Supply Chain Logistics: Cannabis Challenges in States, Interstate and Overseas
John Hartsell, Co-Founder & CEO, DIZPOT
In this session, Hartsell discusses the current state of the supply chain, how the supply chain crisis impacts the cannabis industry, how the holidays impact logistics and much more.
The Future of Sustainable Packaging
Ross Kirsh, CEO, Dymapak
This talk discusses the critical aspects of sustainability in packaging, misconceptions of mainstream terminology (i.e. sustainability vs. recyclability) and more.
Cannabis Labeling from Seed-to-Sale: Doing More with Less
Nick Recht, Sales Manager, TEKLYNX
This presentation delves into cannabis labeling and how your company can leverage software and technology to make labeling less manual, more streamlined
The presentation gets into the dimensions of sustainability, designing with intention, responsible manufacturing and more. Participants get a better understanding the journey through education and reporting: responsible sourcing, transportation and supply chain.
Cannabis and hemp derived concentrates are a rapidly growing product category. Formed by extracting cannabis using a variety of methods including ethanol, butane hash oil and CO2, concentrates find their way into consumer packaged goods as ingredients for infused products or as stand-alone products such as resins, rosins, distillates and hash.
Precision Extraction Solutions (Precision) was founded in 2014 to provide equipment and services to cannabis and hemp processors. In October 2021, Agrify (NASDAQ: AGFY) purchased Precision in a $50M cash and stock deal. The move positions Agrify to offer end-to-end infrastructure solutions for cannabis cultivators and processors.
We interviewed Nick Tennant, SVP of Innovation at Precision, now a division of Agrify. Nick founded Precision after seeing a need for quality equipment in concentrate processing. Prior to Precision, Nick was involved in a vertically integrated cannabis business in Michigan where he gained experience in cultivation, extraction and retail.
Aaron Green: How did you get involved in the cannabis industry?
Nick Tennant: I’ve been in cannabis about 17 years now. I had family in Colorado and California who I started to interface with around 2006. Around 2008, Michigan passed their cannabis law, and we were one of the first businesses to get licensed. The subsequent five years from that law getting passed, up to 2013, I did pretty much everything in terms of commercial cannabis – cultivation, retail, edible manufacturing, you name it. Concentrates didn’t really exist in a meaningful way; the products definitely were there, but the technology wasn’t. I looked at technology at the time and it was very primitive, so we made a shift to focusing on concentrates. We launched Precision in 2014 and we basically shot out of a cannon, doing a million dollars in sales in our first 90 days. Since then, we grew the company up to 60 employees and substantial amounts of revenue. We sold Precision to Agrify in October of this year.
Green: Tell me about that transition from a cannabis products company to an equipment manufacturer.
Nick Tennant, SVP of Innovation at Precision Extraction Solutions
Tennant: It was a gradual transition. As I started to see the extraction niche expand, I really started to put more time and resources into it. When we launched Precision and were met with such success in just the first 90 days, I knew that I had to abandon everything else I was doing to focus on this. My former partners took over the businesses, like the grows. We worked out individual circumstances regarding how I was going to leave those businesses and focus full time at Precision.
Green: So, big news recently with the acquisition, congratulations on that! Tell me about Agrify and why a deal with Agrify made sense to you.
Tennant: The strategic rationale is that we are providing an end-to-end infrastructure solution. They have the horticultural aspect, an excellent public vehicle, and plenty of cash on the balance sheet to continue to scale the business and acquire additional constituents within the cannabis infrastructure. Getting to the point where you can exit the businesses, it’s a long road, and our business is very niche. We were seeking to partner with t a bigger player in the industry with more resources that would help us to scale what we were trying to do, and Agrify was the perfect fit.
Green: You’ve got several areas of focus at Precision ranging from ethanol extraction, distillation, and butane hash oil (BHO) extraction. Where are you focusing the business going forward?
Tennant: Going forward we want to provide that end-to-end one-stop shop infrastructural solution for any cannabis products company. We want Agrify to become the dominant and fastest growing player in the cannabis industry for infrastructural solutions, whether that’s horticulture or extraction. We’re continuing to expand our product portfolio into other niches so that if you’re building a cannabis facility, you only need to come to one company and the process is as simple as possible.
Green: What kinds of products are you seeing the consumer gravitate towards?
Tennant: I think that cannabis will remain to be very artisanal because of the uniqueness of the plant. If you look at similar industries, I could compare it to craft beer or winemaking. I think that hydrocarbon and water hashes will continue to play a substantial role. I also think that ethanol and distillate-based products will hold market share just like the Budweiser and Kendall Jacksons of the world.
People love the native sort of essence of the plant, that this is a plant sort of bestowed upon us by the universe with all these unique healing and restorative properties. I think that trying to capture those properties and that native essence of what’s going on within the genome of the plant and translate that into a product is going to be the theme that continues to dominate, and I think that for several reasons. For the same reason somebody will go to Whole Foods, and they’ll buy the local organic grown fruit or vegetables, people are going to gravitate towards artisanal cannabis products. People that consume cannabis, generally speaking, are more naturalistic or homeopathic than most.
Green: Precision has technology for a range of extraction methods where the focus has been on cannabis. Are you seeing any new markets outside of cannabis?
Tennant: Yes. We’ve dealt with varieties of different botanical extraction companies over the years, but they’re a very small segment of our business. We’re a cannabis business. Non-cannabis extraction may make up less than 1% of our business so it’s very small.
Green: What trends are you following in the cannabis industry?
Tennant: Consolidation, I would say, is a big one. MSOs are consolidating and buying up the small players. The second major trend is regulation, and what’s going on in DC. Beyond that, you obviously have new states coming online, shifting consumer trends, things like that. I would say these last two are less impactful from a macro standpoint, but nonetheless, still things that we follow.
Green: Following up on consolidation, do you see a demand for larger systems now?
Tennant: I’d say 95% of what we do is under 2000 pounds a day, which we consider artisanal. You’re not going to see large scale production consolidation because you have fragmentation by state. It would be most efficient for a cannabis manufacturer to manufacture everything in one location but it’s just not possible with the state laws. It’s very fragmented. Somebody like a Trulieve might have 20 different manufacturing operations, all running similar processes. Perhaps we will see more upon national legalization and the opening of state borders.
Green: What in your personal life or in the cannabis industry are you most interested in learning about?
Tennant: I am constantly learning. That’s just how my brain is, and the type of person that I am. I’m interested in a variety of topics, but I think I’m most interested in how capital markets are going to materialize and substantiate around the federal legalization because we’re in this weird space of cannabis. It’s weird, because you have a boom industry that’s generating massive amounts of revenue and massive amounts of tax dollars, but you must remind yourself that there is no real liquidity in this market, meaning you can’t finance things. A typical cannabis company that wants to go out and get capital is getting rates between 16 to 18%. There’s just a capital restriction since cannabis is a Schedule I substance, and these large lenders don’t want to play into that.
The question in my head and the big catalyst for the entire industry is: what happens when we get a descheduling, decriminalization and/or legalization on a federal level? How does that affect the large funds sentiment to deploy this zero-interest rate capital that we’re seeing in the rest of the world? We’re seeing it in mortgages. We’re seeing it in every aspect of the world. There’s free money printing, but it’s not flowing into cannabis because those federal laws are prohibiting it as such. Ultimately, as more infrastructure comes online, these companies are not going to have to scrape by to build a $3 million lab. They can finance it at a reasonable interest rate, and the infrastructure can come online.
That’s going to be better for the consumer. There will be more infrastructure, more products, more research and development, more retail locations. Everything gets better, more convenient, and more robust. I would think that finance interest rates are the largest lever within the industry right now, and because of that, you’ll likely see cannabis capital markets go pretty crazy when legalization comes around.
Managing compliance for cannabis companies remains a challenge in the United States with a constantly evolving set of regulations that differ at the federal, state, county and city level. Regulators can either fine or force non-compliant companies to cease operations resulting in setbacks for investors and operators.
Simplifya is a software as a service company specializing in cannabis quality and regulatory compliance. The company’s suite of products takes the guesswork out of confusing and continually changing state and local regulations. Featuring SOPs, badge tracking, document storage, tailored reporting and employee accountability features, the company’s custom audit software reduces the time clients spend on compliance by up to 45 percent.
We interviewed Brooke Butler, VP of Partnerships at Simplifya. Prior to joining Simplifya, Brooke worked internationally as a macroeconomic analyst.
Aaron Green: How did you get involved in the cannabis industry?
Brooke Butler: My story is a little crazy. I was working as a macroeconomic investment research analyst for developing countries and wanted to move back to the US after being gone for a long time. Oddly enough, I had gotten malaria a few times when I was living in Nigeria, and I was very sick. They couldn’t figure out anything to help me. Cannabis of all things, which was illegal there, but very easy to find, was the only thing that was able to help me eat and gain enough weight to be a functioning, healthy human again.
Brooke Butler, VP of Partnerships at Simplifya
So, I wanted to move back to the US. I have this very unique and strange skill set for figuring out regulatory and policy regimes, and translating that into advice for business owners and investors. Serendipitously, the last place I worked at was Sri Lanka and the CEO of Simplifya is from Sri Lanka. We met just based on me wanting to be friends with somebody in Denver who was from Sri Lanka. It happened that he had just started a compliance company in partnership with the present-day Vicente Sederberg law firm out of Colorado. And the rest is history. Five years later, I’m still with the company. We’ve grown from one state to now helping licensed operators of any kind in 23 states, it’s been a lot of fun.
Green: So, you joined back in 2016?
Butler: I actually joined in the middle of 2017.
Green: Can you speak to Simplifya’s product and process?
Butler: Absolutely. Simplifya was started because we noticed that when Colorado went adult use you had all these new licensees coming into the space that wanted to run a good business. They didn’t want to get shut down. They wanted to have great operations, but they didn’t know how to read through 800 pages of legal narrative and extract from that what they can and can’t do. Vicente Sederberg was going out and doing on-site compliance checks for these guys and telling them, “Hey, you need to fix these 10 or 15 things.” They’d come back in six months, and the operators were like, “Well, yeah, we still didn’t fix it, because we didn’t know how to fix it and they changed the rules again.” So, it was this constantly evolving thing.
We wanted to find an easy-to-understand set of regulatory checklists that any operator could use to gauge if they had any problem areas in their business. When they did have an inspector come by, we wanted to make it so that operators weren’t sweating bullets or worried about things like, “Well, do we have our cameras pointed in the right direction? Do we have enough video backlog? Are my employee badges in the right place? Are we having our restricted access area in the right place?” All those crazy little minute details that they have to worry about. So, that’s kind of how we got started. We were just trying to find a way to make it simpler and more affordable for anyone that’s brave enough to get a license and really operate in the legal market – not just survive – but really be able to thrive and spend more time on their business and building world-class products and less time worrying about waste disposal and how to do all these crazy things that they’re up against.
Then we moved into helping with standard operating procedures. We have these templates that we tie to the state regulations so operators can then add their proprietary steps and know that it’s built on top of a compliant foundation. But probably the most important thing we have is a great document management system that gives them a cheat sheet.
California is particularly nasty, as operators have well over 100 documents that they’re required to keep for a long time. Again, we’re trying to make sure that they have an easy way to verify that all their i’s are dotted and t’s are crossed when it comes to the million compliance requirements that they have. A lot of people, especially new entrants, think that compliance is just inventory management and as long as they take care of that, they’re good. Unfortunately, I wish that was true, but they’ve got four or five hundred very minute things that they must worry about. If they don’t take care of those, they could get shut down, or lose their license and business.
Green: Is your document management system proprietary?
Butler: We’re a software as a service company. It’s very easy to use. We wanted to make sure that whether it was a budtender or a trimmer, anyone at your company is not only going to be able to use our software very easily but understand the rules. We write everything at a 12th grade reading level. It’s distilled out of all that legal jargon that a regular businessperson doesn’t understand – and shouldn’t have to, they’re not a lawyer – and written in really simplified terms that anyone could understand. Our position for cannabis is that compliance is having all your employees do the exact same thing, every single day, the right way. And that’s not easy. It must be from the top down. Everyone on your team must be doing things the right way. Even if it’s not fun, and not very cool, they must follow all these rules and be compliant. This is how we get the privilege to actually run a cannabis business, and grow, manufacture or run a retail store.
Green: So you mentioned SOPs. Is there also a quality aspect to the service?
Butler: There is, yes. One of my favorite things about what we’ve been able to do is that our clients have been our biggest assets, because they’re telling us, “Here’s our problem areas, or what we need help with.” And what we’ve seen is, as states mature after legalization, there’s a lot more quality control, a lot more quality management. That not only just becomes important, but also gets written into the regulations. So, we do work with a lot of the quality teams to make sure that their recipes are being followed and are tied to what the state regulators have said that they’re supposed to be doing.
Green: Do you support GMP and GAP?
Butler: Yes. It’s really exciting. A couple of our technical analysts have received GMP training and certifications. As of now, we cover five states that have GMP-compliant SOPs, California being the largest one of them. All our SOPs for manufacturers in California, and in places like Massachusetts, Maryland, Nevada and Michigan are written with full GMP compliance. Those get married with all the crazy state, city and county rules.
Green: Do you provide auditing as well or is that outsourced?
Butler: We give them a tool so they can self-audit. Then we also have an audit tool that third party auditors can use. So, let’s say that you’re a manufacturer, and you want a lawyer or consultant to come and do a check on your facility. Because you’re so close to the audit, you want to make sure you don’t miss anything. You can use our software to quickly do that. The beauty of the audit reports is that they’re consistent and they make it easy to see if you have any issues as well as how to remediate them, and then how to prove that it was fixed. So, if you do have a regulator come by, you’re able to say, “Look, we’re doing our best. We are fixing issues when we find them. We have documented that all our employees are trained on these.” So, when the operators do get audited, everything should be in good standing.
Green: You have 23 different states that you’re in and hundreds of city and county jurisdictions. How do you manage change between all the jurisdictions as they’re constantly evolving?
“How do we help social equity applicants get loans and financing?”Butler: It’s constantly evolving. That’s why we’ve built Simplifya and made it a software subscription company. We will notify you when, let’s say Oakland, decides to update its waste management policy, or their security regulations. That will prompt you to log in. We make it very easy for you to see what regulations are new so you can run through and check on those things very quickly and make sure you get into compliance. It’s not easy.
Most of our staff and our team are lawyers, or regulatory analysts. They probably have the worst job in cannabis because they are literally just sifting through constant sets of regulations. They’re on the phone with regulators trying to get clarification when something changes. A lot of it is a manual process with our team, but we do have proprietary technology systems set up to help us monitor. It’s kind of a dual effort, using technology to help us as well as trying to get clarity and stay ahead of city meetings or state regulatory meetings on what changes are coming down the pipe so we’re not surprised when there are new regulation changes coming out.
Green: What in your personal life or in cannabis are you most interested in learning about?
Butler: I am most interested in the finance side of things. How can we help more of these companies get an actual bank account at reasonable rates that won’t kick them out in six months? How do we help social equity applicants get loans and financing? That’s a huge challenge that people don’t really like to talk about, but that is a big issue out there. How do we get insurance companies to cover all the things that need to be covered for a regular business that aren’t currently allowed for cannabis, again, and at reasonable rates?
As a consumer, I want an easier way to pay. I don’t want to have to worry about going to the ATM and worrying if I’ve got enough money to buy whatever new product I want. Payment processing, I think, is something that’s really interesting. We’re moving into that space at Simplifya. We’re really excited about it. We’re launching our payments product called TENDR, in November. We have some great large institutions that are excited to get back into or get into the cannabis space for the first time that I think is going to really excite people. If we can show people that these businesses are compliant, and now we can make the compliance requirements for them, the financial institutions easier, then we’re going to see better access for consumers to these types of products.
Green: Thanks Brooke. That concludes the interview.
Investors looking to gain exposure to the cannabis space have several options given the increase in the number of cannabis producers in the past decade, the recent wave of legalization in the U.S. and a rapidly expanding addressable market. However, one undervalued cannabis stock with enticing growth prospects that remains a top buy today is Columbia Care (OTC: CCHWF). Let’s see why we are bullish on the large-cap multi-state operator right now.
What is Columbia Care?
Columbia Care is one of the largest cannabis producers in the world with 31 manufacturing and cultivation facilities. It has 99 dispensary locations in the U.S. with more than two million square feet of cultivation capacity and over 300 acres of outdoor cultivation capacity.
The company’s rapid expansion over the last few years has allowed Columbia Care to increase sales from $77.45 million in 2019 to $179 million in 2020. Wall Street expects sales to more than triple to $626 million this year and grow by another 55% to $970 million in 2022. In case Columbia Care manages to meet analyst estimates, the company would have grown its revenue at an annual rate of 132% between 2019 and 2022.
While several of Columbia Care’s peers, especially in Canada, are grappling with negative margins, this cannabis company is racing towards profitability. It has already narrowed its operating losses from $81 million in 2019 to $31.5 million in the last 12-months. Analysts expect its bottom-line to improve from a loss per share of $0.48 in 2020 to earnings of $0.27 per share in 2022.
Columbia Care has a strong presence in markets such as Virginia, Ohio and Pennsylvania that provide limited licenses to cannabis producers. This allows Columbia Care to improve customer engagement and ensure repeat purchases of its products.
In the second quarter of 2021, it increased revenue by 232% year over year to $110 million. Its adjusted EBITDA also rose to $16 million, compared to a loss of $4.7 million in the prior-year period.
Columbia Care acquired Medicine Man for $42 million.
Now, Columbia Care has shifted focus to larger cannabis markets including New York, Arizona, Columbia and New Jersey. In Q2, its sales in Arizona and Illinois rose by 23% and 15% respectively, on a sequential basis.
The cannabis heavyweight recently completed the acquisition of Medicine Man, a Colorado-based cannabis producer, for $42 million. Columbia Care explained the acquisition will be accretive to its bottom-line and is valued at 4.5x projected EBITDA for 2021.
Columbia Care has improved its gross margins to 42% in Q2, from 36% in the prior-year period. Its operating costs have also fallen from $61 million to $51 million in the last year, making it one of the best cannabis stocks on the market today.
Bottom Line: Why Should You Add Columbia Care to Your Cannabis Portfolio?
Columbia Care expects its total addressable market in licensed U.S. states to reach approximately $31 billion by 2026. In the event that cannabis is legalized at the federal level, this figure will surge significantly higher. Additionally, Columbia Care is well poised to gain traction in the future and leverage existing expertise, as it already has wholesale distribution agreements in 13 operational markets.
Its capital expenditure investments continue to generate returns as the company continues to benefit from economies of scale and higher margins.
For these reasons, we believe investors should consider adding Columbia Care to their cannabis stock portfolios while it’s still trading at a discount.
Where to Begin: Leveraging Quality Systems to Improve Operations & Growth
David Vaillencourt, CEO & Founder, The GMP Collective
Kathleen May, Founders & Owner, Triskele Quality Solutions
In this session, Vaillencourt and May define what a quality system is, how to apply it in your operation and how to create an SOP that actually works for your employees and operation, and provide key metrics to senior management. Understand the key elements of a Quality System including utilizing a Corrective Action Preventive Action (CAPA) Program to identify and prevent recurring issues that hold your operation back.
TechTalk: MilliporeSigma
Dr. Stephan Altmaier, Principal Scientist, MilliporeSigma
3 Steps to Create a Compliance Culture with Operational Excellence
Dede Perkins, CEO & Co-Founder, ProCanna
This presentation discusses how to create a set of approved and easily accessible policies and SOPs that comply with both external and internal standards, how to create an initial training system with clearly assigned roles, responsibilities, and goals and how to create an ongoing training system with clearly assigned roles, responsibilities, and goals to maintain what you’ve created.
Innovation from an Outside Perspective – For the Purpose of Building Infused & CBD Product Success
Jerod Martin, Chief Research & Development Officer, CannGoods
For the cannabis industry to be successful we must start with quality research enabling us to utilize quality ingredients resulting in quality products. We should look to other industries to gain knowledge for a better cannabis industry. This presentation delves into why research matters, why ingredients matter and why quality matters.
Implementing Food Safety Management Systems in Infused Products Production Facilities
Dr. Laurie Post, Director of Food Safety and Regulatory Affairs, Deibel Labs
Participants will be introduced to Food Safety Management Programs such as HACCP and FDA mandated Preventive Controls systems, Food Safety Hazard Assessments and how to conduct them and Preventive controls and how to use them to craft a Food Safety system
The National Cannabis Industry Association (NCIA) presents the 7th Annual Cannabis Business Summit & Expo, December 15 – 17, 2021 at the Moscone Center in San Francisco, California. As one of the industry’s most influential national trade shows, it is the only event to combine a lineup of business-building education, exhibitors representing the entire cannabis ecosystem and exclusive experiences, all under one roof.
NCIA’s Cannabis Business Summit & Expo is known throughout the industry for its unmatched education opportunities and high-profile speakers. The upcoming event in San Francisco is no exception. Highlighting next month’s conference agenda is groundbreaking keynote speaker Troy Datcher, CEO of The Parent Company.
NCIA will welcome 2021 Cannabis Business Summit Keynote Speaker for Thursday, December 16, Troy Datcher, CEO of The Parent Company. Leading a new generation of c-suite innovators, Chief Executive Officer Troy Datcher, together with Chief Visionary Officer Shawn “JAY-Z” Carter, helms a cannabis business for the post-prohibition era at The Parent Company. Combining best-in-class operations with leading voices in popular culture and social impact, The Parent Company focuses on building brands that will pave a new path forward for a legacy rooted in equity, access, and justice.
Datcher joined The Parent Company from The Clorox Company, where he deployed global sales plans for over $6.7 billion in cross-portfolio annual revenue throughout a 20-year tenure as Senior Vice President and Chief Customer Officer. In an intimate “fireside chat” setting, moderated by Adrian Farquharson, journalist and founder of MARY Magazine, Datcher will share personal stories and detail the impact he is working to make in the cannabis space.
The cannabinoid industry has faced an uphill battle from the beginning due to a lack of reliable scientific awareness about cannabinoids, fueled by decades of the hemp plant’s status as an illegal Schedule 1 drug. Today, scientists finally are free to explore the hemp plant’s 115+ cannabinoids and their relationships with the body’s endocannabinoid system. One cannabinoid, THCV, is currently undergoing scrupulous research.
ECS Brands is an established provider of whole-plant extracts. In the first-ever clinical trial for an organic THCV-rich extract, ECS received support from the National Institutes of Health and guidance from the Mayo Clinic to assess its potential for weight loss, anxiety treatment and other therapies using Nitro-V Hemp Extract, an ECS Brands product containing high concentrations of THCV, CBDV and other cannabinoids. Early outcomes of the 90-day, randomized, double-blind placebo-controlled human study were recently released. 100 out of 100 people lost weight, making no changes to exercise while taking the product for 90 days.
We interviewed Arthur Jaffee, Founder & CEO of ECS Brands. Prior to founding ECS, Arthur was co-founder of Elixinol, a company manufacturing and distributing industrial hemp-based products. Arthur took Elixinol public on the Australian stock exchange in 2018.
Aaron Green: How did you get involved in the cannabis industry?
Arthur Jaffee, Founder & CEO of ECS Brands
Arthur Jaffee: I originally was planning on starting a fitness equipment company. I got introduced to my partner at Elixinol, Gabriel, who my old physical therapist at University of Colorado said I had to meet. By the end of our lunch meeting, we shook hands in agreement to partner up on the fitness equipment concept. The timing happened where he got this opportunity to distribute CBD just following our handshake partnership. I didn’t know what it was at the time. He asked me if I wanted to join and get involved. I did my research into the benefits and discovered CBD’s anti-inflammatory and neuro-protective benefits, which for me was relevant given my football experience. I quickly realized what the vast potential CBD could offer with inflammation, neuroprotection and so many of the health and safety concerns arising from contact sports at the time. So, ultimately the opportunity presented itself through a friend of a friend in Australia who had a supply chain in Europe. This was right when CBD first appeared in the media in 2014. It was almost like it just fell into my lap.
I’ve been fortunate to really see that transition, and the evolution of the industry. Back then was probably the most valuable time because growth was so slow. Nobody knew what CBD was back in 2014. The primary demographic was cancer patients and epilepsy patients which presented a significant challenge to develop sales and marketing materials and communicate compliantly. Our first hire was a Medical Doctor to communicate in a more compliant fashion. I had to learn everything there was about the science and the medical research that existed at that time. For me, that was very valuable.
The valuable learning experiences from the early days of the industry is what laid the foundation today with ECS brands where we are focused on education promoting awareness of the endocannabinoid system to take it a step beyond just CBD because in order to understand what constitutes a quality product, or why CBD can have all these various benefits for people, you must first understand how the body is naturally configured to receive and respond to these amazing phytochemicals such as CBD. CBD is just one of hundreds of phytonutrients that the human body is designed to use. The endocannabinoid system is so significant in the grand scheme of things, because once you start accepting that the system is your overarching regulatory system in the body, we can start to look at the endless therapeutic potential.
Green: Being an early player in the CBD space, how would you say you’ve evolved over time to where you’re at today?
Jaffee: Innovation. That’s what really drove me to start ECS brands. Back in 2014, I originally co-founded Elixinol. After we took Elixinol public on the Australian exchange in the very beginning of 2018, there was a shift in direction away from innovation. Nearly all emphasis was placed on just doing what we’re doing better – meaning improving margins. In such a new and young industry and being a pioneer, you don’t get many opportunities to discover and create something for the first time. So, the past three years with ECS brands is with a heavy focus on innovation and technology.
Green: How do you think about innovation for the endocannabinoid system?
Jaffee: One of the early discoveries for me that was most inspiring, was research that evaluated endocannabinoid receptor sites, basically little keyholes for cannabinoids to perfectly fit in – that are made for cannabinoids. When evaluating the number of receptor sites in different individuals experiencing stress and illness it showed there was a higher concentration of receptor sites in those that were sick and experiencing systemic stress. To me, that was that was powerful because if that doesn’t communicate the body’s need for cannabinoid nourishment to heal and restore back to homeostasis as a natural and involuntary response really motivated me to play a part in getting quality cannabinoid products out to the masses and specifically those in most critical need. Our first interaction with cannabinoids is in mother’s breast milk, the cannabinoids that our bodies naturally produce. After breastfeeding, our diets are completely stripped of virtually all cannabinoids, leaving the endocannabinoid system starving, and likely leading to many of the most common and chronic health deficiencies that causes detriment to so many. Rather than cannabinoids, we then get introduced to pharmaceuticals. The writing is on the wall – this must get accepted and integrated into our society.
The Nitro-V Hemp Extract, an ECS Brands product
When it comes to innovation surrounding the public system it requires research and requires scientific evidence. It requires functional products because you can have all these great benefits, but if you don’t have efficient and effective ways of delivering these chemicals to the body, it can almost be meaningless. It’s a delicate balance between consumer appeal, functionality and efficiency when it comes to the delivery into the body. We’re focusing on delivery systems, making things more bioavailable and integrating other natural botanicals that react and influence the system in similar ways as there are more than just cannabis-derived cannabinoids that can create positive impact and ultimately alter the way that the endocannabinoid system can regulate.
Green: An important aspect of innovation is clinical validation. How do you think about clinical trials and designing clinical trials for products?
Jaffee: Clinical trials are instrumental and required to validate claims because otherwise, it’s just speculation. Directional application without the clinical evidence to support in the appropriate way is setting yourself up for failure. Designing a clinical trial is just as important as performing the trial. If it’s not set up right, it can be a waste of time and money. Trials really need to be held to the gold standard of double-blind placebo controlled and thoughtfully organized.
We did organize a clinical trial at the beginning of this year, and it was incredible. We learned so much about a unique extract of ours that’s naturally rich in THCV and CBDV. We intentionally set it up to be a very broad and encompassing study. I personally wanted to see the different mechanisms and how the endocannabinoid system responded and worked together with other systems in the body. We evaluated a broad range of measurements, with complete safety tox study – blood panels to test every organ – measuring kidney enzymes, liver enzymes, ALT, AST, ALP, bilirubin, albumin, creatinine as well as cholesterol – with HDL, LDL and triglycerides, GFR and Complete Blood Count. We also measured blood sugar hemoglobin A1C and five major inflammatory markers of IL-1, IL-6, C-Reactive protein, Homocysteine and TNF. In addition to performing a full safety run-up of the product, we also measured weight, BMI, girth, questionnaires for anxiety, appetite, pain, mood and finally – we bought brand new Fitbit Versa 3’s for all 125 study participants which gave us objective measurements for REM sleep, deep sleep, awake time, systolic/diastolic BP, SpO2 blood oxygen levels and daily caloric output values – which was really cool because it provided tangible objective evidence that participants weren’t going out and secretly exercising. So, we had 100 people taking the product and then 25 on placebo.
Green: Was this a safety trial?
Jaffee: Yes. The primary endpoint study was safety. That’s how we enrolled participants – as a general product safety study for a natural product. I decided to include a lot of additional efficacy measurements, including weight loss, measuring body mass index as well as heart rate for all the blood markers that we looked at. In addition to that we purchased brand new Fitbit Versa 3’s for the entire study group, which was great because they gave us objective measurements for three different sleep readings, deep sleep, REM sleep and rest asleep as well as lower output and blood oxygen levels.
We saw everything kind of working together. We saw deep sleep improve 300% within two weeks. We saw blood sugars come down significantly from those that are considered high, pre-diabetic ranges of hemoglobin A1C. You saw inflammatory markers reduce to normal levels, with 92% efficacy, which basically just means that those who were experiencing inflammation by means of these major inflammatory markers, after 90 days, 92% of subjects were reduced to nominal ranges. So, it was really fascinating to see how, with all the different measurements. that we can correlate different objective measurements. Then, we did subjective measurements too. We had standardized questionnaires for anxiety and pain, as well as an internally developed appetite and cravings questionnaire.
Green: Based on the results of that safety study, are there particular disease states you want to target going forward?
Jaffee: Moving forward, we are interested to look at each blood sugar and Hb A1C. I think one of the most exciting and popular successes of the study was the fact that we had 100 out of 100 participants lose weight without diet and exercise. Because we incorporated the Fitbit, we were able to obtain objective evidence that participants weren’t going and secretly working out. The Fitbit provided a caloric output value. It is basically an algorithm taking the number of steps taken, stairs climbed, heart rate, movement, etc. to populate a caloric expenditure value, which remained completely stable in our study population. Subjects were specifically instructed NOT to change any lifestyle behavior – specifically diet, exercise, and sleep, and that if any changes were to occur naturally that was acceptable. What this ultimately told us is that diets changed, and metabolisms increased, and we were able to support that notion with the appetite and cravings questionnaire that we had participants fill out where cravings did reduce and desire for sugary foods reduced 63%. These were questions that we internally developed for the appetite and cravings questionnaire, which were based on feedback that we received prior to the study.
Green: What are in your personal life or in cannabis are you most interested in learning about?
Jaffee: It’s changed a little bit over the years. My biggest passion I would say is performance. I think the hemp plant has so much to offer when it comes to superior nutrition and healing. Once I learned about the benefits and the potential of hemp with its food applications and specific protein composition – the powerful oxygenating properties of Hemp Seed Oil, the brain health properties it encompasses, and of course the cannabinoid potential… It got me very motivated to commit myself to this plant. It wasn’t long before learning all the incredible industrial applications and solution the plant also offers – such as plastics, textiles, biofuel, building materials – and as an environmental science major – learning about these amazing applications got me that much more excited, but knowing and trusting that CBD would be the first stepping stone in an industry that needs to evolve into all the amazing sustainable applications because it’s all it’s all very real. It will get there, but it won’t be easy.
Green: Thanks Arthur, that concludes the interview.
Conduction heating is a method used in most dab rigs and vape pens that relies on heating concentrate or flower on a metal surface to vaporize cannabis compounds for consumption. Care must be taken with conduction heating to avoid overheating the material, resulting in combustion or decomposition. Convection heating (think of heating food in an oven) can also be used to vaporize cannabis compounds and has the benefit of being able to control the heating temperature of the material more precisely.
Hanu Labs recently announced the launch of their Hanu Labs EVO Petra. The tabletop device leverages their convection heat-based Perpetual Heat Thermal Technology, which avoids combustion while efficiently extracting the desired compounds from cannabis flower or concentrates.
Prior to becoming the CEO of Hanu, Ricardo worked in sales at Jetty Extracts where he helped to build the Northern California territory. Ricardo is also a classically trained French chef who used to run a cannabis tourism company in California.
Aaron Green: How did you get involved in the cannabis industry?
Ricardo Willis, CEO of Hanu Labs
Ricardo Willis: I moved to California in 2016. I was a professional chef at the time and had just finished up my master’s degree after eight years of schooling. My business partner and I decided we wanted to get into the cannabis space. So, we started a cannabis tourism business. Cannabis tourism wasn’t in the Bay Area at the time. We were kind of first and we were about two years ahead of legalization. We ran a few tours and we started to get into the cannabis game. I found out I didn’t know as much as I thought I did about cannabis. So, I decided to go and work for Jetty Extracts and that eventually led to where I’m at today.
Green: What was your motivation for joining Jetty?
Willis: Education. I knew about flower, but I did not know as much about the manufacturing process. I was first exposed to concentrates in San Francisco and I was really fascinated by it. I wanted to learn more, because I knew that this was going to be the wave at the time. Coming from the east coast, I had never seen a vape pen. So, I come out to Cali, and I see all these different dabs and I’m like, “I need to know more about this.” Jetty was an opportunity for me to educate myself while also helping them build their Northern California division that had only been around for a few years, and they were trying to expand. It was a great opportunity working for those guys, I learned a lot.
Green: I got a chance to see the Petra in action last night. It’s a bit different from your standard dab rig. Can you talk about the standard dab conduction heating versus the Petra and convection heating?
The mica-encapsulated chamber and heating element
Willis: Think about your standard dab rig in the sense of taking a hot plate and dropping your dab onto that hot plate. It just sits there and begins to bubble and then evaporate from the heat. With the Petra, you take in all those same components, but you’re putting the concentrate into this mica-encapsulated chamber, where you have an all-glass air path that is one of the best surfaces for heating, and one of the safest. Those components with our perpetual heating system allow the dab rig, when we drop that nail in or we drop a basket for flower, that convection air circulates around the actual product. The oil begins to sublimate, or the vapor begins to make it through the flower, and it releases all those molecules that are found in the cannabis plant. And because of our glass air hydro tubes, when you pop those on, it basically filters it through water, and gives you one of the fastest and cleanest hits you’ve ever experienced.
Green: You mentioned flower as well as concentrates. Am I correct in hearing that you can also use flower with the Petra?
Willis: Yes. Dual functionality was one of the things found in our original model, the Vape Exhale that we first released nine years ago. I think that that’s very important for products. If a customer is going to spend anywhere between $300 to $500 retail, you need to give them more bang for their buck. Being able to vaporize flower and concentrates fits for the markets that we’re going into. People are consuming flower and concentrates at about the same percentage rate. So, we want to make sure that our devices can give the customer the ability to do both, either at home or on the go.
Green: So, you worked in the cannabis tourism industry. One of the trends we’ve got coming up in California is consumption lounges. How do you see the consumption lounges evolving over time? What are the challenges you see in California?
Willis: It’s a little different in Southern California versus Northern California. We’ve had consumption lounges in San Francisco, as well as Oakland for the past three years. We outfitted the entire lounge with VapeExhales at Barbary Coast, one of our early clients that we work with, which is downtown San Francisco. For us, we knew this is a space that would be thriving.
The Hanu Labs EVO Petra
I’m a big fan of the lounges, because I think people need a safe place where they can go to smoke. Those lounges offer that to people. It also gives them a chance to experiment with different technology and actually test it out before purchasing. Because of my hospitality and restaurant background, I’m always looking for the opportunity for people to become repeat customers. If you offer these things like consumption lounges, instead of people going to bars, they end up at your lounge after work. I think that is something that’s going to continue to grow.
I do think some of the challenges are going to be around single servings. A person doesn’t need to buy a full gram. Maybe they just need to buy a quarter of a dab or something like that. Companies will need to identify those potential pain points in that process, and then offer those smaller products that can be enjoyed while at the lounge.
Green: There’s a certain experience around the Petra. Where it’s really like a centerpiece of the table. How did you think about designing the user experience and designing around that conviviality?
Willis: That’s a great question. For the Petra, what we decided to design was slightly different from the VapeExhale. With the VapeExhale, the purpose of the device wasn’t super obvious, but the Petra has more of a centerpiece design. I’m a big fan of technology, so when I was designing the Petra, I was thinking about the KitchenAid mixer. That may seem strange, but the KitchenAid mixer is something that as a cook, either at home or in a restaurant, they own these things literally for 20 years. It has a very long product life. I wanted the Petra to be the same. I wanted it to look more like an appliance, I wanted it to be built with stability and durability so that when the customer purchases that product, it becomes a centerpiece that they can set up. If your grandkids come in, they see your vaporizer, it becomes more of an educational opportunity, and less about feeling embarrassed about your cannabis pieces. So, for me, design is all about ease of use, but also being appealing to the eye. The Petra is its own show, and it deserves to make a splash.
Green: What in your personal life or in cannabis are you most interested in learning about?
Willis: I am very interested in the customers. I started off in customer service when I was around 16 years old. The one thing that I learned is that the customer is the most important part of the sales cycle. I think that sometimes people focus on the B2B side and making our business partners happy, but my focus is, and always will be on the customers. I need to understand what customers want and how they want it. I’m intrigued by the science behind customer acquisition and want to learn more about how to make my customers happy. If they want cheaper pricing, I’m going to find a way to develop products to give them what they want at the price point they want. There is always going to be a customer who wants premium, or mid-tier or a customer who just wants something fully functional. Maybe they want something that provides the right experience for them, and they don’t have to break the bank to get it.
Green: Thanks Ricardo. That concludes the interview.
Why is customer success a critical differentiator when evaluating technology partners for your cannabis operations? You’re probably familiar with a customer service department. Typically, a customer service team is a reactive relationship that you call on when you have a question or problem. Customer success is different because it takes a proactive approach to relationship management and focuses on your company’s desired outcomes.
It Starts with Transparency
The customer success team is introduced during the sales process, so they know the customer’s goals, objectives and the pain points they’re looking to solve. Keeping these priorities top of mind allows the entire implementation process to align to the customer’s objectives, ensuring immediate success after purchase and a long-term roadmap for future deployments.
A boilerplate solution in software implementation is often not a good idea. While you need standard processes in software deployment, it’s mostly about listening and learning to adapt to a customized approach. Each client can weather different levels of change and advancement, so a customized strategic effort starting in the beginning of the process can help avoid issues later on.“Customer success ensures you are not making unnecessary investments while educating you on available software that would complement existing technology.”
Implementing new software can be a lengthy and challenging process, depending on how many team levels need access, what software integrations are required and the level of business activity you have on a seasonal basis. Adopting new technology into facilities can be even more complicated when implementation delays occur, or the product isn’t working as intended during the initial rollout. Customer success provides transparency throughout the deployment process by conducting ongoing timeline reviews, drafting enablement plans that work within your schedule and driving awareness and adoptions throughout your organization, resulting in a faster return on investment.
Creating a Deeper Partnership
Customer success works as an advocate for the customer while balancing the needs of the business. With software products, it’s easy to turn capabilities on as it is to turn them off, so determining the right timing for each new feature is part of the balancing act. Knowing when customers are ready for specific features and functionality provides a software roadmap for a customer. In this role, the customer success advocate becomes a trusted advisor and becomes integrated into the customer’s business operations.
Being Proactive, Not Reactive
A simple way to describe the differences between customer service and customer success is to consider how your software vendor works with you. Is it a proactive approach or a reactive one? Customer success always leads proactively, strategizing on solutions to benefit the customer immediately while also keeping the long-term vision top of mind.
Creating Benchmarks for Success
Software as a Service (SaaS) has become a competitive advantage for cannabis operators looking to implement a consistent, cost-effective cloud-based technology. Still, many companies end up overspending or paying for more licenses than needed. Customer success ensures you are not making unnecessary investments while educating you on available software that would complement existing technology. Customer success does this by providing tailored reporting, enabling existing and new team members within your facilities on product features and functions, and aligning your software deployment to your facility’s requirements.
When considering a technology partner, inquire about post-sales support. Do you only hear from your technology providers when it’s time for renewal or when you call in for help? Are they offering a “set it and forget it” support model approach? Customer success is about a mutually beneficial relationship between the customer and the software vendor, retaining a happy, using, paying customer who achieves a measurable outcome when using the software. Your success is customer success.
Two decades ago, California became the first state to legalize the medical use of cannabis. In 2021, medical use of cannabis is legal is 36 US states, and 17 states allow adult (‘recreational’) use. This trend of rapid legalization of the cannabis industry, while encouraging for industry growth, attracts more attention from federal regulatory bodies such as the Occupational Safety and Health Administration (OSHA). Following a number of incidents and near misses, cannabis facilities have been increasingly frequented by OSHA visits, leading to a spike in citations and fines. A review of past OSHA citations reveals that the most common citations in the cannabis industry pertains to the employer’s lack of awareness about the hazardous nature of some operations and materials handled in the facility. This leads to an absence of a formal fire prevention plan, lack of proper hazardous chemical training, deficiency in proper documentation related to workplace injury and limited evaluation of required personal protective equipment (PPE).1
Cannabis industry data suggests that as of today, an incident is often followed by an OSHA inspection. This naturally leads to the facility asking, ‘How do we prepare for an OSHA inspection and prevent future citations?’ The answer is a combination of identifying and mitigating risks in advance to avoid incidents and developing management systems that support the identification and risk mitigation efforts. Recent collaboration between cannabis business owners and organizations that write codes and standards have provided a framework in which to address the industry’s unique safety challenges to help reduce inherent risk to a facility. These codes and standards typically impact building construction/safety features and operation of the facility, however, additional risk mitigation can be drawn from the best practices already in place in process industries with similar hazards. These process industries have embraced process safety management (PSM) programs, which are built around principles flexible enough to be successfully implemented in the cannabis industry. Adopting such programs will serve the dual purpose of improving the overall safety record of the cannabis industry while enhancing company sustainability2 and help avoid events that lead to OSHA citations.
Figure 1. Risk Based Process Safety Management System
The risk-based process safety (RBPS) approach developed by the Center for Chemical Process Safety (CCPS)3 may prove to be the most effective framework to implement PSM programs in the cannabis industry. Unlike the prescriptive regulatory approach provided by OSHA 29 CFR 1910.119, the RBPS methodology recognizes that not all hazards and risks are equal. By assessing risk, an organization can develop an effective management system that will prioritize allocation of limited resources to address the highest risks. Figure 1 shows the four foundational blocks (pillars) of RBPS and the various elements that make up each pillar.
If a cannabis business owner were to develop programs on each of the pillars presented in Figure 1, a comprehensive safety program would be in place that delivers sustainable risk reduction and mitigation. However, as with any industry, the elements can be prioritized and tackled over time, starting with the elements having the most influence on the overall safety of a given facility. For example, a given facility may have great procedures and practices, but may not consistently train or instill employee knowledge or competency. Conversely, a facility may have personnel with great knowledge of hazards and risks, but are less developed with regard to documenting procedures, safe practices or training for new hires. Focusing available resources on the less developed elements will lead to an overall improvement in facility risk, leading to a lower likelihood of an incident and OSHA inspection.
Figure 2. Still image from surveillance video of an explosion at New MexiCann Natural Medicine in July 2015.
As with any industry, positive and negative public perception is driven by the media, which tends to focus on attention-grabbing headlines. The majority of past incidents reported in the news for the cannabis industry were explosions that occurred during the extraction process. One such extraction explosion, shown in Figure 2, occurred in July 2015 at the New MexiCann Natural Medicine facility in Santa Fe, New Mexico. With a focus on the ‘hazard identification and risk analysis’ pillar of RBPS, future such events may be mitigated.
Of the twenty RBPS elements, hazard identification and risk analysis (HIRA) stands out as having the highest potential for immediate impact on the cannabis industry’s safety profile.
HIRA is a collection of activities carried out through the life cycle of a facility to ensure that the risks to employees and the public are constantly monitored to be within an organization’s risk tolerance. The four major areas to analyze are:
Hazards – What are the possible deviations from the design intent?
Consequences – What are the worst possible consequences (or severity) if any deviation occurs?
Safeguards – Are there safeguards in the system to reduce the likelihood of this event?
Risk – Is the risk within the tolerable level? If not, what steps are needed to reduce the risk? (Severity X Likelihood = Risk)
Figure 3. A simplified HIRA flow chart for an Extraction Process
Let us consider an example case where the extraction process utilizes propane or butane as the extracting solvent. Figure 3 shows a simplified HIRA flow chart for the extraction process.
This systematic approach helps to understand the hazards and evaluate the associated risk. In addition, this approach highlights operator training as a crucial safeguard that can be credited to lower the overall risk of the extraction facility. Remember, lack of proper safety training (another element!) is one of the most cited OSHA violations in the cannabis industry. Another advantage to the HIRA methodology is that other safeguards that may be present can be identified, their effectiveness evaluated and additional risk reduction measures may be recognized. This will help business owners allocate their limited resources on the critical safeguards that provide the greatest risk reduction. Identifying, analyzing and solving for potential hazards is a key step in safe operation of a facility and avoiding OSHA citations.
While this article discusses only a single RBPS element, this example demonstrates how best practices from process industries can become a powerful tool for use in the cannabis industry. The “hazard identification and risk analysis” element of the RBPS approach is pertinent not only for the extraction process as discussed above, but also directly applicable to other aspects of the industry (e.g., dust explosions in harvesting and processing facilities, toxic impacts from fertilizers, hazards from the CO2 enrichment process in growing facilities, etc.).
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