Tag Archives: labor

The Top 4 Things Cultivation Directors Should Discuss With Their Operations Manager Right Now

By Lucas Targos
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Communication is key for efficient interaction between cultivation and business functions at any cannabis operator. So, what are the top four things cultivation directors should be discussing with their operations manager right now, as we face an uncertain Summer 2020 and unique COVID-related challenges (product demand uncertainty, reduced workforce, and immediate response to problems and issues):

  • Labor requirements
    • Operators should be discussing “Who, and what, do I need to operate this facility and how do I make operations more streamlined without diminishing quality, consistency, and yield?”
    • Efficient operations should focus on labor workflow and circulation and document a clear understanding of how employees will move through the spaces while doing their jobs.
    • Having a “less labor” philosophy and understanding—a ‘first in and first out’ mentality—drives down cost of production.
    • By limiting employees’ need to cross paths and segregating processes (e.g. harvest, distro, packaging) in a facility, you can maintain biosecurity and limit the risks of cross-contamination
    • When working with fewer staff members, everyone should be trained to:
      A greenhouse facility that urban-gro helped bring to operation.
      • Operate all necessary equipment
      • Perform keys tasks like nutrient deliver or preventative maintenance
  • Supply chain
    • What sort of products do I use to cultivate, process, distribute and how will potential shortages affect my use/cost related to these?
      • Consider products and supplies that you can order in bulk
      • Examine and update your chemical regime to focus on products that are cheaper to freight ship, and located within the US or even your state
      • Mitigate the risk of availability by using products that are have no shelf-life or expiration issues, and those where the supply chain has not yet had disruptions
  • Automation and technology
    • What’s the availability to allow for remote monitoring and controls?
      • Cultivators can take some of the load off the reduced staff by automating critical tasks
      • Remote monitoring solutions will also allow for faster notification of crop issues
      • Integrating preventative maintenance tasks like equipment schedules and maintenance can increase efficiency
  • Yield expectations
    • Ensure that conversations on yield expectations are as transparent as possible and set realistic and achievable goals
    • Build business models based on the correct numbers that take into account productions numbers on ‘high yield’ genetics versus lower-yielding plants (yield versus price)
    • Ensure you have a detailed plan that combines both plant density and production goals

Scotland Moves Forward With Its First Cannabis Farm

By Marguerite Arnold
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The village of Langholm, known locally as the “Muckle Toon,” with its most famous descendent being Neil Armstrong (the first man on the moon) is about to get another first. Namely, it will be the location of the first Scottish cannabis farm.

Father and son entrepreneurs William and Neil Ewart (who also own an agricultural farm, raise Angus cattle and have a racehorse stable) have obtained permission to produce enough cannabis to create 200 liters of oils a year. The production facility is also expected to employ about 50 people – from scientists to growers and IT staff.

However, this is just the beginning. Despite being given planning permission, the Ewarts will now have to apply for a license to actually produce medical cannabis.

Reform in the UK marches on

At present, British patients are in one of the toughest situations anywhere cannabis reform has ostensibly started to happen.

Domestic production, in other words, is a vitally needed part of British reform.The UK has moved forward on cannabis reform in fits and starts – one step forward and several back, for the last several years. Late last year, a full year after the drug was approved for prescription, in an abrupt change, cannabis was denied to everyone but Epilepsy and MS patients and those suffering from nausea due to chemo treatments. NICE, the agency in the UK who sets domestic prescription policies, shamefully excluded chronic pain patients from the new guidelines. This is despite the fact that there are chronic pain patients in the UK who had received prescriptions for cannabis after the law changed in 2018. Not to mention the fact that this subset of patients represents the largest percentage of people prescribed the drug in every other jurisdiction, from Colorado to Canada.

Those who have “qualifying conditions” must now find a doctor to prescribe – still no easy task. If GW Pharmaceuticals’ products (Epidiolex and Sativex) do not work, patients must then import the drug, at great expense from overseas. Even though this importing process has gotten significantly easier in the last months, supplies are still highly expensive imports from elsewhere (mostly Holland and Canada). This runs, at minimum, about $1,000 a month.

UKflagDomestic production, in other words, is a vitally needed part of British reform. It is also seen, increasingly, as a high value crop that can be exported elsewhere. Time will tell however, if the expensive British labor market can compete with product grown in Europe (in places like Spain, Portugal and Greece).

So far, the UK has lagged behind Germany, which itself went through a torturous and expensive process to not only approve its first cultivation bid, but is also now in the process of lowering prices. The first German grown cannabis is likely to hit pharmacy shelves by the third or fourth quarter of 2020. Don’t expect any cannabis exports to the UK, at least for now however, as there is not enough domestically cultivated German product to even serve existing German patients.

An Aberdeen clinic plans to be the first Scottish private facility to prescribe
As of mid-February, the privately run Sapphire Medical Clinics announced plans to become the first Scottish private medical clinic to prescribe cannabis. The facility will require a referral from a regular GP. This has so far, not been popular with the National Health Service (NHS). Some administrators have expressed concern that the process will result in doctors using their time to funnel patients into private healthcare to receive treatments not available or recognized by the NHS.

That said, as Sapphire has pointed out, the approximately 1.4 million patients in the UK have few other options beyond the black market.

Cannabis reform, in other words, is clearly inching forward in the British Isles. One cultivation facility and prescribing clinic at a time.

The Impact of Brexit on the Global Cannabis Industry

By Marguerite Arnold
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HMS Great Britain has now set forth from its European home port for another intriguing and very British escapade on the high seas.

So far the jury is out.

It could be the beginning of the next British Golden Age, Spanish Armada and all that. Or could it could end up (more likely) somewhere up the Khyber Pass (a sordid misadventure of British Imperialism that did not go well in the 19th century with global implications still reverberating to this day). For Netflix fans of The Crown, think “Suez Crisis” as a more recent and apt analogy. Starting with as much as a 6.7% reduction in domestic GDP already on the horizon.

Snarky historical analogies and nostalgia aside, how will Brexit influence and shape a global cannabis industry, starting at home?

The UK Is Not Actually in Regulatory Free Fall

The first thing to realize is that most of the puffery around Brexit was that with the exception of labor conditions, there is little free choice in the world of trade anymore. The players who get export and import licenses, for anything, have to conform to basic equivalency rules, no matter what they are called.

This applies to cannabis in a big way. No matter how the UK market develops domestically in other words, and that is a separate discussion.

Currently, shamefully, the domestic medical guidelines for prescription of cannabis exclude chronic pain patients and a few other obvious groups. The NHS medical market in other words, is a monopoly, set up by the current and previous governments, mainly serving GW Pharmaceutical patients who qualify for Sativex and Epidiolex. Not to mention company shareholders.

Everyone else, including those for whom these drugs do not work well, or work less well than other alternatives, are left in an international trade negotiation in their living rooms as they and or their children suffer.

The import barriers for cannabis – both from Europe and from Canada are absolutely in the room and in a very personal way for the British right now.

How they actually define cannabis, will also clarify. This will be driven now by the UK’s biggest import partners – namely Europe, the United States and Canada (although South Africa and Australia of course, will always be in the picture).

Which regulatory scheme the UK adapts, including for cannabis and of both the THC and CBD variety (not to mention other cannabinoids), in other words, will at minimum have to be broadly equivalent with all of the above. Not the other way around. No matter how much the Food Standards Agency (FSA) wants to fuss and fiddle with “Novel Food.” That alone is a canard.

Cannabis is a plant. It is time to start acting like that. And it is no more “novel” than tomatoes in many, easy-to-understand environments, including commercial ones. Not to mention will increasingly be regulated like commercial food crops – even if those crops are then also bound for dual purpose medical use.

The regulators will eventually get there – but not without a lot of tortuous twists and turns.

A “New” Market? Not So Much…

There is a lot of consultant palaver and baloney in the room right now. There is no more a new market in the UK as there was in Germany (or Canada or Colorado). Local producers are already organizing, and on the hemp front. The big ones are hip to regulations and are getting certified to enter it. Everyone else is being left on the dangerous sharp end of police raids, even with prior local approvals.

GW logoThat said, foreign producers are of course looking at the UK right now, and in a big way. The lock GW Pharmaceuticals has on the domestic market will not hold long. European producers are absolutely in the room (starting with Tilray in Portugal and Alcaliber in Spain). Not to mention what is going on in other places right now, even if of less well-known corporate branding.

Every big Canadian company is already in the room in the UK, and many Americans are now beginning to show up in the market.

However, for the most part, such ventures are doomed outside of conference sponsorships until the regulatory questions are answered if not met.

And that includes federal certifications that are easy to find – there is no one single authority that handles cannabis internationally. And there never will be. Supply chains are already global.

A Perfect Export Market

One of the biggest, so far widely discussed questions is who in Europe will start exporting to the UK (forget Holland for the moment). Not to mention producers in Spain, Greece, Poland if not Macedonia. That conversation is also on the table now. For the first time, so is Germany, and on the medical side.

Pharmaceutical producers in particular who meet international pharma standards may be the best hope yet – although right now policy makers are still looking at cars rather than cannabis to help keep Germany’s trade export quota where it feels “comfortable” domestically.

Image credit: Flickr

That too will change. And fairly quickly. See Greece, if not South Africa.

The political roil of branding and politics afoot in Germany right now makes this new kind of export market idea as a part of economic development, an inevitability.

Not to mention, at least for the present, a reverse trade in regulated British CBD products – if producers are smart about regulations – throughout the continent right now.

Of all countries, outside Switzerland, the UK has the ability to develop a broad and intriguing market in the EU – but only if they are compliant with regulations in Europe.

And this is where the policy makers in Parliament and 10 Downing Street have already misjudged if not broadly misled, not in a regulatory environment of their own, but in fact in a diplomatic “room” where the rules are already set via international standards and certifications, not to mention treaties.

Taxes & Cannabis: 280E, R&D Credits, 199A & Qualified Opportunity Funds: Part 2

By Zachary Gordon, Jason Hoffman
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Editor’s Note: This is the second piece in a two-part series delving into tax issues. Part one discussed tax code 280E as it pertains to cannabis businesses. Part two will go into research and development credits, 199A and a discussion of risk as it relates to Qualified Opportunity Zones. 


While 280E is the most influential code section for the cannabis industry, structuring never happens in a vacuum. There are many open questions that each business must answer for themselves without court adjudication. We believe that among the riskiest of questions is whether a cannabis business can claim research and development credits.

There is no clear legal authority that either allows these credits or disallows them but certainly utilizing such credits comes at great risk. At the beginning of this article we talked about Congress and the purpose of 280E. Congress’s intention was to make sure that only the minimum required tax deductions were available to Schedule 1 and 2 sellers. A cannabis business receiving a research and development credit would not be with the intension of Congress. While the credits would be computed based on COGS expenditures, at this time we do not believe that a cannabis business should take this credit. Disallowance of COGS would create a constitutional challenge which is why Congress allowed the COGS deduction. Disallowance of Research and Development Credits does not open up the same constitutional issue since the credit is not part of COGS although calculated based on COGS expenditures. 280E states very clearly that credits arising from other code sections are disallowed in the entirety.

More recently the Tax Cut and Jobs Act (TCJA) opened up new issues for cannabis companies that are still unfolding. Two of the most publicized are Qualified Opportunity Funds and Section 199A, the 20% deduction (Qualified Business Deduction).

The 199A deduction allows eligible pass-through entities to claim an additional deduction of 20% of the income (subject to certain limitations) at the individual level potentially lowering the tax rate from 37% to 29.6%. While the American Institute of Certified Public Accountants (AICPA) and others have asked the IRS to clarify if 280E would make a cannabis business ineligible, the final regulations on the subject did not address this issue. There are other significant limitations and hurdles in 199A regulations that any business would have to first pass to be considered for the rate deduction. If a cannabis business meets all other eligibility and limitation criteria, should the pass-through income to their investors be qualified income under 199A? The answer will depend on whether the courts will treat this “deduction” as falling under the general prohibition of 280E.

We believe that there is a reasonable chance that the courts will allow the 199A deduction for cannabis companies. That does not mean, however, that we advise cannabis companies to claim this on their pass-through returns as Qualified Business Income. Much like everything else, it depends on the particular business and the risk profile that management is willing to tolerate. This is one area of tax law that is sure to be challenged in court. The more risk-averse business should pass on claiming this deduction on their returns, but monitor development with an eye to amending at a later date if favorable precedent emerges. If the amounts are large enough, consideration should be given to applying for a Private Letter Ruling, but that also has its own tax risks.

Another new tax incentive that was in the TCJA was Section 1400Z or Qualified Opportunity Zones (QOZ). The incentive allows for the deferral of capital gains until December of 2026. The use of 1400Z also results in up to a 15% decrease in capital gains tax- and tax-free appreciation if all requirements are met. While the IRS has only released proposed regulations and we anticipate significant changes to them when they are released as final, there was nothing in the proposed regulations limiting cannabis businesses from using Qualified Opportunity Funds (QOF) in their structure. It is interesting to note that the TCJA and proposed regulations did list other types of businesses that could not make investments under 1400Z along with all its benefits. Liquor stores, golf courses and sun tan parlors were among those listed but cannabis growers and dispensaries were not.

As the industry continues to mature, new issues and precedents will require CPAs and attorneys to find new solutions to best serve the industry.Using Opportunity Zones to entice investors sounds like a great opportunity, but there are significant risks. The first risk is that the proposed regulations, while currently proposed, may not be final. There is always a chance that the IRS will take a different position when the final regulations are released and add cannabis to the type of businesses that do not qualify. Another risk, and one that was previously mentioned as part of 199A and other areas of structuring, is that the IRS and the courts can always disagree with the taxpayer’s position. This is a new area of tax law and will eventually be litigated. The loss of the Opportunity Zone benefits can significantly change the return to the investors and lead to other issues.

All of these issues come into play when structuring businesses in this industry. These issues must be evaluated as they pertain to the business needs. This can be very complex and requires a great deal of research for each business opportunity. We have found that professionals operating in this industry like to know about all of their options. The most important thing we can do for the industry is to continue to educate the professionals working in it.

Accountants should be available to assist their clients and their clients’ attorneys with structuring techniques aimed at asset protection and minimizing 280E disallowances. Accountants should also be ready to speak to the questions outlined above and be prepared to explain the risks associated with each choice. As the industry continues to mature, new issues and precedents will require CPAs and attorneys to find new solutions to best serve the industry.

Taxes & Cannabis: 280E, R&D Credits, 199A & Qualified Opportunity Funds: Part 1

By Zachary Gordon, Jason Hoffman
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Editor’s Note: This is the first piece in a two-part series delving into tax issues. Part one discusses tax code 280E as it pertains to cannabis businesses. Part two will go into research and development credits, 199A and a discussion of risk as it relates to Qualified Opportunity Zones. Stay tuned for Part two coming next week!


When building a knowledge base in the cannabis industry as a CPA, one’s tax research typically starts with Internal Revenue Code (IRC) Section 280E. For those that are unfamiliar, 280E is only three lines long. With this in mind, we at Janover realized that we needed to understand the context for this highly influential tax section.

The genesis of 280E dates back to 1981 with a Tax Court case: Jeffrey Edmonson v. Commissioner. The decision in this case was that a seller of cocaine, amphetamines and cannabis could deduct most business expenses, cost of goods sold, packaging, home, phone and automobile expenses relating to the seller’s illegal business.

In 1982, 280E was enacted to reverse the Edmonson decision and deny sellers of Schedule 1 or 2 controlled substances the right to deduct business expenses. Under the Controlled Substances Act, the federal government defined Schedule 1 drugs as drugs that have no currently acceptable medical use and a high potential for abuse. Since cannabis is classified as a Schedule 1 drug, cannabis businesses were unable to deduct most business expenses.

To get a better understanding of what the legislators were trying to accomplish, House and Senate reports provided insight into what their goals might have been. Under the Explanation of Provision, the Senate Report reads:

All deductions and credits for amounts paid or incurred in the illegal trafficking in drugs listed in the Controlled Substances Act are disallowed. To preclude possible challenges on constitutional grounds, the adjustment to gross receipts with respect to effective costs of goods sold is not affected by this provision of the bill.

As the Senate Report explanation provides, 280E specifically excluded cost of goods sold (COGS) from the disallowance of deductions. This treatment was affirmed by the Tax Court in 2012 in Olive v. Commissioner (139 T.C. 19 2012).

To date, there are not many cases that have dealt with the tax issues of 280E. In a 2007 decision involving Californians Helping to Alleviate Medical Problems (CHAMP), the Tax Court ruled that a taxpayer may deduct expenses allocable to an affiliated business that was separate from the entity “trafficking in a controlled substance.” In CHAMP, the legal caregiving business, which was a separate business, was able to deduct the allocated portion of shared expenses. This set a legal precedent that allowed a taxpayer engaged in the selling of a Schedule 1 or 2 controlled substance to distinguish expenses incurred on behalf of other non-prohibited business lines and deduct these expenses.

In addition to these court cases, tax professionals can rely on IRS Chief Counsel Memorandum CCA 201504011. The IRS Chief Counsel released this memorandum in January 2015 in order to respond to questions the IRS was receiving from practitioners.

Although Chief Counsel Memoranda, in general, may not be cited by taxpayers as precedent, this memorandum is the current and best authority outlining the IRS’s position with respect to the extent to which a cannabis business may deduct business expenses. The memorandum also refers to IRC Section 162, ordinary and necessary business expenses that would be disallowed, as well as separately identifying certain direct and indirect business expenses that would be allowed. Citing methods in Treas. Reg. 1.471, the memorandum states that a cannabis producer may allocate to inventory and COGS direct production costs, including direct material costs (Cannabis seeds or plants), direct labor costs (e.g., planting, cultivating, harvesting, sorting, etc.), and transportation or other costs to acquire of the cannabis. It also indicates certain indirect costs that may be taken as COGS.

As the industry continues to mature, more cases are finding their way to the Tax Court. On June 13, 2018, the Tax Court issued a ruling in Alterman v. Commissioner that specifically disallowed the use of 263A under 280E and applied only Section 471 to determine COGS. While we need to follow the facts and circumstances of each case, the broad language used might very well disallow capitalizing of inventoriable costs for companies subject to 280E.

IRC Section 471 is the general rule for inventory accounting for tax. IRC Section 263A is the uniform capitalization rules for tax. Most businesses need to utilize both 471 and 263A when accounting for inventory and to properly capitalize costs into COGS.This opinion may have lasting effects on the part of the industry trying to create brands associated with their cannabis products.

Many resellers and retailers of cannabis thought they could use 263A to capitalize more costs into inventory decreasing their tax burden. The Chief Counsel Memorandum disagreed and more recently the Tax Court in Patients Mutual Assistance Collective Corp v Commissioner sided with the IRS and upheld some of the precedents set in Alterman v. Commissioner. In siding with the IRS, the judge concluded that a taxpayer who is subject to 280E can only deduct costs of goods sold under 471 as the IRC existed when 280E was enacted (in 1982). The taxpayer in the case used two arguments that were not new to the cannabis industry, but to no avail. The first argument was that the business was not trafficking in a controlled substance because the government had abandoned a civil forfeiture action. The second argument that was rejected was that a portion of the business involved branding, marketing and the sales of other non-illegal products. The claimant tried to convince the court that deductions related to these operations should not be subject to the same disallowance of deduction as outlined in 280E.

This second argument is very important for structuring purposes. The court used a significant portion of its opinion to address why the entire business is integrated and completely subjected to 280E. This opinion may have lasting effects on the part of the industry trying to create brands associated with their cannabis products.

This case has even more implications given part of the ruling in which the courts stated that being state licensed in no way effected the Schedule 1 determination at the federal level and, therefore, subjected them to 280E. The judge went so far as to separate the Department of Justice, which enforces the Schedule 1 status of cannabis, and the Department of the Treasury, which has full authority and enforcement rights to treat cannabis as a Schedule 1 drug subject to 280E for income tax purposes. This ruling made it clear that even if the Department of Justice is not pursing criminal charges against state-licensed cannabis businesses the IRS is not precluded from fully enforcing the Internal Revenue Code.

5 Compliance Reporting and Notification Requirements That You May Not Know About

By Anne Conn
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New cannabis businesses must demonstrate proof of compliance to myriad laws and regulations as part of the initial license application process. And once a license is issued, it is easy to prioritize day-to-day business operations over ongoing compliance reporting requirements especially when sales are booming and compliance requirements are multi-layered, vague or obscured in non-cannabis specific programs and regulations.

But seemingly benign neglect of some minor reporting requirements can have major consequences to new and established businesses alike.

This article explores five compliance reporting requirements that cannabis businesses may not know about, and suggests ways to maintain a strong compliance posture across all regulatory agencies.

Pesticide Reporting

All licensed growers are required to prove compliance to state pesticide usage regulations. However, expectations on how and when to provide that proof of compliance vary greatly from state to state.  Furthermore, the responsibility of education and enforcement for pesticide usage in the cannabis industry often falls to non-cannabis specific agencies such as state departments of agriculture or environmental compliance.

For example in California, cultivators must report detailed monthly pesticide use reports via the State’s Agriculture Weights/Measures Division reporting portal, while Washington State regulators simply expect cultivators to keep records locally on site and provide them when requested.

With so many places to look, the best place to start your pesticide reporting requirement search is with your local agriculture department. They should be able to answer your questions and provide you with a list of resources to help you better understand how to comply with state pesticide usage and reporting regulations.

Hazardous Materials Reporting

Like pesticide use and reporting, hazardous waste handling and reporting requirements are complex and vary state to state. In fact, there may even be nuanced variations in handling requirements at the county level. The best approach to ensure compliance with a complicated set of regulations is to start by consulting your local county fire department. They will have the most specific set of rules for hazardous materials handling and reporting and can help you develop a site-specific compliance plan.

Two OSHA reporting requirements

Depending on how your cannabis business is classified, you may be required to keep injury and illness incident records and provide reports to the Occupational Health and Safety Organization (OSHA) for specific time periods.

Contact your business insurance provider’s loss prevention representative for more information about how your business is classified, which specific OSHA reporting requirements apply to you, and how to stay in compliance with applicable OSHA requirements.

Click here to learn more about how OSHA organizes reporting requirements by business type.

A note of caution here: OSHA non-compliance penalties can be steep and “I didn’t know I was supposed to do that” is not an acceptable defense when it comes to explaining any OSHA violations.

Labor Law Notification Requirements

Federal labor law requires that you notify employees of their rights. At a minimum, you post information regarding wages and hours, child labor, unemployment benefits, safety and health/workers’ compensation and discrimination in a conspicuous place where they are easily visible to all employees. Some states requires additional information be posted in a similar manner, so it’s important to be sure that those notices are posted along with the federal requirements.

This is a simple, yet easily overlooked, requirement for all businesses, regardless of industry. Ask your insurance provider for a copy of the notice to print and post right away (if you have not already) for a quick compliance win!

These five reporting and notification requirements may seem tedious, overly complicated and burdensome in the face of day-to-day business operations, but compliance to these requirements not only protects your business and employees, it also enhances the overall reputation of the industry. The good news is that regulatory agencies welcome a proactive approach and are happy to work with cannabis businesses to provide guidance and information for developing compliance plans.

Canopy Growth and Spektrum Cannabis Form Alliance With Spanish Alcaliber

By Marguerite Arnold
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Canopy Growth (based in Ontario, Canada) and its subsidiary, Spektrum Cannabis GmbH (in St. Leon-Rot, Germany) have been making waves all year.

As of early September, Canopy and Spektrum also announced their next strategic European move. They have just entered into a supply license agreement with Alcaliber, S.A., a leading Spanish pharmaceutical company. Alcaliber specializes in research, as well as the development, breeding and preparation of plant-based and other raw materials into narcotic medicine. More significantly, it is already a leading company in the global pharmaceutical and narcotic space.

According to Bruce Linton, chairman and chief executive officer of Canopy Growth, the partnership opens a lot of doors. “This agreement gives us additional resources to aggressively enter the European market where federally permitted by law, while we continue to work to establish our own complimentary production footprint for cannabis cultivation, value-add oil extraction and Softgel production in the European Union,” says Linton.

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

Alcaliber is one of the largest producers of morphine in the world (27% of global production) and supplies 18% of its codeine. Cannabis is also considered a narcotic drug in Europe. This kind of track record is exactly what governments are looking for as they figure out how to integrate cannabinoids as medical products into existing pharmaceutical production and distribution. They are equally excited about the possibilities this partnership brings, according to Jose Antonio de la Puente, chief executive officer of Alcaliber. “There is a clear demand for pharmaceutical cannabis produced in accordance with pharmaceutical standards and the expertise we have developed manufacturing narcotic derivatives for over 40 years,” says de la Puente.

The agreement is also the first of its kind between a Canadian cannabis company and a separate, established, international pharmaceutical company. The fact that Alcaliber is located in Spain (albeit Madrid and not Barcelona) makes this new alliance even more interesting, and for several reasons. Not just in Europe or even Canada for that matter.

In the EU? GW Pharmaceuticals, the only other existing pharmaceutical manufacturer and grower of cannabis in Europe, and based in the UK, just got major European if not global competition.

And then of course, there is what is going on Down Under. Australian and Tasmanian companies moving into the game now (with pharma connections, background in opioids and a global footprint) as the medical market in Australia begins to take shape, are about to go head to head with the Canadian-Spanish-German alliance now forming on the other side of the world.

Cross-Continental Plays Are Now Forming

Just as in the U.S., Europe is turning out to be literally a state-by-state chess game of legalization, regulation and supply. Unlike the U.S., however, European countries are bound by both European law and in some cases, sub-regional agreements – like what exists in the so-called Schengen States.

However, even here, the new world is graduating into federal and regional law. And how that will play out in Europe, where the focus is still largely on medical use, is going to be interesting.

What does this mean for Canada’s largest LP? A strong, multi-country presence in the medical cannabis space that, strategically, is par to none other. There are other Canadian LPs who are planning production facilities in other EU countries of course. And some Canadian companies who appear to see Europe as one giant export market. Germany is just one of them. However, the German-Spanish connection is interesting for several reasons: The two most interesting markets globally right now from both a strictly medical perspective with a clear pathway to much broader acceptance as it transitions into some kind of recreational reform, are Spain and Germany. While the former has not signed up for full-boat medical acceptance, the recent independent assertion by the Catalonian government that they would formalize the cannabis club system is seen here as one more step towards the inevitable. So are ongoing and significant Spanish medical cannabis trials.

This move also gives Canopy and Spektrum something else: access to much cheaper Spanish labour and production. This means that no matter where they grow their crops in Europe, or process them, the company now has a two-country supply system for a multi-country medical market that is just waking up. And that is highly valuable right now.

Why?

It gives Canopy direct market entry into several European states, with federally approved, medical grade cannabis and medical products. Those who are coming to the rest of Europe from a Spanish base only, will not at this juncture meet strict medical growing requirements for the German market for starters. On the Spanish side of things, this also means that cannabis clubs might be pressured to stop growing their own (at least outside of Catalonia) and rely on more corporate entities to actually grow and process the plant.

What Does This Mean For Euro Industry Development?

Canopy, strategically, has been at the forefront of interesting strategic plays in the global industry for at least the last 18 months to 2 years. They have eschewed the American market (unlike other Canadian competitors) in lieu of other game elsewhere. However their current expansion strategy, geolocationally, has clearly also been at least 12 to 18 months ahead of just about everyone else.

The cross-country chessboard game is also something that other Auslander (foreign or international) companies are clearly trying to play, particularly in Europe. This is true of both actual cannabis production and distribution entities as much as tech. The hop-scotching of both Leafly and Weedmaps across the continent in search of a business strategy that makes sense is just another face of this. Advertising rules in Europe, including online, and especially for cannabis, are a lot different from say, California state law.

However what Canopy appears to be doing is establishing both a brand and production presence in a way that guarantees not only European entry, but potentially dominance in the medical market as the market here continues to expand and open up.

What they are also doing with this announcement is telling the German government, for one, that they can supply patients in the EU with EU-sourced product, even if not grown or produced in Germany itself. This alone will help keep prices down as German cannabis production gets underway over the next several years.

It will also help Canopy deal with what is expected to be at least supply pressure as of next year as the Canadian recreational market gets underway. There is a very good chance that Spanish grown cannabis might end up not only in the rest of Europe but will also be shipped back to Canada if the supply problems there are severe enough.

Whatever the end result, this is an interesting alliance, and coming at an interesting time for not only the German cannabis industry, but a regional market as well. And further, it is also clearly a play with not only hemispheric implications but global ones.

Organic Cannabis Association & Ethical Cannabis Alliance Announce Merger

By Aaron G. Biros
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The Organic Cannabis Association and Ethical Cannabis Alliance announced today they are merging into one organization, the Cannabis Certification Council (CCC), according to a press release. The new third-party certifications include “Organically Grown” and “Fairly Produced”, granting producers a seal for marketing if they achieve the certifications.

Ashley Preece, executive director of the Cannabis Certification Council

According to Ashley Preece of the Ethical Cannabis Alliance, now executive director at CCC, they plan on starting with the “Organically Grown” certification as first certification to market. “We are launching with Organically which will include robust labor standards as well as standards that go beyond [USDA] Organic,” says Preece. “The USDA Organic standard is watered down and we want to expand on proper horticulture practices so it relates directly to cannabis producers.” The process of designing that certification involves using that USDA Organic certification as a building block to draw from but not directly adopt.

“We will start by pulling from Organic and Fair Trade standards, then we will have a technical advisory committee (TAC), made up of multi-stakeholder agricultural industry and cannabis industry professionals to give input and adjust the standard accordingly,” says Preece. “From there we will have a pilot program, engaging with producers abiding by the standards’ requirements. After the pilot phase, we make final adjustments before bringing it to market.” In order to make sure their certification works across the board, Preece says they are engaging with stakeholders around the country and eventually globally. “We need to engage each different community to make sure this is applicable on a national level.” Preece also says they plan staying abreast of other standards, such as ASTM International’s, but those are geared more towards production safety. “We are looking towards more robust Organic and Fair Trade standards, and ‘cannabinizing’ them,” says Preece.

Photo courtesy of L’Eagle Services

David Bronner, a prominent advocate of drug policy reform and CEO of Dr. Bronner’s, a top-selling soap brand in the US market place, will be providing seed funding and a matching grant to the CCC. “We are committed to making socially and environmentally responsible products of the highest value, and we are excited for the CCC to begin driving that ethos in the cannabis industry,” says Bronner. “The Cannabis Certification Council (CCC), with its unique mission, is a perfect vessel for us to support our values in the cannabis space.”

Preece says the “Fairly Produced” labor certification is going to be based off of Fair Trade practices. “That will include living wages per community and taking options of ownership into consideration, including different business models where employees might have shares or partial ownership,” says Preece. “As we know, this industry has come from the illicit market, where we saw a lot of inappropriate working environments, gender relations and pay schedules. So we want to ensure that workers have contracts in place, they are treated fairly just as any other industry and we want to mitigate any strange encounters that might have seeped into this regulated market.” Founding board members include Laura Rivero of Yerba Buena Farms; Amy Andrle of L’Eagle Services Denver; Nick Richards of Dill and Dill and Vicente Sederberg; and Ben Gelt of Par, with Ashley Preece as executive director. “This is a huge step for the cannabis industry,” says Preece. “Our collaboration reflects the priority of the mission ingrained in both parties, and together we will immediately be greater than the sum of our parts.”