Tag Archives: marijuana

Rhode Island Embraces Adult Use Cannabis, But With A Bitter Tax Pill

By Abraham Finberg, Simon Menkes, Rachel Wright
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Although Rhode Island is the USA’s smallest state, it has traditionally taken an out-sized dislike for cannabis and its users. It first banned cannabis in 1918 and, up until recently, had some of the strictest mandatory minimum sentences for large-scale possession, sentencing those with more than 5 kg (11 lbs) to 20 years’ imprisonment and fines of between $25,000 and $100,000.

Rhode Island’s Change of Heart

These days, however, the Ocean State has turned over a new leaf. It legalized medical cannabis in 2006, and on May 25, 2022, legalized adult use sales as well. Starting in December 2022, Rhode Island residents could purchase cannabis from five of the six medical cannabis dispensaries across the state which have also been approved to sell to adults.

Over the course of 2023, the state is expected to issue licenses for an additional 28 dispensaries, including a portion reserved for social equity applicants and worker-owned cooperatives. At the same time, 33 cities and towns across Rhode Island voted to determine whether cannabis businesses would be allowed in their jurisdiction. 25 of these municipalities ended up approving these measures.

Social Equity

Like many retail-legal states, Rhode Island has enacted social equity support for cannabis licensees. The state is divided into six retail license zones, and within each zone, one retail license will be reserved for a social equity applicant and one for a worker-owned cooperative. In addition, the state’s cannabis legislation provides for a $1 million fund to help support the social equity license recipients. Funded by all fees collected from adult-use cannabis businesses, this assistance fund will provide grants, promote job training and workforce development, and administer programming for restorative justice. The legislation also establishes a process whereby individuals may have their misdemeanor or felony convictions for cannabis possession expunged.

How Tax-Friendly Toward Cannabis is Rhode Island?

The Ocean State still has a way to go to be considered a truly cannabis-friendly state. For one thing, the state is forcing both individuals and corporations to conform to Internal Revenue Code section 280E which disallows deductions and credits for expenditures connected with trafficking in controlled substances under the Controlled Substances Act, schedule 1 or 2. This means cannabis companies will only be permitted to reduce their sales by cost of goods sold when determining their taxable income on their state tax returns unless they decide to take more aggressive tax positions. For example, with a conservative IRC 280E tax position, a cannabis dispensary would only be allowed to deduct the cost of the product purchased and the cost to transport the product to the dispensary, while disallowing such significant expenses as rent and payroll. All cannabis businesses must forgo expense deductions related to selling, general and administrative expenses, as they are disallowed under the tax code under this traditional method. Rhode Island has also disallowed cannabis businesses from taking an R&D tax credit as a result of conformity with federal tax law.

In addition, Rhode Island is requiring retailers to collect 10% state cannabis excise tax plus 3% local cannabis excise tax from its customers, along with the standard 7% sales tax. Good news: sales tax is not calculated on the excise tax collected (unlike California, which does impose tax-on-tax). Medical sales are subject to sales tax but not to excise tax, and excise tax is not charged on cannabis accessories. Excise tax, like sales tax, must be remitted to the state by the dispensary on or before the 20th of the following month.

In Summary

Rhode Island has taken a big step forward from its anti-cannabis past by legalizing adult use sales and by supporting equity applicants as well as the expungement of past criminal convictions for many of those victimized by the war on cannabis. While Rhode Island’s excise taxes are not the worst we’ve seen, the state’s support of 280E will make it a lot harder for cannabis businesses to thrive.

ASTM Develops Two New Cannabis Standards

By Cannabis Industry Journal Staff
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According to a press release emailed this week, ASTM International’s subcommittee focused on cannabis, D37, is in the midst of developing two new standards surrounding cannabis safety and education.

One standard, WK84667, is designed to “help document engineering controls for air filtration and person protective equipment (PPE) in cannabis processing facilities,” says ASTM member Trevor Morones. The premise of this standard appears to be employee safety; with proper, standardized air filtration and PPE, the standard will help companies keep their workers safe and prevent inhalation of potentially harmful particles, like cannabis dust, stalk fiber, florescence and crystalized dust. “We are working to develop a robust community of cannabis professionals who can share their experiences in workplace and personnel safety,” says Morones.

The other proposed standard, WK84589, seeks to develop a uniform metric for “determining the intoxication level of a cannabinoid.” Initially focusing on delta9-THC, the standard will help raise awareness and promote public health and safety by informing consumers how intoxicating a cannabis product is for the average adult.

ASTM Pamela Epstein says this standard will hopefully develop a form of measurement akin to ABV in alcoholic drinks, allowing consumers to see how potent a certain cannabis product is. “Beyond providing consumers with a complete assessment of a product’s total intoxicating/impairing effects, the proposed standard may provide regulators with a methodology to meaningfully account for public health and safety,” says Epstein. “The specification can unify consumer awareness and can be used across all product types and jurisdictions.”

The ASTM D37 committee is working on a number of other standards related to these and they invite anyone interested to share their feedback.

From Seed to Storefront: Why Cannabis Retailers Should Know How to Cultivate

By Itali Heide
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There isn’t one simple formula that holds the secrets of success in cannabis branding, but there are some things that might give you an advantage. The possibilities of cannabis are endless and understanding the cultivation process can be incredibly advantageous to brands who want to become involved every step of the way and build a trustworthy brand from seed to storefront.

Some of the most successful brands in the cannabis industry have built their name on quality and the best way to ensure that is to know exactly where your bud is coming from.

The Advantages of Understanding the Cultivation Side of Cannabis

Understanding the cultivation side of the cannabis industry can be quite valuable for many reasons. If you’re in commercial cannabis, getting up close and personal with the cultivation process can lend cultivation expertise to your brand name and help connect you with the process from the very start so you can offer your customers a guarantee of high-quality products with a hands-on approach. Being close to the process allows you to develop the highest standards when it comes to better yields, stronger plants and more potent cannabis. In short, it gives you complete control of your brand and its reputation.

Radiant Huoang, CEO of Delta Munchies, shares how a deeper knowledge of the brand’s cultivation has affected and given Delta Munchies an advantage. “The years of experience on the cultivating side of cannabis, gave me an appreciation for the craftsmanship and the hard work that is essential to creating a great product,” says Huong. “In a crowded market, it’s impossible to build a lasting brand without a product of undoubtable quality, and that starts with the flower we use, thanks to our cultivators.”

Essentially, when you have control of the cultivation side of the business, you are able to craft strains, edibles and other products that are unique to your company. It gives you control over the quality of your product and gives you a consistent edge over the competition.

Being close to the process allows you to develop the highest standards when it comes to better yields, stronger plants and more potent cannabis.

“This level of craftsmanship bled over [to the retail side] when creating our brand and what we choose to offer to our consumers,” says Hoang. “Always trying to craft and improve the best products possible that deliver a similar effect to your traditional cannabis is our goal.”

Anyone buying a cannabis product wants to know that what they’re consuming is cultivated with passion and a careful eye for the details. As a retailer, cultivating their own crop allows Delta Munchies to ensure the integrity of the final product and deliver a true plant-centered experience to their clients.

Beyond retail, growing is an excellent place to start in the cannabis industry. It sets up a solid foundation for you to understand cannabis and allows you to bring the highest quality products to the market. Especially since a rise in the use of cannabis calls for more growers and cultivation-centered businesses.

Understanding the Headwinds of Cannabis Cultivation and Cannabis Retail

Not everything in the cannabis cultivation and retail world is perfect, as with any other industry. Making it can be challenging, especially as local regulations fluctuate while nationwide legalization remains in limbo.

The first challenge is legalization: as of now, hemp is federally legal and hemp-derived products containing less than 0.3% delta 9 THC are technically legal in all states. It can be difficult to keep up with new laws and constant changes. Right now, cannabis businesses can still struggle with access to banking services and insurance.

It’s important to follow general federal regulations for your product, such as the nutrition facts section

Growers are also faced with the bureaucracy and costs of regulations, testing conditions, label requirements and other additional investments that come with constant change. Still, change is a part of any budding industry, so it’s important to keep this in mind and remain adaptable.

Some states place a limit on the number of licenses they’re allowed to issue to cannabis businesses and growers, which can make it challenging for new players to join and results in the market being dominated by the top dogs, but this isn’t unlike any other industry. Making sure you can commit to a business of this type is another thing to consider deeply before endeavoring into the world of cannabis.

What About the Future of Cannabis Cultivation and Retail?

The future of cultivation and retail is bright, although not without speedbumps along the way. The good: we can expect more consistency and structure after regulation becomes the norm, advances in technology are being used to make exciting, creative products and growing interest and preferences make for a promising future of growth.

On the other hand, regulation could go a bit too far. When asked about the future of the industry Huong believes brands need to be given the freedom to innovate. “We think that cannabis cultivation will always be a beautiful art, but with so much saturation and over-regulation it makes it extremely difficult to operate,” says Hoang. This is an important factor to consider, although regulation can have its advantages, states need to consider whether their regulations are truly aimed at improving quality and safety, or just acting as barriers to entry.

Technology will surely play a role in the future of cannabis cultivation and retail. Advances in the agricultural sector grow exponentially, with systems that are developed and optimized to grow hemp and cannabis with a variety of top-of-the-line technologies that help ensure high-quality raw materials.

The future of the cannabis industry will be shaped by many things, but nothing can influence the market as much as its consumers. Customer preference, brand trustworthiness and effectiveness, and legality will ultimately lead the way for cannabis trends.

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Getting involved with the cultivation process can be important for overall quality.

One way to do this is to be in complete control of your product, from seed to storefront. Being able to cultivate the product you sell allows you to pivot more easily when the market demands it. Rather than seeking out new suppliers, a nimble cannabis brand will be set up to shift its cultivation operations as consumers switch from high THC strains to CBD or any other novel cannabinoid to hit the market.

Final Thoughts

Getting involved with the cultivation process can be important for overall quality. If you own a cannabis brand, having a close relationship with your grower or growing your own cannabis can lead to a product that’s higher in quality, as you can achieve a deeper understanding of the unique effects that you want your product to have and the quality necessary to achieve them. At the end of the day, what customers care for most is the product inside the packaging that you’ve designed to catch their eye. This is what will keep them coming back. It’s that quality that will imprint the packaging in their minds on their next trip to the dispensary.

Knowing more about cannabis from the ground up can be beneficial when it comes to innovation opportunities. Being able to apply your own knowledge or that of your trusted growers to a new product can help you grow your brand in a way that’s uniquely yours.

Hoang says harmony between the grower and the brand is important: “Seeing something you grew yourself come to life bleeds into the brand.” Becoming involved in the cultivation process of cannabis allows you to gain perspective that can be beneficial for your brand.

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FDA Punts on CBD Rules

By Cannabis Industry Journal Staff
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On December 20, 2018, Former President Trump signed the Farm Bill into law, which removed hemp-derived cannabidiol (CBD) from the Controlled Substances Act, stripped the DEA’s authority from hemp and gave states the ability to regulate hemp markets of their own, with approval from the USDA.

FDAlogoWhen that Farm Bill became law, it paved the way for state-sanctioned hemp and CBD product markets and it seemed as if the floodgates were opening for legal CBD, but some caveats and gray areas remained. The same day the Farm Bill became law, the FDA released a statement asserting their authority, threatening enforcement actions for things like unsubstantiated drug marketing claims.

Over the past four years, the FDA has dealt with dozens of enforcement actions involving CBD products. The agency said they were “working quickly to further clarify our regulatory approach,” but that seems categorically false given how long it took them to tell the public they don’t know what to do. Finally, after four years and change of comment periods, industry frustration, warning letters and state-sanctioned gray markets, the FDA announced they need help from Congress.

Janet Woodcock, M.D., principal deputy commissioner at the FDA

Last week, the FDA published a statement from Janet Woodcock, M.D., principal deputy commissioner, that says, to paraphrase, they’ve given up. Industry stakeholders have long agreed that the food and dietary supplements regulatory framework is adequate for CBD products, citing minimal public health risk and a pre-existing framework that CBD could fit into easily. “The FDA’s existing foods and dietary supplement authorities provide only limited tools for managing many of the risks associated with CBD products,” says Dr. Woodcock. “Under the law, any substance, including CBD, must meet specific safety standards to be lawfully marketed as a dietary supplement or food additive.”

The reasoning behind the agency’s unwillingness to regulate it as a dietary supplement is because of safety concerns, like potential liver damage, possible drug interactions and reproductive harm. Scientific data available to the FDA shows that they cannot say that CBD is generally recognized as safe (GRAS). “Today we are announcing that after careful review, the FDA has concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the regulatory oversight needed to manage risks,” says Dr. Woodcock. “The agency is prepared to work with Congress on this matter.”

Anticipating the Ebbs and Flows of Seasonal Retail Cannabis Sales

By Itali Heide
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Like any industry, cannabis can experience ups and downs, especially when it comes to a doors-open retail business. Dispensaries that operate in towns or cities that attract tourists experience this more than anyone, seeing sales spike during the busy months and reach lows during the off-season.

We spoke with the folks at Dragon Hemp, a hemp retailer based in Sag Harbor in the Hamptons. As a brand that has first-hand experience with seasonal spikes, they were able to provide more context when it comes to anticipating the ebbs and flows of seasonal retail cannabis sales.

What is the Best Way to Prepare for Post-Busy Season Retail Lulls?

In Sag Harbor, Dragon Hemp awaits a spike during the busy summer months, as well as lulls when the tourist season is down and visitors head back to New York City and beyond, many becoming loyal online customers year-round.

According to Kevin Menard, LAc, founder of Dragon Hemp, the best way to prepare for post-busy season retail lulls is to build a community of loyal customers that take your brand home with them.

“Post-busy season lulls can be very useful in setting strategies and goals for the coming year. In our case, we do a thorough inventory review and align what we have with what we need for the upcoming peak season,” says Menard. “As the season winds down, they prepare for online orders that come from the impression left on customers in the store. “We also focus on cultivating our owned channels where we can have more direct communication with our community.”

Advice on Preparing for Busy Retail Seasons

Kevin Menard, LAc, founder of Dragon Hemp

Before the busy season is even over, it’s important to start preparing for the lull in business that’s bound to set in. For Kevin Menard and his business, preparation starts with inventory. So, what’s their secret? “Make sure you have budgeted for an inventory of your most popular items and hire excellent storytellers in both your retail locations and e-commerce marketing teams.”

Keeping an eye out on inventory management can be a great way to spend the slow months. Give brands a chance to monitor sales trends and keep up with changes in consumer preferences, putting more time and effort into online retail and social media and implementing promotions and sales online and in-person. Grow the team behind the brand, keep up with all new regulations and focus on customer loyalty to maintain trustworthiness even from afar.

Turning a Seasonal Customer Into a Lifetime E-Commerce Customer

In order to turn a seasonal customer into a life-long client, it’s important to connect beyond just the sale and product. For Dragon Hemp, the most important part is personalizing the experience for their customers: “For us, it’s all about achieving personalization with each customer,” says Menard. “Typically, a seasonal retail buyer will be opportunistic about their purchase in-store, but that purchase is indicative of a longer-term need. We try to create customer profiles based on in-store buyers and craft recommendations that fit that customer’s health needs over the long term.”

In order to turn a one-time buyer from out of state or city into a lifelong loyal customer, there are a few things to consider that can make this connection happen. First and foremost, building a relationship by maintaining impeccable customer service and personalizing the experience.

Focusing on online retail is also important in order to maintain the connection with clients. Making sure the website is in perfect shape and offer loyalty programs, incentives, promotions, sales, discounts or rewards to returning customers.

Marketing and publicity are other essentials, as you want to target those who have a long-time need that needs to be filled. Allowing for a fuss-free online shopping experience, targeting people who fall in line with the brand’s products and values, being creative and innovative when promoting the website and keeping in touch with active social media and newsletters.

How to Project Goals In Places That Swell Seasonally

It can be difficult to project year-on-year retail goals when the geographic location has a tendency to swell seasonally and have off-seasons but preparing and knowing what to expect can help with reaching those goals (and even surpassing them).

According to Menard, the secret to projecting their goals starts with their first location: “Since our first retail location in Sag Harbor, NY has been open only a year, our projections are still a work in progress! We’re using 2022 data to budget for this year, accounting for marketing efforts, increased awareness, and seasonality. We have some sensitivities built into this model based on different growth scenarios.”

The instabilities and fluctuations that come with a business that works on a seasonal tempo can be challenging when it comes to reaching and achieving specific goals, but there are things that can be done to make the whole process more seamless, and hopefully, more successful.

Looking back at previous years can be helpful in pinpointing tendencies and habits that can be observed in the consumer, and the lower sales allow space for the time that can be used in innovating and creating new products that are based on what the client base wants.

Researching not only the immediate region, but the regions that people often visit is another handy trick. Knowing who is coming, why they’re coming, and what they’re looking for can help set objectives that can be brought to reality throughout the off-season and the busy season, even experiencing more foot traffic in town. Moreover, making the most of the local events, occasions, changes and circumstances like holidays and local events can keep the brand connected to its roots and primary clients.

The off-season is a great time to set up a budget or specific monetary goals to reach, and off-season fluctuations can be added in to give a more complete idea of what the year might look like. Keeping an eye on the market by monitoring it and using forecasting models to predict results can also help set the stage for changes in the year-to-year goals.

Expanding From a Cannabis Retailer to a National E-Commerce Brand

Dragon Hemp didn’t start off with a bang, but they sure have achieved it over time. Dragon Hemp products were conceived by renowned alternative health practitioner and founder, Kevin Menard. Using hemp oil, Chinese herbs and native botanicals, they have managed to create a variety of beneficial and natural products.

“Our apothecary in Sag Harbor has been a great success, but the most rewarding aspect of the location has been the ability to have direct conversations with customers and get a deep understanding of how we can support their journey to better health,” says Menard. “We’re excited to expand our mission of helping people feel like themselves again by using next-generation natural botanicals and time-honored herbal remedies.”

Final Thoughts

As the country continues toward legal and accessible cannabis, new businesses are learning the ropes and those that have been there all along have been leading the way.

Having ups and downs in any business is to be expected, but just like any industry, knowing what to expect and what to do can make these challenges seem like less of a hassle. Building an online presence that clients connect to, developing e-commerce strategies, expanding product lines, building a loyal customer base and staying up-to-date with the latest regulations are surefire ways to stay on top of the cannabis business.

durnagofacility

3 Benefits of Conducting Genetic Tests on Your Plants

By Angel Fernandez
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durnagofacility

Many growers may wonder why it’s important to get their plants genetically tested, but the truth is that genetic testing can make growing a lot easier. Genetic analysis in plants can give a wide range of results that can help scientists solve everyday problems in plant cultivation, such as detecting diseases and identifying important traits in plant species.

Currently, three of the most important benefits that genetic testing can give growers are the ability to detect diseases, identify the gender of their plants and control the quality of their crops.

Pathogen detection

Pathogen infections can be difficult to detect and by the time symptoms are obvious, it may be too late and the rest of the crop is already contaminated. This is why DNA tests are a valuable tool for the early detection of diseases in plants. Even though plants reproduce through cloning, it’s crucial to make sure the mother plant is healthy before proceeding, as 100% of the genetic material will be transferred to the clone, including any diseases the mother plant may have, such as a virus.

There are a few ways to detect pathogens in plants, including detection and symptomatology, serological techniques for viruses and microbiological techniques for fungi and bacteria. However, another effective method is detection tests using genetic material, also known as molecular methods. These tests involve screening the plant’s genetic material for any alterations, such as the presence of the pathogen’s genetic material. These tests are particularly useful as they provide accurate results when at least part of the pathogen’s genome sequence is known. This is important as many of these genomes have yet to be fully studied and there may be new unknown variants.

Tobacco Mosaic Virus symptoms can include tip curling, blotching of leaf mosaic patterning, and stunting

The reliability and effectiveness of genetic and molecular tests are due to the use of DNA as the starting material for pathogen detection. DNA is a stable molecule that can withstand adverse conditions, such as high temperatures or low humidity. Additionally, this technique can still be effective even when the samples used are very damaged or necrotic. Due to these qualities, genetic testing is considered one of the best methods for pathogen detection.

In summary, genetic testing is the most effective technique for pathogen detection as it is highly specific, requires a small sample and provides accurate results in a short period of time.

Plant gender detection

In the case of the cannabis plant, it is naturally diploid and dioecious, meaning that it has separate male and female reproductive structures, and each one contributes a chromosome during reproduction. However, there may be mutations that result in hermaphrodite plants, which have both male and female reproductive structures.

Growers who propagate their crops through seeds must wait several weeks to identify the sex of their plants, as their dioecious nature makes it difficult to recognize the plant’s sex in the early stages of growth. This can be time-consuming and resource-intensive. However, thanks to genetic testing, it is possible to determine the sex of a plant long before it reaches the flowering stage.

The sex organs on a Cannabis plant identified.

The determination of the gender of a dioecious plant is influenced by a sex chromosome system. Male plants have an XY sex chromosome system, known as heterogametic, while female plants have the XX sex chromosome system, known as homogametic.

To identify the sex of a plant through genetic studies, DNA or RNA-based molecular markers are used with a tissue sample. These markers typically look for the male trait “Y” in the plant, as the trait “X” is present in both male and female plants. In this way, the presence of the Y chromosome can be used to confirm the plant is male, and its absence can be used to confirm that it is female.

Crop quality control

The same species can often present one or more varieties, and although they may have physical features that distinguish them, it is not always possible to identify them with the naked eye. Beyond physical characteristics, genetic traits can have considerable differences.

Molecular identification is a very accurate tool for identifying varieties

Different varieties of cannabis have been widely cultivated and crossbred, making it possible for plants to have very similar physical traits, making it difficult to identify the variety being cultivated. This is why molecular identification is a very accurate tool for identifying varieties in cases where there is uncertainty about their identity.

Additionally, some plants can produce lower or higher amounts of cannabinoids due to their genetic nature or small mutations that occurred during growth. This is how there are plants with the advantage of having genes that code for high production of THC or CBD. These outstanding traits can be detected through the selection of characteristics using analysis of molecular markers that indicate the presence of these genes in the plant, or that detect the genes responsible for synthesizing these substances and determine their respective quality.

These procedures are performed using a tissue sample from the plant and using DNA as a starting material for testing, which provides information on the genetic traits of interest and validates their function.

AOAC International Names New CSO

By Cannabis Industry Journal Staff
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AOAC International, an independent nonprofit standards development organization has announced the appointment of Dr. Katerina (Kate) Mastovska as their new deputy executive director and chief science officer.

Dr. Katerina Mastovska

Most recently, Dr. Mastovska served as chief science officer for the Eurofins US Food Division. She has been an active member of AOAC for almost twenty years, winning the Harvey W. Wiley Award in 2021, their highest scientific honor. “I’m delighted to join the AOAC staff and lead the team of dedicated scientists,” says Dr. Mastovska. “AOAC has a critical role in food safety, and I’m inspired to continue to be a part of this important work.”

AOAC International works actively in the cannabis industry through their Cannabis Analytical Science Program (CASP), a working group established in 2019 that is dedicated to developing standardized methods in cannabis testing. In the world of cannabis lab testing, AOAC International creates standards under the standard method performance requirements (SMPR®) moniker, which are detailed descriptions of what analytical methods should be able to do.

More recently, CASP launched their own proficiency testing program last year and launched their first round, shipping samples to labs across the country in the Fall.

Soapbox

Attracting Investment: How Cannabis Companies Can Best Position Themselves

By Joe Madigan
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Remember those heady days of the Green Rush a decade ago, when markets were small and it seemed everyone had a chance? Now it’s more of a mad rush to get some green in the form of investment capital.

The majority of states in the country now have some type of legal cannabis market. Businesses in those states operate in spite of regulations that are restrictive, confusing and make it very difficult to make a profit. Meanwhile, heavy tax burdens, differences in enforcement techniques and varying degrees of oversight are other factors that influence bottom lines in the cannabis industry.

Saturated markets are giving businesses trouble when it comes to their bottom line

Inflation also continues to be a prominent force across world markets. Sales of cannabis products have fallen as consumers adjust to inflation and post-COVID supply chain issues that are causing higher prices on necessary staples like food and gas. An oversaturation of cannabis flower is becoming a perennial problem in some states and another factor causing industry distress.

When cash flow slows to a trickle, companies of all sizes seek out investment funding to keep their momentum. But catching the eye of an investor group requires more than just sticking your hand out.

What Attracts Potential Investors?

A company is best positioned to attract those interested in cannabis investment opportunities when it appears serious about its growth plans. That means being well positioned with a solid upper-management foundation and so much the better if there’s an advisory board in place too. A company built with a diverse group of talent—ideally from consumer packaged goods companies—presents an attractive opportunity for investors.

Talent from the CPG space can help attract investors

Top-quality and industry savvy finance employees who maintain sound financial books and establish a solid banking arrangement are also important. If the company’s financial scenario is robust enough to provide confidence in case of an audit and the books are in good shape with auditable METRC logs investors will be far more inclined to put money on the line.

A cannabis company with full inclusion (or seed to sale) is often a smart choice for investment. The vertical integration of cultivation, processing/manufacturing and retail allows them to sell their own products while also stocking other brands’ products on the floors of their dispensaries. If their products are respected and the brand is held in high regard, even better. Similarly, a cultivation enterprise that can grow crops for multiple brands can also be very attractive. The ability to pivot and adjust production to reflect the market and consumer demands indicates a strong business foundation.

Despite the current headwinds and saturated markets, other chances for growth exist. When a local municipality finally decides to “opt-in” to adult-use cannabis sales, there’s opportunity for both established brands and startups. It’s a matter of being ready for those opportunities and having a plan to leap in whenever new licenses become available.

What Businesses Will Struggle to Attract Investment?

Culture is key here. Poor employee relations and weak cohesion across departments are indicative of deeper problems. Do people actually want to work for the business? Do they feel supported by human resources? A company with underdeveloped or non-existent workers’ compensation policies and a management team that is not respected by its employees is not going to look good in the eyes of potential investors.

Non-diversified cannabis businesses are also at a major disadvantage when seeking investors. Cultivators of one type of product or service are locked into a single operation geared to do one thing. Any changes to market whims or problems with the supply chain can wreak havoc on a business based around a single product.

Stick to Business Basics

The cannabis industry is unique, but the basics of running a business well enough for success still apply. Strictly adhering to the traditional methods that any successful organization follows is extra important in cannabis. Businesses that are active in their community and make a real effort to be involved will be held in higher regard by investors. They want to see cannabis businesses that are not just setting up shop to make a quick buck, but are dedicated to bettering their community. That indicates a relationship with customers that involves mutual respect and promotes business longevity and financial stability.

A Guide to Dispensary Insurance

By Itali Heide
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As a business owner, insurance is always a must. If you are interested in entering into the cannabis industry or you already have, it’s important to know what to expect when it comes to insuring your cannabis-related business.

That’s why we’ll be exploring what dispensary insurance is, different options for business owners and general advice regarding dispensary and other CRB insurance.

What is Dispensary Insurance?

Insurance for cannabis-related businesses refers to policies that protect the business against risk. This can include dispensaries, cultivation centers and testing labs – all of which require different levels of coverage and liability.

We spoke to Alexander Marenco, an insurance broker from Marenco Insurance, who explained what dispensary owners should know before seeking out insurance. Marenco says it’s similar to shopping for insurance for other businesess. “You need to have full details of the business and location to receive a quote.” He adds. “The applications will ask questions such as location, renovations, or improvements to the location, ownership information, payroll details, and sales or projected annual sales.”

How is Dispensary Insurance Different From Other Forms of Business Insurance?

Because non-hemp-derived cannabis is still considered a schedule one controlled substance under the Controlled Substance Act, cannabis insurance can be more expensive than regular insurance for non-cannabis businesses. Because of the risks associated with being considered a potential retailer of a controlled substance, liability policies and other options can cost a pretty penny.

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The cash-only nature of the business makes insuring dispensaries more costly

Additionally, when asking Marenco about how dispensary insurance differs from other brick-and-mortar retail insurance, he says: “With more states increasingly legalizing medicinal and recreational marijuana, insurance carriers have started to open risk acceptability. However, since marijuana is still federally illegal, businesses will find it difficult to find multiple quotes from different carriers.”

Types of Insurance Available for Cannabis-Related Businesses

What kind of insurance is available for cannabis-related businesses? Let’s find out.

First off, it’s important to keep in mind that CRBs are at risk for a lot of things: workplace accidents, damage to property, theft, general liability and product liability. Plus, the fact that most dispensaries work on a cash-only business model until the Secure and Fair Enforcement (SAFE) Banking Act is approved by Congress, CRBs tend to handle big amounts of cash, further putting them at risk of theft and liability. CRB insurance can be as low as $350 and as high as $7,500 depending on the type of business and policy.

Here are some of the most common types of insurance for CRBs and what they cover:

  • General liability: third-party claims for bodily injury, property damage and reputational harm.
  • Commercial property: damage to a business-owned property.
  • Professional liability: third-party accusations of negligence and mistakes.
  • Workers’ compensation: employees’ medical bills and lost wages due to injury or illness.
  • Inland marine: damage or theft of business-owned property in transit.
  • Crop: costs from damage to seeds and plants.

With so many things to watch out for, insurance for cannabis businesses and dispensaries isn’t cheap. Here, Marenco says what CRB owners can do to keep their premiums as low as possible:

A smart safe like this one can help secure cash handling

“Premiums are primarily based on sales (actual or projected). After the term expires, the insurance carrier will conduct an audit for the prior term to confirm the information from the application. The audited discrepancy will adjust the next term’s sales figures. Dispensary insurance will typically be placed through an excess & surplus market which do not provide traditional discounts.”

So, in essence, the best thing a dispensary owner can do is be honest about their projections.

Navigating premiums can be a detailed process, as we learned when speaking to Jesse Giffith, an owner of Smokeless CBD and Vape: a chain of retail shops across the twin cities Minneapolis–Saint Paul, Minnesota:

“Our shops carry insurance that has been offered with a modified rate for vape retailers. This route was not as straightforward as some traditional retail insurance options, but may offer benefits, and a better fit for coverage than other dispensary insurance options.”

A Growing Number of Dispensaries Across America

With the growing legalization and normalization of adult use, medical and hemp-derived cannabis across the nation, it should come as no surprise that the number of dispensaries across the country grows exponentially.

In 2021, the cannabis market in the U.S. was valued at 10.8 billion dollars, with an expected annual growth of 14.9% annually. This is a sign of what’s to come. Cannabis may be an industry that’s been considered taboo for decades, but the growth shows the growing acceptance of the plant for medical and adult use reasons.

Insurance providers remain cautious as cannabis laws are still in flux.

With that growth comes a greater need for insurance providers, opening the door to the possibility that these two industries will grow in tandem. The future may bring a greater variety of options for coverage at cheaper prices. But for the time being, insurance providers remain cautious as the fate of federal and local cannabis laws are still in flux.

Are There Limited Carriers that Issue Dispensary Insurance?

Every CRB needs insurance, just like any other type of establishment, business or company. The issue within the cannabis industry is that there is still a limited insurance market, with insurers willing to provide insurance constantly exiting and entering the market. Plus, the overall capacity and variety of policies that cover different types of risks are limited. Lastly, it can be difficult to use CRB insurance when you read between the lines of the policy. Because cannabis with THC is still federally illegal (excluding hemp-derived cannabis products containing less than 0.3% THC), insurers can negate coverage when a loss or claim occurs.

Because of the complications that may arise even if you do have insurance, Marenco offers some advice for dispensary owners that are searching for the right insurance option for them: “Before shopping for insurance make sure you have all your licenses and are in full compliance with all regulations. Insurance carrier’s requirements from the state. Additionally, consider different coverage options.” He continues. “At a minimum, a business needs general liability insurance. Insurance companies can also consider covering business property including inventory, betterments, and improvements to a rented space, among others. When shopping for insurance make sure your agent reviews different coverage options.”

Compliance as a Revenue Center: Banking & Cannabis, More Similar Than You Think

By Kevin Hart
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Have you ever been to the DMV, only to be turned away because you didn’t have the countless forms of identification needed? Sometimes it feels like no amount of ID or proof of residence is enough, whether it’s your 2nd grade report card or an electric bill from 25 years ago.

That feeling is what it’s like for anyone working in compliance; regardless of industry. Banks are no different. They need to possess compliance documents such as Consolidated Reports of Condition and Income and other Federal Financial Institutions Examination Council (FFIEC) reports that work like the laundry list of documents you need to get a driver’s license or get your car registered.

The same can be said for newly licensed and legal cannabis companies. They often need state and local inspection documents, federal background checks and a list of other documents that make a CVS receipt look minuscule in comparison.

Historically, across all industries, the whole process of gathering and providing these sorts of documents can turn into a bit of a charade. Many companies do the bare minimum to check the compliance box and achieve certifications. Various teams and stakeholders try to skate through the compliance process by providing answers that reflect what they think the enterprise customer wants to see (vs. the reality).

In order to achieve long term growth, financial institutions (FIs) and cannabis companies alike need to start executing compliance plans. FIs are always seeking new growth and revenue opportunities, and cannabis companies are constantly under the scrutiny of regulators. Identifying new solutions that can help companies grow quickly while also maintaining compliance should be an essential part of the roadmap.

Financial Institutions and Cannabis

Many think that financial institutions and cannabis businesses would be on opposite ends of any spectrum. Banking is a mature and established industry, while legal cannabis is a new, fast moving and constantly evolving space. So, on one side, there is a risk averse fiscally conservative and traditional business model, and on the other side is an industry that is outside of the mainstream.

Let’s look at this perception from a different angle though. What is true is that both industries are highly regulated and must comply with the rules placed upon them by regulators; and if their house isn’t in order, the consequences can be disastrous (Read: Massive fines or even losing the ability to operate). CRBs and FIs deal with the security and dual control of inventory, and making sure customers are properly identified and of legal capacity to conduct business. In most cases, both are small businesses within their respective communities. ‍

Moreover, each of the industries are forced to navigate nearly-constant regulatory change, making the act of complying with applicable regulations a moving target. For most of these types of businesses, regulatory compliance is cited as one of the largest (and most expensive) challenges they face in day-to-day operations.

Compliance as Revenue Protection 

When financial institutions make the decision to offer services to the cannabis industry, they naturally look at the market opportunity to determine whether the effort associated with the increased compliance obligations outweigh the potential benefits. Traditionally, compliance is viewed as a cost center, but in reality, it’s a revenue protection center. As the old saying goes; “an ounce of prevention is worth more than a pound of cure.” Compliance is that prevention.

Cannabis companies need to demonstrate reliability and a history of compliance in order to attract investors and accumulate capital

Failing to fully comply and meet regulatory compliance standards can cost organizations billions. Having a trusted system of compliance established should not be looked at as a cost-sucking measure for businesses, when it really is negligible when the cost of getting it wrong is far more substantial. Setting up a truthful and transparent compliance program isn’t just the right thing to do, it also protects revenue.

As the cannabis industry continues to grow, navigating around pain points is becoming increasingly expensive for the companies participating in it, many of whom are still struggling to turn a profit. Specifically, an IDC forecast shows global revenue from GRC solutions growing from $11.3 billion in 2020 to nearly $16.2 billion by 2025. And the average business hires and spends upward of $50,000 to $200,000 on consultants to manage compliance. It’s not uncommon for companies to dedicate five to 10 people working on compliance every week for hours and months on end.

Many in the banking industry are worried about forging into a stigmatized stream of revenue like cannabis, but with the right compliance solutions in place, they can have peace of mind. These solutions guarantee that revenue from cannabis is done legally by analyzing where each dollar came from, and denying those that don’t meet the minimum criteria. Having visibility into cannabis-related business (CRBs) accounts that do the enhanced due diligence is the only way to operate.

By implementing purpose-built compliance management solutions, financial institutions are able to unlock new revenue streams and scale cannabis banking operations. Meaning that as cannabis continues to gain mainstream momentum, and becomes less scrutinized locally and federally, these FIs that take part will be ahead of the curve. 

Looking Ahead

With recent movement towards legalization in the House, cannabis investors are optimistic about the industry’s future. So how can the cannabis market overcome these hurdles and remain highly profitable?

To start with, CRBs must have greater access to accredited financial institutions like banks and credit unions. Owning bank accounts, obtaining credit cards, and applying for small business loans is essential to growth. Providing CRBs with access to proper financial support and compliance control is crucial for the cannabis market to continue to thrive.

Federal legislation such as the SAFE Banking Act is currently thought of to be the silver bullet that will open the floodgates for CRBs and FIs to work together. But in reality, this is a myth, as the SAFE Banking Act will simply make the current compliance rules stricter.

To be a first mover FI in your area, businesses must start by implementing a scalable, verifiable cannabis banking program. The real customers and financial opportunities are out there, and are even greater than what you might have modeled given the growth of the industry. The ability to do this today is real.