensaries can stay competitive in today’s market, we put together some criteria to examine.
Cross-Training Employee Teams
The fact that small cannabis dispensaries do not have many employees significantly reduces operating costs. However, to capitalize on the savings of a small employee team, you must cross-train your staff. Because if a small team can handle all the required tasks of a shift, you will never waste money on over-staffing your dispensary operation.
Looking at the specific jobs of a small cannabis dispensary, business owners should ensure that budtenders are trained to handle nearly every business task. To illustrate, you should train budtenders to open and close the store, conduct inventory work, recommend products and operate seed-to-sale software. Not only does this cross-training keep you from overstaffing your dispensary when it is slow, but it also insulates your business during busy market fluctuations.
Please note, once you train budtenders to handle a variety of tasks, you should also pay them more than the industry average. In doing so, you insulate yourself from the high turnover rate that plagues the cannabis space.
Lean Operating Principles
Lean operating is a practice that has exploded in popularity across the business world. To help teach lean operating principles, specialty training companies offer Six Sigma certifications. These certifications help business owners and executives save money on operational efficiencies. Methods taken from Six Sigma can be incredibly impactful for small cannabis dispensary businesses.
According to the ASQ professional training website, “Lean Six Sigma … drives customer satisfaction and bottom-line results by reducing variation, waste, and cycle time, while promoting the use of standardization and flow, thereby creating a competitive advantage.”
Lean Six Sigma principles can be beneficial with inventory control in small cannabis dispensaries. To this end, these businesses should apply analytics to track consumer behavior within their stores. After that, they can use data to create precise sales forecasts and conduct highly accurate product procurement. The end goal being to increase liquidity by reducing money tied up in a bloated inventory of unsold cannabis products.
Due to their small size, single dispensaries have the luxury of customizing the retail shopping experience. As such, without the added pressures of corporate oversight, small operators have the creative freedom to make for highly memorable shopping experiences within their stores. In going the extra mile on things like interior design, small dispensaries can help ensure customer retention and benefit from word-of-mouth marketing.
For example, Barbary Coast Dispensary in San Francisco, CA, has the look and feel of a high-end speakeasy, making it the perfect match for the Bay Area’s aesthetic sensibilities. The dispensary interior is decorated with a 19th-century touch and features a dab bar, where clients can enjoy the surreal atmosphere while consuming some of California’s best cannabis. A visit to a small dispensary like this will likely leave a lasting impression.
Memorable retail shopping experiences often translate directly to customer loyalty. In turn, this dynamic directly impacts your bottom-line concerning marketing expenses. Notably, a steady base of loyal customers will sustain your business, significantly reducing your marketing costs. In the end, marketing can be directed at retaining clients through loyalty programs and customer engagement – both can be mainly handled “in house” and relatively inexpensively.
Small dispensaries can utilize product differentiation to stay competitive in today’s market. To this end, small operators are blessed with the ability to pivot quickly with new product offerings. Conversely, large dispensary chains with corporate structures must go through rigorous steps before launching new products at their stores.
Small cannabis dispensaries can immediately “get out ahead” on new product trends as they arise. For example, you can offer rare cannabis strains or boutique extracts that none of the larger dispensaries carry.
By the time the larger dispensaries in your area catch up on the current trends, you can move on to the next one. We recommend making alliances with some of the top craft growers in your area to make this possible.
Every year, the cannabis industry grows more competitive. As this business evolves from an underground affair to a multi-billion-dollar enterprise, the scope and sophistication of cannabis dispensary operations grows exponentially. Within this ever-changing dynamic, many small dispensaries fear the wayside will leave them.
Yet, if you approach the market with creativity and zeal, you can make the additional market pressure work to your benefit. By focusing on critical facets like cross-training employees, lean operating principles and product differentiation, you can build a profitable and sustainable cannabis dispensary by making small size a competitive advantage.
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.
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!
All major industries took a hit during the COVID-19 pandemic, but in many states, cannabis dispensaries were labeled as essential, which has allowed the industry to continue with some alterations. The impact now will come from what innovations and improvements the industry can leverage going forward.
From changes to protocols and buyer behaviors to supply chain disruptions, there were many new hurdles for the industry in addition to the ones cannabis businesses already faced, such as funding. But the silver lining could be that businesses within the cannabis industry become less of a specialty and more ‘every day’ than ever before.
The effects of the pandemic on the cannabis industry
Overall, the industry has fared well, in part thanks to its distinction as an essential service in states where cannabis is legal. It’s possible states made this decision for the same reason that alcohol businesses were deemed essential in most places: hospitals are not equipped during pandemic times to take care of people who are being forced to detox or those suffering from anxiety because they don’t have access to their legal drug of choice.
In a multitude of ways, cannabis businesses have adapted to bring calm in a storm while at the same time making manufacturing adjustments to meet the CDC guidelines. For example, there is more attention placed on individually pre-packaged products for single use; something that is less sharable as an experience but eminently practical.
Another area that has shifted a little is in the limiting of the exchange and interaction between business owners and staff relative to the customers. It’s all in the aim of mitigating the risk of exposure, but it has changed the dynamic in many cannabis businesses. This is the new normal for the time being and the industry has adapted well.
Ultimately, retail cannabis businesses today are no different than the retail of candy, cigarettes or alcohol. Certainly, segments of the industry have still struggled. Lack of tourism and the curbside/take out circumstances at dispensaries took their toll. But without the opportunity to still conduct business in some capacity, 50-60% of all operators would have gone out of business. Plus, as many people use cannabis to offset medical symptoms, including pain management, there is a legitimate need for cannabis to be available. The pandemic has provided the opportunity for many who might not have tried it before to give it a chance to help them medicinally.
Behaviors have changed, including those of buyers
Driven by consumer interests, many dispensaries have adapted to provide curbside pickup options, delivery of online orders and more. That has meant that the customer also needs to be more knowledgeable about cannabis: the experienced consumer knows what they like and want and can make their choices at a distance. Someone who is new to cannabis use might find navigating the choices and options a little more difficult, without the help of experienced staff. The breadth of material online and the ability of some dispensaries to share content that helps the consumer to make choices, in the absence of walking around the dispensary, have been additional tools at the disposal of businesses.
That said, the cannabis industry today is not a vastly different one: it is adapting to the new rules and new reality. Whether this way of doing business—at a distance—is a temporary or permanent solution will be dependent upon what federal and state regulators dictate in the months ahead, but there is likely to be ongoing demand for being able to order online and keep social distance protocols in place.
An interesting example is the Ontario Cannabis Store (OCS) in Ontario, Canada. This is a government run shop that has retail as well as a robust online presence, with free delivery during the pandemic. This has facilitated an increase in new customers, which had already jumped, post legalization. People who might have felt uncomfortable going into a dispensary can still learn about cannabis online and order it, from the relative comfort and safety of their sofa.
Supply chain disruptions and the cannabis industry
The industry has long been focused on overseas suppliers. With the arrival of the pandemic and restrictions on obtaining products from other countries, supply chains have been disrupted for many cannabis businesses. That has forced many to shift their supply chains to more local manufacturers, in North and South America.
In the long run, this should have a positive impact for the industry, so that despite the short-term disruption to the supply chain, which is having an impact on the industry as a whole, there could be an upside for local producers, growers and manufacturers. It will take time to know how this will all play out.
Funding and other issues for the cannabis industry
For a new cannabis startup in these times, the key will be what it has always been for any business, just to a greater degree: due diligence. Companies that want to open a cannabis business, whether during the pandemic or not, need to evaluate the opportunity as one would any investment. It’s all about the numbers: data for the industry as a whole and specifically from competition. These days, that data is widely available and more and more consultants and investors have expertise in this industry. “Overall, there is more interest in the industry than ever before”
It’s vital to be extremely well versed, particularly for businesses that are relatively new in the industry, because the single biggest issue for many has and will continue to be funding and investment. The cannabis industry is no different than any other business, except for the fact that it is a specialty business. With that comes the need to look for funding among investors who have some knowledge or appreciation for the industry.
Some of the key concerns traditional investors will have include:
Regulatory differences from state to state: since cannabis is still illegal at the federal level, there can be an array of hurdles at state and local level that make cannabis businesses trickier to work with.
There are religious based/morality issues for some lenders in dealing with the industry. These aren’t dissimilar from issues with other industries such as adult entertainment and gaming. It’s also fair to point out that, morality aside, these industries have thrived in the last several decades.
So, while traditional banking institutions will often deal with the proceeds from the cannabis industry, including allowing bank accounts for these businesses, there is far less of a chance that they would invest in a cannabis business, for fear of risking their license. They can even go so far as to refuse to include income from a cannabis business in the determination of a loan application.
There are more unique lending or investing groups that either specialize in cannabis or are starting to open their books to specialize in cannabis. Overall, there is more interest in the industry than ever before, as it becomes normalized in American society: more participants and more insiders of the industries that are willing to invest in the right idea.
Will legalization be more likely in the future?
The fact that cannabis businesses and dispensaries have been deemed essential services during the pandemic, where they legally operate, has shed new light on the relevance of these businesses and the advantages of more widespread legalization.“Consumers will help drive the innovations as they demand clean consumption methods”
In fact, the pandemic has normalized a lot of new behaviors, including the acceptable use of cannabis to help with stress and anxiety. People are, perhaps thanks to staying at home more, doing the legwork to understand how cannabis could be useful to them in managing their stress. The medicinal benefits of cannabis have long been researched and understood: consumers are coming into the fray to express their interest in it, which can only fuel the possibility of more widespread legalization.
Add to this the fact that the cannabis industry is a growth industry. There are companies and jobs that aren’t coming back, post-pandemic. There is an opportunity to grow the cannabis industry to the general benefit of many, both as business owners and employees. The revenue generated from taxation following legalization would also benefit many state coffers. Federal level legalization would be the panacea to eliminate the mixed message, state by state regulation that currently exists.
Opportunities for innovation, moving forward
As more and more people become interested in the industry, and as cannabis use is normalized within society through legalization, the opportunities for the industry can only expand.
For an industry that started on the simple concept of smoking cannabis, the advances have already been legion: edibles, nanotechnology-based formulations for effective, clean consumption and many more innovations.
In a world that increasingly sees smoking as a negative, for the obvious impact to lung health, there are so many opportunities to grow the industry to find consumption methods that are safe and still deliver the impact of the inhaled version.
Here again, consumers will help drive the innovations as they demand clean consumption methods. The technology is available to make this possible; it only takes innovation and education to find the best ways to move this industry forward.
As legalization expands—and particularly if it is dealt with at the federal level—the industry will be able to capitalize on existing infrastructure for manufacturing and distribution, allowing new businesses to grow, get funded and thrive in the new normal.
This year, many issues have gotten put on a shelf as the world has dealt with the COVID-19 pandemic. The legalization of cannabis in many states has been one of those issues. But this time on pause has given the industry a chance to identify how it would like to move forward as an emerging market that has many benefits across medicine, from mental health to the economy.
For many of these reasons, cannabis use is coming out of the shadows and there has clearly been a shift in recent years from cannabis being an illicit item to becoming a boutique product in many circles. The transition of cannabis’ image from that of the stoner in his parent’s basement to the “it” consumable for the jet set has as much to do about science as it does sophisticated branding.
Approximately 24 million Americans in 2019 have used cannabis, about 10% say they consume it for medical purposes based upon a growing body of evidence supporting the use of medical cannabis for a number of conditions. There are also economic reasons why legalizing cannabis makes sense including increased revenue for the government, job creation and more.
As cannabis becomes legal across America—11 states have adopted laws allowing for recreational use, while 22 others permit only medical cannabis—it’s finally becoming the sprawling business its proponents have long envisioned.
And this has moved the mainstreaming of cannabis in today’s society from a taboo illicit drug to now being openly discussed at dinner tables.
First of all, our hats need to be taken off to the cannabis advocates who over the last 20 years have shaped an emerging industry, educating society and the government on the benefits cannabis can offer based on science.
The global cannabis community has collaborated with regulatory bodies to establish compliance and regulations as a starting point to help the general public understand sourcing products from legal entities is a safer way to get quality product to consume that is not compromised from unregulated producers.
In addition, technology advancements within the cannabis space have led to sophisticated track and trace solutions of raw materials and products through the supply chain. The data captured within these systems allows cannabis brands to tell a compelling authentication story to end consumers based on scientific facts.
This all leads to an emerging market that has open transparency, full traceability and establishing trust with consumers. The early master growers now work hand in hand with designer laboratories, perfecting and protecting their IP. A sophisticated supply chain has been put in place so consumers know where their cannabis was grown and by whom. Consumers understand which strains have been harvested and what hybrid models have been created. This is certainly no longer a bag of weed you purchased from a neighborhood friend, but a complex, innovative industry with established brands that have celebrities, ex-politicians and well know business executives involved now and the advocates that has been leading the charge for over 30 years are still the backbone to educate the masses on the benefits cannabis and hemp will bring to mankind over time.
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