The word “audit” evokes various emotions depending on your role in an organization and the context of the audit. While most are familiar with and loathe the IRS’s potential for a tax audit, the audits we are going to discuss today are (or should be) welcomed – proactive internal quality audits. A softer term that is also acceptable is “self-assessment.” These are independent assessments conducted to determine how effective an organization’s risk management, processes and general governance is.
“How do you know where you’re going if you don’t know where you’ve been” – Maya Angelou
Internal quality audits are critical to ensuring the safety of products, workers, consumers and the environment. When planned and performed periodically, these audits provide credible, consistent and objective evidence to inform the organization of its risks, weaknesses and opportunities for improvement. Ask yourself the question: do your clients/vendors rely on you to produce reliable, consistent and safe products? Assuming the answer is yes, what confidence do you have, and where is the documented evidence to support it?
Compliance units within cannabis businesses are typically responsible for ensuring a business stays legally compliant with state and federal regulations. This level of minimum compliance is critical to prevent fines and ensure licenses are not revoked. However, compliance audits rarely include fundamental components that leave cannabis operators exposed to many unnecessary risks.
As a producer of medical and adult-use products that are ingested, inhaled or consumed in other forms by our friends, family and neighbors, how can you be sure that these products are produced safely and consistently? Are you confident that the legal requirements mandated by your state cannabis control board are sufficient? Judging by the number of recalls and frustrations voiced by the industry regarding the myriad of regulations, I would bet the answer is no.
What questions do internal audits address? Some examples include:
Are you operating as management intends?
How effective is your system in meeting specified objectives? These objectives could include quality metrics of your products, on-time delivery rates and other client/customer satisfaction metrics.
Are there opportunities to improve?
Are you doing what you say you do (in your SOPs), and do you have the recorded evidence (records) to prove it?
Are you meeting the requirements of all applicable government regulations?
There are potential drawbacks to internal audits. For one, as impartiality is essential in internal audits, it may be challenging to identify an impartial internal auditor in a small operation. If your team always feels like it is in firefighting mode, it may feel like a luxury to take the time to pull members out of their day-to-day duties and disrupt ongoing operations for an audit. Some fear that as internal assessments are meant to be more thorough than external assessments, a laundry list of to-do items may be uncovered due to the audit. But, these self-assessments often uncover issues that have resulted in operational efficiencies in the first place. This resulting “laundry list” then affords a proactive tool to implement corrective actions in an organized manner that can prevent the recurrence of major issues, as well as prevent new issues. The benefits of internal audits outweigh the drawbacks; not to mention, conducting internal audits is required by nearly every globally-recognized program, both voluntary (e.g. ISO 9001 or ASTM Internationals’s Cannabis Certification Program) and government required programs such as 21 CFR 211 for Pharmaceuticals.
Internal Auditing is a catalyst for improving an organization’s effectiveness and efficiency by providing insight and recommendations based on analyses and assessments of data and business processes. Additional benefits of internal audits include giving your organization the means to:
Ensure compliance to the requirements of internal, international and industry standards as well as regulations and customer requirements
Determine the effectiveness of the implemented system in meeting specified objectives (quality, environmental, financial)
Explore opportunities for improvement
Meet statutory and regulatory requirements
Provide feedback to Top Management
Lower the cost of poor quality
Findings from all audits must be addressed. This is typically done in accordance with a CAPA (Corrective Action Preventive Action) program. To many unfamiliar with Quality Management Systems, this may be a new term. As of Jan 1, 2021, this is now a requirement for all cannabis licensed operators in Colorado. Many other states require a CAPA program or similar. Continuing education units (CEUs) are available through ASTM International’s CAPA training program, which was developed specifically for the cannabis industry.
Examples of common audit findings that require CAPAs include:
Calibration – Production and test equipment must be calibrated to ensure they provide accurate and repeatable results.
Document and record control – Documents and records need to be readily accessible but protected from unintended use.
Supplier management – Most standards have various requirements for supplier management that may include auditing suppliers, monitoring supplier performance, only using suppliers certified to specific standards, etc.
Internal audits – Believe it or not, since internal audits are required by many programs, it’s not uncommon to have a finding related to internal audits! Findings from an internal audit can include not conducting audits on schedule, not addressing audit findings or not having a properly qualified internal auditor. Are you looking for more guidance? Last year, members of ASTM International’s D37 Committee on Cannabis approved a Standard Guide for Cannabis and Hemp Operation Compliance Audits, ASTM D8308-21.
If you are still on the fence about the value of an internal audit, given the option of an inspector uncovering a non-conformance or your own team discovering and then correcting it, which would you prefer? With fines easily exceeding $100,000 by many cannabis enforcement units, the answer should be clear. Internal audits are a valuable tool that should not be feared.
There are many factors that can lead to the challenges people face when scaling up their processes. These challenges are not unique to the cannabis/hemp industry, but they are exacerbated by the consequences generated from decades of Reefer Madness. In my time operating in the cannabis/hemp space, 15+ years, I have seen established equipment vendors and sellers of laboratory supplies, like Sigma-Aldrich (now Millipore-Sigma), Fisher-Scientific, Cerilliant, Agilent, and others, go from reporting individuals inquiring about certified reference materials to setting up entire divisions of their companies to service the needs of the industry. Progress. But we are still a fledgling marketplace facing many challenges. Let’s look at a few specific to process scale up.
Darwin Millard will deliver a presentation on this topic during the Cannabis Extraction Virtual Conference on June 29. Click here to learn more.Equipment Availability: Lack of available equipment at larger and larger process scales can severely impact project timelines. Making not only equipment acquisition difficult, but also limiting the number of reputable equipment manufacturers you can work with.
Non-Linear Expansion: NEVER assume your process scales linearly. Perhaps one of the most avoidable mistakes during process scale up. You will quickly find that for many processes you cannot just put in a larger unit and expect a proportional increase in output. This is because as process equipment increases so to must utilities and other supporting infrastructure, but not only that, process vessel geometry, proportions, and design are contributing factors to process efficiency as your scale of operations increases.
Hazardous Material Quantities: Just as important to the process as the equipment are the solvents and reagents used. As your scale of operations increases so does your demand and production of hazardous materials; solvents including carbon dioxide (CO2), ethanol, and liquid petroleum gases (LPG) like Butane and Propane are obvious hazards, but so too are the refrigerants used in the chillers, fuels used to power generators, steam created to heat critical systems, and effluents and wastewater discharged from the process and supporting systems. Not every municipality wants thousands of gallons of flammable substances and hazardous waste being generated in their backyard…
Contractor/Vendor Misrepresentation: Finding out in the middle of you project that your contractor or equipment vendor has never set up a system at this scale before is never a good feeling. Unfortunately, contractor and vendor misrepresentation of qualifications is a common occurrence in the cannabis/hemp space.
If all this was not bad enough, all too often the consequences of improper planning and execution are not felt until your project is delayed or jeopardized due to misallocation of funds or undercapitalization. This is especially true when scaling up your production capacity. Now let’s look at some ways to avoid these mistakes.
The Rule of 10
When scaling up your process, NEVER assume that a simple linear expansion of your process train will be sufficient. It is often the case that process scale up is non-linear. Using the Rule of 10 is one way of scaling up your process through a stepwise iterative approach. The Rule of 10 is best explained through an example: Say you are performing a bench-top extraction of a few grams and want to scale that up to a few thousand kilograms. Before jumping all the way to your final process scale, start by taking a smaller jump and only increase your bench-top process by a factor of 10 at a time. So, if you were happy and confident with your results at the tens of grams scale, perform the same process at the hundreds of grams scale, then the thousands of grams scale, tens of kilograms scale, and so forth until you have validated your process at the scale of operations you want to achieve. By using the Rule of 10 you can be assured that your process will achieve the same yields/results at larger and larger scales of operation.
Scaling up your process through an iterative approach allows you to identify process issues that otherwise would not have been identified. These can include (but by no means should be considered an exhaustive list) improper heat transfer as process vessels increase in size, the inability to maintain process parameters due to inadequately sized utilities and/or supporting infrastructure, and lower yields than expected even though previous iterations were successful. However, this type of approach can be expensive, especially when considering custom process equipment, and not every processor in the cannabis/hemp space is going to be in the position to use tools like the Rule of 10 and instead must rely on claims made by the equipment vendor or manufacture when scaling up their process.
The Cannabis/Hemp Specific Process Equipment Trap
How many times have you heard this one before: “We have a piece of process equipment tailor-made to perform X,Y,Z task.”? If you have been around as long as I have in the cannabis/hemp space, probably quite a few times. A huge red flag when considering equipment for your expansion project!
Unless the equipment manufacturer is directly working with cannabis/hemp raw materials, or with partners who process these items, during product development, there is no way they could have verified the equipment will work for its purported use.
A good example of this are ethanol evaporation systems. Most manufacturers of evaporators do not work with the volumes of ethanol they claim their systems can recover. So how did they come up with the evaporation rate? Short answer – Thermodynamics, Heat Transfer, and Fluid Mechanics. They modeled it. This much surface area, plus this much heat/energy, with this much pressure (or lack thereof), using this type of fluid, moving through this type of material, at this rate of speed, gets you a 1000-gal/hr evaporator or some other theoretical value. But what is the real rate once an ethanol and cannabis/hemp solution is running through the system?
For a straight ethanol system, the theoretical models and experimental models are pretty similar – namely because humans like alcohol – extensive real-world data for ethanol systems exist for reference in designing ethanol evaporators (more accurately described as distillation systems, i.e. stills). The same cannot be said for ethanol and cannabis/hemp extract systems. While it is true that many botanical and ethanol systems have been modeled, both theoretically and experimentally, due to prohibition, data for cannabis/hemp and ethanol systems are lacking and the data that do exist are primarily limited to bench-top and laboratory scale scenarios.
So, will that 1000-gal/hr evaporator hit 1000-gal/hr once it is running under load? That’s the real question and why utilizing equipment with established performance qualifications is critical to a successful process scale up when having to rely on the claims of a vendor or equipment manufacturer. Except this is yet another “catch 22”, since the installation, operational, and performance qualification process is an expensive endeavor only a few equipment manufacturers servicing the cannabis/hemp market have done. I am not saying there aren’t any reputable equipment vendors out there; there are, but always ask for data validating their claims and perform a vendor qualification before you drop seven figures on a piece of process equipment on the word of a salesperson.
Improper design and insufficient data regarding process efficiencies on larger and larger scales of manufacturing can lead to costly mistakes which can prevent projects from ever getting off the ground.
Each aspect of the manufacturing process must be considered individually when scaling your process train because each element will contribute to the system’s output, either in a limiting or expansive capacity.
I go further into this topic in my presentation: Challenges with Process Scale Up in the Cannabis/Hemp Industry, later this month during Cannabis Industry Journal’s Extraction Virtual Conference on June 29th, 2021. Here I will provide real-world examples of the consequences of improper process scale up and the significance of equipment specifications, certifications, and inspections, and the importance of vendor qualifications and the true cost of improper design specifications. I hope to see you all there.
With data forecasting expert BDSA predicting that the global cannabis market will reach $56B by 2026, there is no time to waste. Whether it’s Oklahoma, New York or even Macedonia, the frenzy is on. Investment decisions are immediate, and you have to be correct out of the box. This is where an expert like Andrew Lange and his company, Ascendant Management, come in. Andrew has designed more than 1.5 million square feet of cannabis facilities and moved them into profitable production in North America and Europe. One of his active customers is Onyx Agronomics in Washington. Bailee Syrek is the director of operations at Onyx and this is the story of the key points in designing a precision cannabis facility with state-of-the-art efficiency.
Andrew Lange, a navy veteran, runs a global cannabis consulting business based in Washington. With a “prove it to me” approach, he regularly tests the best new technologies in the facilities he designs. He integrates his knowledge of what works in practice into his subsequent facilities. One of his previous projects, Onyx Agronomics in Washington, started in 2014 and moved quickly into production in a retrofitted warehouse. Many of his best ideas started with Onyx, including some new innovations in the latest expansion there this month. Onyx is a tier 3 cannabis cultivator.
Bailee Syrek’s operation at Onyx currently produces 9,000 lbs. of dry trim bud per year in 8,000 square feet of canopy. She operates the state-of-the-art, clean room style, indoor grow facility around the clock, delivering 2.7 grams/watt from every square foot of canopy in her building. She runs a highly efficient facility.
Onyx has had an ongoing relationship with Ascendant Management and chose to leverage them again with their current expansion to increase their capacity further. Onyx uses a range of advanced technologies including aeroponic cultivation equipment and control software from AEssenseGrows to hit their metrics.
Precision, Quality & Consistency
“I look for ways that my clients can differentiate themselves,” says Lange. Maybe it’s his military background, but Andrew demands precision, quality and consistency in the operations he designs. “Cannabis is a just a plant really so we look for the highest performance grow methodology. I find that to be AEssenseGrows aeroponics,” says Lange. “The AEtrium Systems provides a good foundation to manipulate for grow recipes and business process. I add teamwork, communications, and operations procedures to that foundation.”
At Onyx, Bailee Syrek works closely with her channels. She invites her customers in regularly to review the Onyx cultivars and to cover their ideal requirements. These can range from bud size for their packaging to THC or terpene profiles (Yes, channels do want both higher and lower THC content for different consumers and price points). Based on that feedback, Bailee and Andrew work together to dial in the ideal grow recipe in the AEssenseGrows Guardian Grow Manager central control software. They push their target strains to optimize the results in the direction requested by their customers. For example, “How do you get the highest possible THC out of 9lb Hammer?” You’ll have to ask Andrew and Ascendant Management.
Driven by customer requests, Onyx is adding new strains to build on their innovative brand. Bailee expects to reach new levels of terpene bundles with Cheeseburger Jones, Koffee Breath, Shangri-La and OK Boomer. Utilizing Andrew’s expert knowledge, they can take typical sub-20% cannabinoid bundles and improve them using aeroponics and better controls, into standout aeroponic 30% packages.
The Onyx Vision
Bailee Syrek believes this is the most exciting time yet for Onyx. Delivering premium grade cannabis as a white label flower supplier for years, Onyx is a profitable and successful business. But even with doubling capacity every year, they are still having trouble keeping up with customer demand. Bailee wants to get to the point where she can always say yes and accept an order from their white label customers. With this objective, she again engaged Ascendant and Andrew to get beyond 15,000 lbs. of output in 2021 to make her customers happier. Beyond that basic expansion, she is also ambitious and is preparing plans for additional lines of revenue with their own proprietary flower, oil and derivative products.
“This expansion will be a new challenge,” says Syrek. “Flower production is in our wheelhouse. We have tighter operations, with the most consistent bud size, terpenes and test results in our state. These new products will require that same quality but now in new areas.”
Her Path to Leadership
Bailee started with Onyx in a compliance position that grew out of the constant demands for government licensing and reporting. In that compliance role, she had the opportunity to work a bit in every department, giving her a good understanding of all of the facility operations and workflows. All of that experience led her to eventually take over the operations leadership role. She instills care and effort to maintain the cleanest and most efficient operations possible. “With aeroponics, we don’t have to lug soil from room to room or in and out of the facility. This saves us a ton of work that we can redirect to plant health and maintenance,” says Syrek. “Medical precision and GMP quality is a given. Each room on average is 105 lights and one room manager and one cultivation technician take the room from clone/veg transfer to harvest as a two-person team.”
Bailee prides herself with results. “Medical grade precision is normal for us. We use medical grade SOPs for every aspect of our production.” Bailee has designed these guides into their control system that runs on the Guardian Grow Manager software. From sensor tracking, to performance graphs to time cards; everything is integrated in her performance monitoring.
A quality focus is very apparent in every Onyx flower room. Every watt of light energy is transferred to the pristinely manicured canopy. Naked stems feed nutrients up to the fat buds at the trained canopy surface. Fan leaves are removed and all possible energy turns into bud weight and potency. The room technician has a passion for plant health, table care and plant maintenance all the way through to the harvest bonanza.
What is the biggest challenge for Bailee as she drives the operation? Even at 105-110 grams per square foot per harvest, they are sold out. “Every customer wants to buy beyond our capacity. It is a good problem to have,” Bailee says. “Customers want our quality and love the consistency. This is the most exciting thing about our expansion. We will finally be able to make additional channels happy with high quality supply.”
This is where Andrew credits Onyx’s performance. “Most well running operations deliver 1.1-1.8 grams of dry trim bud per watt of electricity used in powering a grow room,” says Andrew. The Onyx grow formula results leave this in the dust. Running Fluence SPYDR 2i grow lights and the AEtrium System aeroponics, Onyx plants are delivering just shy of 4 lbs. per light with every harvest cycle. At 630 watts max output, that delivers ~2.7 grams/Watt, the most efficient operation he has seen. The Onyx process and execution works.
“Bailee is a great example as a professional. She builds a motivated team that executes better than her competition,” says Andrew.
At the same time, Onyx runs a highly space efficient nursery with just enough mother plants feeding energetic cuttings into the 4-layer stacked AEtrium-2.1 SmartFarms in their environmentally controlled clone room. They produce more than enough healthy clones to jump from veg to flower in the span of a week. Grow time, harvest turn time and no veg space, results in very efficient use of power in the complete operation.
Mirroring Onyx for Medical Grade Cannabis in Europe
Andrew Lange’s current passion is a green-field project in Portugal. Self-funded, Andrew says that this facility will be one of the first that is pure enough in operations to supply non-irradiated clean-room-level-quality cannabis beyond the precise standards required by European regulators. Current importers have not been able to clear the European standards for cleanliness without irradiating their buds. Other companies like Aurora have abandoned efforts to access the market due to the precision requirements. Typical methods used for fruit imports use gamma radiation to get bacterial counts down. This was tried with cannabis to sterilize buds, but the problem with cannabis is this degrades the quality of the flower.
Andrew’s Portugal facility will be using a sterile perimeter surrounding his grow space (mothers, clones/veg, flower rooms) and harvest and processing areas (dry, trim, packaging). Andrew creates a safe environment for healthy production. A steady harvest cleaning regimen is built into his operational designs from the beginning. All operators are trained in procedures to exclude pathogens and limit all possible transmission (airborne, physical/mechanical touching, or water carried). Every area is cleaned during and between harvests. Andrew is confident he will reach a consistent level of accuracy and purity beyond European requirements because it is routine in all of his designs.
Certified Efficiency is the Message
Good Manufacturing Practices (GMP) and Good Agricultural and Collection Practices (GACP) are required for certification and access to European markets. Andrew always builds tight operations, but in this case, his Portugal facility is designed with the fit and finish to be GMP and GACP compliant from day one with advanced air filtration and air management throughout.
Automated aeroponics is a foundation technology that Andrew recommends for his facility designs. The automatic data logging, report generation, cloud access and storage make this a foundational technology. Andrew does get some resistance from cultivators that are used to the classic soil media approaches but he explains that software configurable grow recipes, precision controls, zero soil/no pests and hyper-fast growth makes aeroponics the foundation of competitive advantage. Precisely controlled medical quality precision operations are built on top of this foundation.
The initial phase of the Portugal facility is 630 lights and this facility is Andrew’s latest personal investment. From secure perimeters to modular grow rooms and highly automated equipment, this location will be state-of-the-art in terms of grams/watt yields and renewable energy with an output of 6 metric tons per year. Solar powered electricity from a 4-megawatt farm will use Tesla megapacks for storage and be grid independent.
Technology & Innovation, Onyx & Ascendant
From his first experience with AEssenseGrows aeroponics, Andrew has been able to design complete grow recipes in the Guardian Grow Manager software with very tight precision on dosage. This makes it possible to create ideal recipes for each strain (nutrition, irrigation cycles, lighting and environmental management). This frees up the operations teams to focus on plant health and execution. The nutrients, pH, CO2, temperature and humidity, follow the Guardian directions that he sets.
Working with Bailee at Onyx, Andrew is now consulting on the post-harvesting side of operations (drying, trimming, extracts and packaging). In parallel with his efforts, Bailee is optimizing THC & terpene production on the cultivation side with UV lighting (considering far-right red frequency light recipe enhancements).
That is the Ascendant Management approach to innovation. Trial, test constantly, perfect ideas in practice. Optimize the results for consistent, high-quality results. Even while driving for the personal craft touch, use automation to increase efficiency of mundane, but important tasks. With these methods, Andrew believes that the Onyx labor cost is one third of typical soil media grow operations. Zero soil aeroponics offers many benefits. Bailee’s team is able to give each plant more attention and delivery better quality. Automation is a win-win for them.
Bailee finds that constant testing is useful for two things: one, great results, and two, surface the best talent with their hand’s-on approach.
Always Finish with People
Bailee says that her staff works incredibly hard. “We are a different grow, with better ergonomics on the job, aeroponics for precision and yields, and advanced technology at the leading edge in every part of our grow. No dirt up and down stairs. People are proud to work here. We are not your dad’s grow operation.”
“We promote from within. Everyone starts as a room tech and has the opportunity to move up. Teams are isolated by rooms so there is no contamination between rooms or humans. Put in the work, and you will get promoted with expansions, and grow with the company as we take a bigger share in the market.” Female employees make up almost half of the current staff, and Bailee encourages employees to refer their friends. “Good people invite good people,” she says.
Her training program introduces the technical aspects of their unique operation, the positive expectations and career path for every new employee. The social environment is friendly with good pay and regular raises. Each new employee fills a range of roles during their 1-month training circuit and are assigned to a cultivation space under a lead as an official cultivation tech at the end of 30 days. “One thing that we do more than at other grows is constant cleaning,” says Bailee. “This is an ever-present mantra for the staff.”
Freya Farm, a pesticide-free cannabis producer and processor located in Conway, Wash., was recently forced to issue a recall after the chemical o-Phenylphenol, listed under CA Prop 65, was found on its products. Testing traced the antimicrobial compound, known to cause cancer, back to the FDA-compliant food grade gloves used by Freya during packaging.
The reason this could happen with FDA-compliant, food grade gloves needs urgent attention. The production and manufacturing of food contact gloves is largely unsupervised, with limited and infrequent checks on gloves imported into the US. After initial approvals, non-sterile, FDA-compliant food grade gloves are not subject to ongoing controls. This may lead to lower grade and cheap raw materials being used in sub-standard production facilities and processes.
Why “Food Safe” Gloves Aren’t Always Safe
The quality and safety of disposable gloves are limited to Letters of Compliance and Guarantee on the general make and model of the glove, not necessarily the glove you are holding in your hand. There are few controls on the consistency of raw materials, manufacturing processes and factory compliance for both food contact and medical examination grade gloves. Therefore, the opportunity exists for deliberate or accidental contamination within the process of which the Preventive Controls Qualified Individual (PCQI) may not be aware.
In the words of Freya Farm, “Nothing ruins your day like testing your product, confident it will be clean, only to find it contaminated with some crazy, toxic chemical.” In tracing the issue, the gloves were the last thing Freya Farm tested, as they never suspected something sold as food safe could be the culprit.
A recall of this type can be expensive, as fines range up to $200,000. Since this incident, Freya Farm has implemented a responsible sourcing policy for gloves using supplier Eagle Protect to protect its products, people and brand reputation.
Eagle Protect, a global supplier of PPE to the food and medical sectors, is currently implementing a unique proprietary third-party glove analysis to ensure a range of their gloves are regularly checked for harmful contaminants, toxins and pathogens. This Fingerprint Glove Analysis mitigates the risk of intentional or accidental physical, chemical or microbiological glove contamination by inspecting five factors: the use of safe ingredients, cross-contamination potential, cleanliness, structural integrity and dermal compatibility.
Harmful toxins and contaminants in gloves have been identified in many peer reviewed scientific studies. This is now a real issue for companies producing consumer products, especially in industries such as organics and cannabis whose products must be handled by gloves and test clean.
Three key areas that can be tested for in a glove analysis to ensure safe product handling include:
Dermal compatibility tests for toxins and chemicals will flag any toxic chemical, such as o-Phenylphenol
GCMS testing for consistent quality and safety of glove raw materials
Cleanliness tests for pathogens inside and outside the surfaces of gloves – particularly pathogens also required in cannabis testing, such as E. coli and Salmonella, mold and fungus and pesticides.
For cannabis producers responsible glove sourcing is vital, especially as the COVID-related demand for single-use gloves exceeds supply, with poor quality, counterfeit and even reused gloves flooding the market. For producers with a product that rests very much on its quality, it’s important to focus on quality and not just cost when procuring gloves.
On January 15, 2021, the USDA published its final rule on US hemp production. The rule, which becomes effective on March 22, 2021, expands and formalizes previous guidance related to waste disposal of noncompliant or “hot” crops (crops with a THC concentration above .3 percent). Importantly for the industry, the new disposal rules remove unduly burdensome DEA oversight and provides for remediation options.
Producers will not be required to use a DEA reverse distributor or law enforcement to dispose of noncompliant plants. Instead, producers will be able to use common on-farm practices for disposal. Some of these disposal options include, but are not limited to, plowing under non-compliant plants, composting into “green manure” for use on the same land, tilling, disking, burial or burning. By eliminating DEA involvement from this process, the USDA rules serve to streamline disposal options for producers of this agricultural commodity.
Alternatively, the final rule permits “remediation” of noncompliant plants. Allowing producers to remove and destroy noncompliant flower material – while retaining stalk, stems, leaf material and seeds – is an important crop and cost-saving measure for producers, especially smaller producers. Remediation can also occur by shredding the entire plant to create “biomass” and then re-testing the biomass for compliance. Biomass that fails the retesting is noncompliant hemp and must be destroyed. The USDA has issued an additional guidance document on remediation. Importantly, this guidance advises that lots should be kept separate during the biomass creation process, remediated biomass must be stored and labeled apart from each other and from other compliant hemp lots and seeds removed from non-compliant hemp should not be used for propagative purposes.
The final rules have strict record keeping requirements, such rules ultimately protect producers and should be embraced. For example, producers must document the disposal of all noncompliant plants by completing the “USDA Hemp Plan Producer Disposal Form.” Producers must also maintain records on all remediated plants, including an original copy of the resample test results. Records must be kept for a minimum of three years. While USDA has not yet conducted any random audits, the department may conduct random audits of licensees.
Although this federal guidance brings some clarity to hemp producers, there still remains litigation risks associated with waste disposal. There are unknown environmental impacts from the industry and there is potential tort liability or compliance issues with federal and state regulations. For example, as mentioned above, although burning and composting disposal options for noncompliant plants, the final rule does not address the potential risk for nuisance complaints from smoke or odor associated with these methods.
At the federal level, there could be compliance issues with the Resource Conservation and Recovery Act (RCRA), Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and ancillary regulations like Occupation Safety and Health Administration (OSHA). In addition to government enforcement under RCRA and CERCLA, these hazardous waste laws also permit private party suits. Although plant material from cultivation is not considered hazardous, process liquids from extraction or distillation (ethanol, acetone, etc.) are hazardous. Under RCRA, an individual can bring an “imminent and substantial endangerment” citizen suit against anyone generating or storing hazardous waste in a way the presents imminent and substantial endangerment to health or the environment. Under CERCLA, private parties who incur costs for removal or remediation may sue to recover costs from other responsible parties.
At the state level, there could be issues with state agency guidance and state laws. For example, California has multiple state agencies that oversee cannabis and hemp production and disposal. CA Prop 65 mandates warnings for products with certain chemicals, including pesticides, heavy metals and THC. The California Environmental Quality Act (CEQA) requires the evaluation of the environmental impact of runoff or pesticides prior to issuing a cultivation permit. Both environmental impact laws permit a form of private action.
Given the varied and evolving rules and regulation on hemp cultivation, it remains essential for hemp producers to seek guidance and the help of professionals when entering this highly regulated industry.
Between the patchwork quilt of rules and regulations that is the modern cannabis industry, products pass through many hands before being sold to a customer. From sourcing, cultivating, manufacturing, distributing and vending, the relationships between a licensee and their vendors/partners up and down the supply chain is complex and touches many stakeholders along the way.
While the focus on quality packaging, dope labeling, delicious ingredients and consistently potent cannabis is a priority for most companies, what often isn’t thought about is the liability in bringing these components together in terms of compliance.
Compliance responsibility falls on licensees as a direct term and condition of licensure within their state. To operate, licensees must maintain and be able to demonstrate compliance with a plethora of rules and regulations. Compliance is the name of the game in cannabis.
While most operators understand this, what most do not think about is how the compliance or noncompliance of their vendors affects their own liability.
Sharing Noncompliance & Liability
Licensees are the only entities in the supply chain that can be fined, administratively held, suspended, revoked or even arrested due to noncompliance. This fundamental nature means that supply chain partners are automatically segregated by whether or not they are plant touching licensees or not.
In the case of mutual licensees such as a manufacturer and dispensary, the liability for compliance falls on both entities. A single manufacturer that makes an error on labeling language or a cultivator using the incorrect containers both pass on their liability to any downstream partners.
iComply has seen regulators quarantine hundreds of products among multiple dispensaries who never checked the compliance of the supplying manufacturer. Surprisingly, most dispensaries don’t think of the liability passed to them amid hundreds of SKUs and multiple manufacturers and cultivators. Confounding the issue further is that everyone in the industry can interpret the same rules in completely different ways.
Assuming your supply chain partners are 100% compliant is a dangerous pitfall.
By not checking noncompliance from supply chain partners, operators accumulate evidence dating back years. Like METRC being off, these issues tend to snowball until they seem overwhelmingly difficult to handle. And it doesn’t just stop at labeling issues. Noncompliance can fall on all supply chain partners and be left in the hands of a licensee in a variety of ways.
Even worse, are supply chain partners who don’t have a motive to be compliant as they do not own licenses and often have a poor understanding of cannabis compliance. A packaging provider, marketing company, CBD provider, security company, vending machine providers, waste disposal companies and other commonplace suppliers and partners can often run afoul of regulations and put their licensed partners at risk.
Since regulators can only enforce the licensed entity, many states have made it clear that licensees are ultimately and fully responsible for any actions of noncompliance taken by third parties contracted by the company – regardless if they touch cannabis or not.
Areas of Common Noncompliance in Cannabis
Like a game of “Hot Potato” (worth millions of dollars), we’ve seen common noncompliance liability get passed down the supply chain in the following areas of cannabis operations:
Packaging and labeling
Test result manipulation
Input or ingredient defects
Inventory tracking errors
Recordkeeping and manifest errors
Some of these areas of noncompliance rely with non-licensed supply chain partners such as packaging, ingredients or third party printed labels. Often, these folks simply don’t know what they don’t know and make mistakes – not knowing the thousands of dollars they could be costing their licensed partner down the line.
Other areas in which compliance should be expected from licensed partners lies in product liability, test result issues, inventory tracking, manifests and recordkeeping. No one usually wants to be out of compliance and usually these issues arise from licensed partners who are simply confused, mistaken or ignorant to the requirements of ongoing and changing rules.
It’s hard to keep all of one’s suppliers and supply chain partners on the same page over the long run and amid a multitude of changing rules. But what you resist, persists…
Managing Compliance in the Cannabis Supply Chain
Nothing worth it is ever easy; but it is possible to identify common areas of noncompliance in one’s cannabis operation and supply chain partners and to do something about.
To identify problem areas, iComply recommends conducting regular auditing at a macro level; but to also dive deeper into micro level audits of all of one’s books and records (covering vendor files) and packaging and labeling for at least 12 months.
You don’t know what you don’t know, so one must begin by investigating and understanding where liabilities are occurring between themselves and their supply chain partners. Once valid feedback and noncompliance is discovered, it can be remediated.
Like triage, you have to stop the bleeding before you can prevent further injury.
It is always more expensive and time consuming to continue reacting to noncompliance and trying to fix issues after the fact. This is how snowball effects happen until the problems seem so overwhelming, operators tend to simply ignore the liability. While it is human nature, it is also extremely dangerous and detrimental when multimillion dollar licenses are on the line.
An ounce of prevention is worth a pound of cure –Benjamin Franklin
By implementing proactive compliance measures, cannabis businesses can avoid costly noncompliance consequences and position themselves as proactive checkpoints of supply chain compliance. We recommend integrating the following procedures, documents, training and tools into one’s operational compliance infrastructure:
New vendor checklist
Packaging and labeling checklists by product type
Virtual review of labels/non-cannabis packaging
Calendar expiration dates for licenses and products
Compliance auditing of key vendors and strong contracts regarding liability
Input product checklists and tracking as per GMP compliance
This snapshot is just the tip of the iceberg when it comes to the depths of liability a cannabis business is exposed to by its supply chain partners. To truly manage compliance, one must be aware of shared risk and implement proactive measures to prevent suppliers and supply chain partners from inadvertently affecting the operational compliance of your cannabis business.
Selecting Supply Chain Partners
There are plenty of fish in the sea and plenty of suppliers vying to do business with you. iComply has seen the good, the bad and the ugly. We’ve been on the front lines of developing markets like California where we warned our clients to steer clear of companies like Kushy Punch long before they finally lost their license for noncompliance.
We advise our clients on the importance of being selective and conducting due diligence in vetting supply chain partners and vendors. Most fundamentally, how aligned are the values of potential partners? Are they in the business for the same reasons you are? What brought them to the cannabis space? How do they value relationships and what do they know about compliance?
Too often when focused on price or speed, people miss the more important fundamentals of relationships. We serve as vetters for our clients whether they are shopping for a POS provider, a bank or a waste disposal company. Beyond the cultural alignment, the more objective questions begin to take shape in vetting a potential partner. This can differentiate between license holding and non-holding supply chain partners.
For plant-touching licensed partners, we recommend answering the following before entering into business partnerships that affect your supply chain:
Copies of licenses, contracts, and a catalogue of products
For products being selected, prior to ordering a sample, obtain a copy of the label by email first. Or an EMPTY sample of product packaging and labeling to vet against a packaging and labeling checklist.
Search news articles on the company and ask if they have had compliance issues before. Obtain documentation if there have been compliance issues previously.
Ask how they manage their compliance and prevent noncompliance down their supply chain. Do they train their staff? Do they conduct regular audits internally? How often do they update SOPs and reconcile inventory?
For non-plant touching partners, we recommend answering the following:
Obtain any certifications for quality assurance or in credentials for services.
Ask for references from other customers who have cannabis licenses.
Discover how familiar they are with the cannabis industry AND the rules and regulations in your market.
Ensure they have an understanding of how they impact your compliance. Discover how they plan on preventing areas of concern together.
Make sure they know you are ultimately responsible for noncompliance and understand what they are willing to do to protect you.
Ensuring accountability across the supply chain means selectively choosing partners who share the same values of integrity and professionalism. On more complicated deals, such as licensing IP or your brand to operators in new states or markets, we recommend that you mandate a compliance program that offers third-party validation to ensure the internal integrity of your partners. Too often, brand risk isn’t considered in the fast-paced expansion of the industry and operators must not only be vetted, but held accountable, when representing one’s brand and products.
For all intents and purposes, the wild web of the supply chain in cannabis is the industry. We are a collective of collaborators who all serve the goal of delivering high quality and safe products to cannabis consumers globally. For those committed to minimizing their risk to protect their profits, cannabis compliance is the key to success.
Ensuring accountability across the supply chain means selectively choosing partners who share the same values of integrity and professionalism. In doing so, the industry elevates its legitimacy and more effectively expands in a sustainable manner that protects all stakeholders involved.
Noncompliance affects licensees the most and they must be the most vigilant, but it takes a village to raise an industry. Compliance affects most everyone in the supply chain and the loss of any operator hurts the entire industry.
Cultivation businesses should consider specializing in just one stage of the cannabis cultivation process. The industry has focused heavily on vertical integration, and some regulating bodies require licensees to control the entire cannabis value chain from cultivation and processing to retail. This requirement is not always in the best interest of the consumer or the business, and will likely change as the industry evolves. Not only will companies specialize in each step of the value chain, but we’ll see even further segmentation among growers that choose to focus on just one step of the cultivation process. Cannabis businesses that want to position themselves for future success should identify their strengths in the crop production process and consider specializing in just one part.
Elsewhere in commercial horticulture, specialization is the norm. It is unlikely that the begonias you bought at your local garden shop spent their entire life inside that greenhouse. More likely, the plant spent time hopping between specialists in the production chain before landing on the retail shelf. One grower typically handles stock plant production and serves as a rooting station for vegetative cuttings. From there, rooted cuttings are shipped to a grower that cares for the plants during the vegetative stage. Once they’re an appropriate height for flowering, they’re shipped to the last grower to flower out and sell to retailers.
Cannabis businesses should consider imitating this model as a way to ensure competitiveness in the future. In the US, federal law does not yet allow for the interstate transport of plants containing THC, but the process can be segmented within states where vertical integration is not a requirement. As we look ahead to full federal legalization in the US, we should anticipate companies abandoning the vertical integration model in favor of specialization. In countries where cannabis cultivation is federally legal, entrepreneurs should consider specialization from the moment they begin planning their business.
Cultivators that specialize in breeding and genetics could sell seeds, rooted cuttings, and tissue culture services to commercial growers. Royalties could provide a recurring source of income after the initial sale of seeds or young plants. Contracting propagation activities to a specialist can result in consistently clean rooted cuttings that arrive certified disease-free at roughly ¼ the cost of producing them in-house. This not only frees up space at the recipient’s greenhouse and saves them money, but it eliminates the risks inherent in traditional mother plant and cloning processes. If a mother plant becomes infected, all future generations will exhibit that disease, and the time, money, energy, labor, and space required to maintain healthy stock plants is substantial. Growers that focus on large scale cultivation would do well to outsource this critical step.
Intermediary growers could specialize in growing out seeds and rooted cuttings into mature plants that are ready to flower. These growers would develop this starter material into healthy plants with a strong, vigorous root system. They would also treat the plants with beneficial insects and inoculate the crop with various biological agents to decrease the plant’s susceptibility to pest and disease infestations. Plants would stay with this grower until they are about six to 18 inches in height—the appropriate size to initiate flowering.
The final stage in the process would be the flower grower. Monetarily, this is the most valuable stage in the cultivation process, but it’s also the most expensive. This facility would have the proper lighting, plant support infrastructure, and environmental controls to ensure that critical grow parameters can be tightly maintained throughout the flowering cycle. The grower would be an expert in managing late-stage insect and disease outbreaks, and they would be cautious not to apply anything to the flower that would later show up on a certificate of analysis (COA), rendering the crop unsaleable. This last stage would also handle all harvest and post-harvest activities—since shipping a finished crop to another location is inefficient and could potentially damage the plants.
As the cannabis cultivation industry normalizes, so, too, will the process by which the product is produced. Entrepreneurs keen on carving out a future in the industry should focus on one stage of the cultivation process, and excel at it.
Carbon Dioxide (CO2) extraction is a processing technique whereby CO2 is pressurized under carefully controlled temperatures to enable extraction of terpenes, cannabinoids and other plant molecules.
Green Mill Supercritical is a Pittsburgh-based manufacturing and engineering company focused on cannabis and hemp extraction. The company offers a range of CO2 extraction equipment where users can tune and control their extraction methods.
We spoke with Wes Reynolds, CEO of Green Mill Supercritical. Wes recently joined Green Mill as CEO and investor in the company after a long career at the Coca-Cola Company in senior sales and general management roles.
Aaron Green: Wes, thank you for taking the time to chat today. How did you get involved in Green Mill?
Wes Reynolds: I came out of a 20-year career at Coca-Cola, where I lived and worked around the world. I was a sales and general management guy with Coke, and learned a lot about running businesses and how to drive growth. I left Coke in 2017. After that successful career I wanted to be in the cannabis space. I felt like cannabis was a growing space with a lot of opportunity and a lot of misperceptions out there, particularly around the foundations of what I would call the “evil reputation” of cannabis. I just found that abhorrent and wanted to be part of changing it.
So I ran the Florida operations for Surterra, which is now called Parallel, for a year out of Tampa, and we did a great job of growing that business in Florida. As the president of the Florida operation for Surterra, I saw everything seed-to-shelf for the industry. We had a 300,000-square-foot greenhouse in Central Florida, we had dispensaries, we had all the production, distribution and all the marketing. I was really able to learn the industry top to bottom.
When I left Surterra, I started looking at various investment opportunities and thinking about what I might want to do next. I came across Green Mill out of Pittsburgh, and was really impressed with the technology that they had put together. Having run a company where we used CO2 extraction, I had experiences with systems that didn’t work when they were supposed to or didn’t work the way they were promised, which led to lots of downtime, lots of frustration and lots of babysitting. I was impressed with Green Mill’s engineering approach and decided that I’d like to be involved with them. I originally considered just being an investor, but more and more conversations led to a greater understanding of some basic business administrative needs that they had as well. One thing led to another and I agreed to come on as the CEO, and I’m also an investor.
I’m excited about what we’re doing at Green Mill. I think that bar none, we make the best supercritical CO2 extraction equipment out there. We continue to innovate on that every day. We want to push CO2 beyond known limits, which is our stated goal as a company. We believe in CO2 and we’re living our goal in that we really are pushing it beyond known limits. There are new things we’re uncovering every day where we go, “Oh, my God, I didn’t know we can do that with CO2!” So, that’s kind of fun.
Aaron: Can you tell me just a high-level overview of how CO2 extraction works?
Wes: A supercritical CO2 extraction system is a collection of extraction vessels and fractionation vessels or collection vessels. In our case fractionation because we’re doing multiple collections through a single run. Then you need a system of pumps and valves and tubing, etc. to move the solvent in a supercritical state through the packed biomass, and then move the extracted compounds into a set of collection vessels. It sounds very easy. But the key to supercritical CO2 extraction is controlling temperature, flow rate and pressure. The better you can control temperature, flow rate and pressure, the more precise of an outcome you’re going to get. For example, say you run a three-hour extraction run, and you want to run it at 3500 psi. Well, you know, a competitive system might fluctuate 300 to 400 psi on either side of 3500. Whereas our system currently fluctuates more like five to 10 psi on either side of the 3500. So, there is much more control and precision.
Our whole goal, when we’re talking about pushing CO2 beyond known limits, is how do we continue to chase that holy grail of perfect control of temperature, flow rate and pressure? One of our advances so far is a proprietary pump, for example, that’s a liquid displacement pump that we engineer and build. It ensures a very even and consistent flow, independent of the pressure setting. So, that flow rate doesn’t change in our system compared to what you would see with another system. It sounds like a minor thing, except that at the end of a run, if you expected to get a certain set of molecules, you’re going to get a different set of molecules if your temperature and flow rate and pressure are varying, because what you’re doing is disrupting the density of the CO2 as it flows.
It’s about building a system that is precise in that way, I think, that requires enormously skilled engineering effort and design effort on the front end, and then requires us to have advanced production and manufacturing capabilities in our shop in Pittsburgh. Our customers are clearly impressed with the levels of consistency that they’re getting out of their system.
Aaron: You talked about precision and consistency as two items. Is there anything else that makes Green Mill different?
Wes: I’m a brand guy. I believe in brands. I came out of a 20-year Coca-Cola career.
The way that the cannabis industry is going in total, in my opinion, is the consumer is going to get more and more discerning along the way. Up until this point, everybody thinks “oh, we have THC and CBD and we have intensity.” But the more sophisticated and educated consumers get, the more discerning they’re going to be about what products they want to put in their bodies.
What makes Green Mill different is that we’re building a system that allows the operator of that system to create differentiated products for the marketplace. So, it’s not simply “CBD is CBD.” It’s: what plant did you start with? How can you maintain as many of the characteristics of that plant as possible?
We’re going to create the most sophisticated tool possible to allow the operator to create products that can be differentiated in the marketplace for a discerning consumer at a premium price. That way, you can create a market where there might not have been a market before, instead of just “hey, I’ve got X pounds of biomass that I need to extract. Give me your bluntest instrument and let me extract.”
We currently make five different systems. First is the SFE Pro. We make a seven and a half liter and a 10-liter version, with two-vessel configurations of each of those. Then we have what we call a Parallel Pro, which has four 10-liter vessels and two pumps, with two streams running parallel to each other and emptying into shared collectors. It doubles the extraction rate, and you don’t expand the footprint very much. But 10-liter vessels are the biggest vessels we use. Because when you go too large with the vessel, you are giving up something in terms of the ability to control temperature, flow rate and pressure. Your efficiency starts to drop with higher vessel volume.
One of the things that makes Green Mill different is our extraction rate. Our Parallel Pro can do 145 pounds a day of biomass. We think that’s a significant amount, given the demand that’s out there for unique products. What we’re advocating for is multiple extraction systems instead of giant permanent installations of extraction systems, that end up limiting your flexibility. Big systems also prevent you from creating redundancies in your operating system. So, when your extraction system goes down, you’re done. Versus in our universe, we would say, you might want to have three or four extraction systems in different locations, running different products. Our price points are such that that’s very doable.
Aaron: How does the breakdown look between your cannabis and hemp clients?
Wes: A lot of that is legislative frankly. It has to do with what the environment is like at the moment. About 60% of our customers are small hemp farmers. And then we have the other 40% in the cannabis space that are medical or adult use producers.
CO2 extraction has a lot of applications beyond cannabis. We have a couple of customers using our system for hops extraction, for example. We see an enormous opportunity out there for non-cannabis botanical extraction, but our primary focus is cannabis. That is what we’re designing this system to do.
We find that small hemp farmers love our system because it is reliable and very automated. We have proprietary software that operates the whole system. You load and run various “recipes,” at least we call them recipes. What you are doing is setting flow rate, setting temperatures, setting pressures, etc., then that proprietary software has an unbelievable ability to control everything through the process. I’ve talked to several different operators who have used other machines, and then found themselves on a Green Mill system and couldn’t believe how easy, but also feature-rich it was.
I talk about it like it’s like an oven, you know, you set the oven at 375 degrees. And a really good oven stays right at 375. You still need to be a good chef to be able to make that perfect cheesecake. But without that oven, your hands are tied, so you are constantly trying to check those, “is it still 375? I don’t know!” With our system, if it says 375, it holds at 375. So we’re pretty excited about that.
And we’re going to continue to innovate. For example, we have a proprietary heat exchanger that we use on our systems. It’s actually 3D printed stainless steel. It’s about a 20-pound piece of steel that’s been printed to have a special tubing shape in the center only possible with 3D printing that allows us to heat CO₂ very quickly.
Aaron: That’s very cool. I’m noticing a lot actually, the innovations in cannabis are creating these adjacent market opportunities in botanicals. So, I think that’s interesting you point that out. You mentioned terpenes are one of the things you collect out of the CO2 extraction. Can you talk about the crude that comes off and how people are either monetizing or formulating that crude?
Wes: Our goal is to produce the “purest crude” possible. So, we want “less crude” crude. I think that we’re at the beginning of this, Aaron. We’re nowhere near the end, which is what I find so exciting, because all of our innovation, all of our continued development and all of our experimentation is designed to keep thinking, how do we push this further and further and further and get a more refined crude.
We just welcomed Jesse Turner to our team as Director of R&D, who is a well-known extraction guy in the industry. He came from Charlotte’s Web and Willie’s Reserve, and has been doing independent consulting. He’s just a rock star. He’s already off and running on experimenting with different stuff.
I think that we are just at the beginning of seeing more and more of that opportunity to help people realize, “Oh, my gosh, I did not know you could do this!” Terpenes are a good example. I think we are only scratching the surface of what terpenes can do. I mean, a cannabis plant has 400 plus molecules and we know a good bit about probably 10 or 12 of them. So, what are we going to find out about the other 390? And as we do, the Green Mill system will be ideal for separating those molecules that we don’t know today are valuable. So, I think that’s part of what we’re chasing as well.
Aaron: So where do you see CO2 extraction fitting into the cannabis and hemp supply chain?
Wes: For any product on the market that is not a smokable flower it helps to have an extraction process. There may be some products that come out that we don’t know about yet that are not going to qualify in that category. Whether you are talking about vape cartridges, or lozenges, or gummy bears, or whatever it is, they are going to start with extract. I think what consumers want is zero adulteration of their product. So if you take any botanical product, and if it is GMO-free, does not have any pesticides, maybe it is all organic, etc. — there is real consumer appeal to that. Whether you agree with it or not, it is what consumers want.
We believe that we can continue to push CO2 so that there’s no requirement for introduction of any other materials than just CO2, which is a completely inert gas. It’s got no residual effect whatsoever on the product. If we get where we want to go, then eventually you are talking about a pure botanical experience.
Initial upfront capital is higher than you are going to see with ethanol and butane extraction solutions for the same size equipment, but ongoing operating costs of those are much higher, when you weigh it out over a period of time. I think what we are going to find is that people are going to keep coming to CO2 because they realize there are things they can do with it that they can’t do any other way.
The end consumer is really who we want to keep in mind. I think for a long time, this industry was very demand driven. “I have X acres of cannabis product, whether that’s hemp, sativa, indica, whatever it is, and I need to extract this many pounds a day over this period of time.” And we keep asking the question, well, who’s going to buy that product on the other side? What do you want it to look like when you put it out on the market? As opposed to how much raw plant matter do you have? What’s the demand? And that was a difficult conversation. We’re starting to see more people come around to that conversation now. But I think that’s the question we want to keep answering is how do we create those products that are differentiated in the marketplace and that can pass muster in any regulatory environment? People are going to want to know what’s in their product.
Aaron: What trends are you following in the industry?
Wes: As the CEO, I’m particularly interested in the overall development of the landscape of the industry in terms of who’s playing, who’s winning, what’s happening with legislation, MSOs versus SSOs. I’m also interested in the international environment. We have a good bit of interest from multiple countries that have either ordered Green Mill systems or are talking to us about Green Mill systems, including Canada and Latin American countries, some European countries, Australia and New Zealand.“We’re really committed to educational efforts with a very rigorous scientific foundation, but in language that is approachable and people can understand.”
The trends that I’m particularly interested in are more on the business side of the equation, in terms of how this business is going to shake out particularly from a capitalization perspective, as banking laws continue to change, which is a big deal, and the legislative environment gets a little more predictable and a little more consistent.
Aaron: Okay, last question. So what are you personally interested in learning more about?
Wes: Everything, is the short answer! I constantly run this little challenge of trying to understand enough of the science. I’m not a scientist, I’m a sales guy. That was how I grew up: general management and sales. I’ve made my living over many years being wowed by the pros. Depending on the scientists and the very specialized folks to help provide the right answers to things. I’m fascinated by the chemistry and I’m fascinated by the mechanical engineering challenges of what we do at Green Mill. So, I’m always interested in learning about that.
I think there’s a need, and it is helpful to be able to talk about those things in language that the layperson can understand, as opposed to explaining everything in scientific language. I think what I am trying to do is help people put it into a language that they can get, but that is not simple. Language that is correlative to reality. I think there’s so much misunderstanding about how these things work and what’s happening. We’re really committed to educational efforts with a very rigorous scientific foundation, but in language that is approachable and people can understand.
Aaron: Okay, that’s it. Thank you for your time Wes!
One of the biggest challenges that cultivators, processors and distributors face in doing business is the requirement to track the product at every step in the production process, from seed to sale. When you add the wide range of label sizes and requirements across the supply chain, labeling can feel overwhelming. While business systems such as METRC, BioTrack, MJFreeway and others are key, integrating accurate and secure barcode labeling with those systems will streamline the end-to-end process while meeting traceability requirements. Here are some things to consider, no matter what role in the cannabis supply chain you play.
Cultivation: Where Tracking and Labeling Starts
It’s crucial to implement accurate labeling processes from the beginning, whether growing for a customer or your own vertically integrated operation. The cannabis industry is faced with strict labeling regulations for a variety of cannabis products. Start with a labeling system that can integrate with METRC, BioTrack, MJ Freeway or other seed to sale software solutions. Your barcode labeling solution should also include label approval requirements, so you have role-based access and transparency with label changes and print history in case of issues or recalls. Whatever cannabis labeling regulations your business faces, label design software helps you create compliant cannabis labels throughout the supply chain, from grower to consumer.
Radio Frequency Identification (RFID) Labeling
Select regulations require growers to leverage RFID technology to track the location of the plants in their grow houses. RFID technology also enables accurate real-time inventory analysis and helps reduce manual labor costs, as well as errors that can occur with manual counting. To accurately encode RFID tags with variable plant data, be sure you are using a barcode labeling system that can enable easy RFID tag encoding that integrates data from all your business systems. Fastening RFID tags to plants across your grow house floor enables quick and easy location tracking, and RFID reading removes the need for a manual line of sight and allows hundreds of tags to be read at the same time, speeding up shipping and receiving.
After a plant is cultivated, a certain percentage is sent to a lab to be tested to ensure its proper strain, weight and compound makeup. After your product has been lab tested, leverage the data from your certificate of analysis to accurately display on your cannabis product labels, including:
Pass/fail chemical testing
Final date of testing & packaging
Identification of testing lab
Cannabinoid profile & potency levels
Efficiently display lab testing results on product labels with the use of a QR code for the consumer to review the independent lab’s certificate of analysis
Processing and Production: Tracking and Labeling After the Plant Has Been Harvested
A lot of information needs to go on a cannabis label. Whether you’re producing pre-rolls, packaged flower, edibles, beverages, topicals or cartridges, your labeling software must have the capability to create a wide variety of label sizes with barcodes that encode a large volume of data, while also being fully compliant and showing consumer appeal.
Your cannabis labeling software should do the following for you:
Support database integration to populate variable data from METRC, BioTrack, and other systems
Import high-resolution artwork and leverage with dynamic barcodes and variable data
Contain barcode creation wizards for 1D & 2D barcodes
Automate weigh & print
RGB/CMYK color matching
Feature secure label approval processes, label change tracking and print history
Offer WYSIWYG (What You See is What You Get) printing
Automatically trigger printing directly from scales and scanners when cannabis is weighed
Integrate labeling with your seed to sale software solution to automatically trigger label printing by an action in your seed to sale system or by monitoring a database. By integrating your label printing system with your seed to sale traceability system, you can expect to minimize errors, increase print speeds and maximize your ROI. Your business system already holds the variable data such as product names, license number, batch or lot codes, allergens, net quantity, cannabis facts, warning statements and more. By systematically sending this data to the right label template at the right time, labeling becomes an efficient and cost-effective process.
Distribution: labeling for consumer and industry demands
The ability to manage and distribute inventory efficiently is critical in the cannabis market. Warehouses and distributors need to ensure proper storage, handling and traceability of product, from the warehouse to the truck.
Leverage your labeling software to easily create:
Case & pallet labels
If you use the same data for your documents and labels, consider moving document printing into your label design software for greater efficiency. An advanced label creation and integration software enables label and document printing standardization by allowing multiple database records to be on one file. That means when new documents or labels come into your database, your software can seamlessly integrate.
Dispensaries can benefit from integrated seed to sale labeling for traceability, speed to market
Whether you’re a small outlet or a large dispensary, you benefit from integrated barcode labeling that starts from the beginning of the process. How? When barcode labeling software is integrated with seed to sale software, product is fully traced throughout the entire process, from tagging each plant at cultivation to identifying the consumer at point of sale, and accurately communicating that data back to METRC, BioTrack and other critical systems. Some dispensaries do package raw flower onsite, which many times means manually weighing, recording and entering the weight on the label, which is a time consuming and error-prone process. Integrating weigh and print functionality with barcode software enables dispensaries to use the action of weighing raw flower to automatically trigger the label print job. The variable weight is then accurately and automatically populated on cannabis flower package labels, creating an accurate and efficient on-demand labeling process for dispensaries. With efficient labeling processes, time spent creating, correcting, approving and printing labels will be reduced, getting product on the shelves faster.
Cannabis extraction and manufacturing is big business in California with companies expanding brands into additional states as they grow. This is the fifth and final article in a series where we interview leaders in the California extraction and manufacturing industry from some of the biggest and most well-known brands.
In this week’s article, we talk with Kristen Suchanec, VP of Production at Island. Kristen converted her experience in traditional consumer packaged goods to cannabis to help create a brand that is sought after by many. The interview with Kristen was conducted on August 21, 2020.
Aaron Green: Good afternoon Kristen, I am glad we were able to put this interview together. I know you have been very busy!
Kristen Suchanec: I’m so sorry this took so long to actually work! Thank you for bearing with me. I’m happy we are able to talk.
Aaron: Great! I like to start off the conversation with a question that helps our readers get to know you a little better. So, Kristen can you tell me how you got involved at Island?
Kristen: My background is in manufacturing and planning for consumer packaged goods. I had a friend of a friend and we were just at a happy hour and I asked what he was up to. He was actually our VP of Finance at Island and he handed me a box of pre-rolled joints. They were our Island Minis and I thought it was a great customer experience. I loved the brand and packaging which made it a consumer product versus, you know, this was a few years back where cannabis wasn’t necessarily commoditized or branded. I got really excited about that because I feel like cannabis should be traditional CPG and it should appeal to different people and it should have different brands that appeal to those different groups. So I literally just started a conversation. His brother is our founder and CEO and they needed someone to run production so that was my background and it all kind of lined up and I ended up being employee number five at Island!
Aaron: Wow, employee number five – awesome! OK, great. That is some nice background about how you got involved at the company. The next questions get into product development and manufacturing. The first question is: what’s your decision process for starting a new product?
Kristen: Yea, we are right now owning the lane between cultivation and distribution. So, getting those raw materials for whether it be concentrates or flower and then converting them into that final packaging for everything. So that is what we focus on and spend all of our time with automation and trying to make that process as efficient as possible.
When we’re looking at a new product we’re not necessarily creating a new extraction, we are really looking at the market and the end consumer and what people want. At Island we’ve really focused on vape, pre-roll and packaged flower. Those are the three categories we are working on right now. We are expanding and looking to move more towards vape and live resins and specialty concentrated products that we haven’t really had in our portfolio before. What we would like to do is make sure we have the capability to manufacture that and then take a look at where we think the market is going. We are trying to go in the flower, pre-roll and vape because that is where we spent so much of our time getting pieces of automation so not everything we are bringing in house is manual.
Aaron: Now when you say the capability to manufacture that are you talking about from a packaging perspective or…?
Kristen: Yes, so we won’t do any extraction on site. It’s getting distillate, shatter and flower and then we take that and convert that either into pre-rolled joint, a package of flower or any other final product. So, we are looking at automating that packaging piece.
Aaron: Got it. OK, so the next question — and I think you kind of touched on this as well — are you involved in manufacturing to the extent that you are manufacturing the packaging?
Kristen: Yes absolutely. My whole team’s manufacturing is based out of Oakland. That’s where we do all the conversion of products. I oversee that entire team and have been really involved in a lot of the equipment that we have sourced and iterations that we’ve gone through to make sure that we’re able to automate as much as possible. We’ve really focused on the issue of weighing the material. For our flower line everything is weighed and put into a jar, capped, sealed and labeled for it to come off our lines. We don’t have anyone in packing or anything like that. Our pre-rolls manufacturing is an automated machine where it actually weighs the flower before going into the cone so we’re not having to weigh after the fact and take into account the weight of the cone because that’s so variable so we know that the customer is getting consistency. Then for the vapes, it’ssame thing – the volumetric doses everything.
I have to give my credit to everyone on the floor who is doing the day to day, they find so many new solutions since they are the ones that are hands on. I am really involved in what new equipment we need, what problems we are looking to solve and what’s causing our bottlenecks so we can continue to improve our process week over week and year over year.
Aaron: We’ll dig into some of those problems in a bit. What is your process for not just starting new product but for developing a new product?
Kristen: Yeah, absolutely. So, I think it’s really interesting to see where the market is going. What’s selling really well and especially over the past year pre rolls have been a huge growth platform for us. And especially now, we’ve seen some changes because of COVID as well. We have single joints. But then we have our Minis, which I’ve mentioned before, which are half gram joints. We’re seeing sales on those actually increased because I think people are sharing joints as people want individual things because of this pandemic.
When we go through this process, we’re really – again – we’re so focused on what the consumer wants, and what we think is going to add to our portfolio. Then when marketing and our product team comes to me, we really focus on our machinery, what we can do with it currently, and if we would need something additional. So,we’re excited about expanding into 510s right now. We’re looking at how we can automate the process of capping – we can fill right now, but not cap. And then we also take a look at packaging.
I think it’s a little different than creating like a whole new product, extraction or anything like that, but we were looking at more sustainable options for packaging for child resistance because we’re trying to move away from barrier bags as much as possible. We’re looking at, okay, how many stickers do we need to put on there? What is the labor time going into each piece of product? And again, how are we eventually going to get some consistency across product lines, etc.
So, it’s really taking all three of those components, making sure we’re getting out the customer that feels like they want. I’m having it either fit into our process or again, then go through and look at what automations meanand automation equipment investment you want to make for long term future investments.
Aaron: Are you developing new products internally, or are you relying on outside manufacturers for that?
Kristen: Not everything we do is internal. We have a big network of, you know, cultivators and extractors we work with, but we’re in the midst of getting our own cultivation and manufacturing in house by working with other companies. So with that we’re doing everything.
Aaron: Do you ever bring in external product development consultants for helping out with your processes?
Kristen: No, we don’t bring in consultants. But we have brought in another brand into our fold via a brand called Neutron Genetics. That is part of our overall portfolio. We work very closely with the founder because he has a lot of trade secrets, a lot of his own processes to make sure you’re getting the best product for that specific brand.
Aaron: In your product development, what does getting stuck look like to you?
Kristen: That’s a good question. I think one of the biggest challenges is working with the plant itself, because it’s not consistent and it’s not homogenous. You could get the same strain from the same cultivator, but it’ll be a different batch. It might be a little stickier or a little larger, etc. When you’re looking at traditional manufacturing and automation, you want consistency, homogenized liquids, same viscosity every time, and we don’t have that because the plant itself is natural and is going to have all these different expressions depending on the batch and how it was grown and how it was trimmed even.“I think it’s really the proper equipment, the proper training and then, again, continuing to evolve as a team.”
So, getting stuck means finding an off-the-shelf solution that might work for, you know, nuts and bolts or some kind of food production and then you’re going to have to convert it to actually work with the cannabis plant. So that’s what makes it so challenging, but also really exciting. In the bud, humidity and air can really throw off a manufacturing process which is really different than just doing beverages for example.
Getting stuck means really having to work with the plant concentrates specifically if you think about just the nature of those whether it be shatter, distillate or very sticky product. So again, working with machinery isn’t always what goes hand in hand. So, getting stuck is dealing with all those different formats and inconsistency using the same product day after day.
Aaron: It sounds like consistency is kind of a main topic here?
Kristen: Yeah, I think it depends on what product format we have. For example, about a year ago, we launched infused pre-rolls for Neutron where we’re putting flower, kief and shatter into a joint. So that’s going to perform differently on a piece of machinery than just straight flower.
I think it all depends on the product. Usually it happens when it’s in that machine, you’re trying to get a good flow and a good consistency. You want to have time studies, you know how long it takes to make each batch. But if a certain flower mix is performing differently, it’s getting the settings of the machine dialed, right? It’s also properly training personnel so people know how to react when things get going. Sometimes things get physically stuck in the machine as well, so to be able to react on that.
I think it’s really the proper equipment, the proper training and then, again, continuing to evolve as a team. So for our pre-roll machine, we are now on our third version of it, just because we kept running into the same roadblocks and I’m hoping that continues to evolve and we just continue to get better equipment year after year.
Aaron: I see, do you ever hire outside consultants when you do get stuck?
Kristen: We’ve worked closely with vendors. I will say that we’re not a machine shop or engineering firm. So we’re not the ones creating a lot of what we use on the floor. We’ve partnered with various vendors, which has been helpful, but we haven’t used external consultants.“When you see the huge potential and then see how much is taken out from illegal activity right now, it is frustrating to see.”
Aaron: Okay, now imagine that you have a magic wand and somebody can come in and help you. What does your magic helper look like?
Kristen: I could probably make a really long list if I’m focusing on just my manufacturing and everything! I think the next thing which we’re already thinking about that magic wand is how to get a perfectly rolled joint without having so much manual human touch to it. And like I said, we’ve really attached to that weighing problem. And we’ve seen solutions out there that you know, claim to twist and have that “perfect roll” and you don’t need to even touch it. But I think the biggest challenge there is it depends how well it’s packed. You know, you don’t want it too tight. You don’t want it too loose for that customer experience. So getting that quality, if I could wave a magic wand where I’m putting in, you know, paper on one side and out comes perfectly rolled joints, that would be my magic wand for sure. Okay, I think there’s a lot of solutions out there but to get that quality and that consumer experience that we want, I haven’t seen working practice yet.
Aaron: Okay, What’s the what’s the most frustrating thing you’re going through with the business right now?
Kristen: Again, that could be a long list! I think from a more macro-level, it’s definitely the competition with the illicit market and just how there’s not enough outlets for legal cannabis right now in the state of California. When you see the huge potential and then see how much is taken out from illegal activity right now, it is frustrating to see. We’re going to get this growth and projection of the right number of dispensary licenses and things like that are definitely a huge frustration as well as with the tax structure right now because it’s obviously contributing to people going to the illicit market.
Aaron: So what are you following in the market? And what do you want to learn more about?
Kristen: Yeah, I think that’s a great question. I think the thing I’m most excited about for the larger population isjust more research to come out about the actual attributes of the plant, or how different cannabinoids react together and can have different effects. How terpenes can affect the high, how things can be used and distantly, recreationally, etc. And really, hopefully evolve and move away from strictly some sativa, hybrid,indica classifications, and really be able to educate the consumer more about the plant so people can have a more a personal relationship to understand how cannabinoids or specific terpenes are going to give them a different effect. And again, I think that’s so interesting because it could be used for therapeutic reasons that people do consume cannabis or it could just make it a better experience for people who want to take this as an escape or a way to relax and everything. So I’m really excited because more research is going to be able to get done and we can really learn more about how all of these things interact in the body and then people can take it to a whole new experience and be more educated all around.
Aaron: Alright that’s the end of the interview Kristen! Nice chatting and meeting you!
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