Here’s some news that might sound familiar: recently, Governor Andrew Cuomo insisted that cannabis would soon be legal in New York. Perhaps this seems like déjà vu given that he made the same pronouncement back in 2018, insisting that cannabis would be legal in the Empire State by 2020.
Might this simply be wishful thinking on Governor Cuomo’s part? Perhaps, but if cannabis is, in fact, legalized—whether this year or anytime down the road—it’d be a boon to cannabis entrepreneurs looking to expand into New York and capitalize on the vast resources of its citizenry. Still, by virtue of the inherent challenges and question marks related to legal cannabis in the state, these would-be cannabis titans should keep their excitement in check.
Questions Abound
When any jurisdiction considers legalizing cannabis, uncertainty follows. In the case of New York, the questions are many: Will the recreational use of cannabis be legal or just further decriminalized (as was done last year)? And if recreational cannabis is given the green light, what sort of distribution regulations will be in place; where will it be permitted to be sold; will the four-dispensary limit remain in effect; and what’ll the parameters regarding growing in state be? To properly formulate New York business plans with eyes wide open, players in the cannabis biz must be given answers to these and other related queries that are crystal clear.
Does Cannabis Equal Revenue?
NY Governor Andrew Cuomo Image: Pat Arnow, Flickr
No doubt about it, Governor Cuomo was beyond enthusiastic when he publicly promised for a second time that legalization of cannabis is coming later this year, citing the $300M in potential tax revenue the state can glean once that mission is accomplished. Yet this guarantee and income forecast might be best taken with a grain of salt in light of New York’s history when it comes to legal vices. Remember, the state managed to run off track betting into bankruptcy, partially as a result of oppressive taxation and the OTB being staffed with political cronies. No wonder former Mayor Rudy Giuliani called OTB “the only bookie joint to ever go broke.”
Consequently, New Yorkers and cannabis entrepreneurs must adopt a bit of skepticism when it comes to the “pot of gold” at the end of the “legalized cannabis rainbow.” This is especially true given the downturn of the cannabis business in Canada, as reported by the New York Times. According to the news outlet, the cannabis slump up north can be attributed to several factors, including an extremely slow licensing process; limits placed on the number of licenses issued to distributors; marketing restrictions (e.g., how, where, and to whom cannabis companies can market themselves); and infrastructure challenges. Is it realistic to think things would be any different in New York?
MedMen: A Case Study
To avoid the current fate of the legal cannabis business in Canada, adopting a streamlined and open-minded regulatory framework that translates to a robust and healthy cannabis economy within the state will be essential. However, New York’s track record so far—at least as it pertains to medical cannabis—isn’t very promising. The case of MedMen on Long Island is illustrative.
Colorado’s economic success story—both in terms of growth and tax dollars—is a model to emulate.Late in 2018, MedMen, the best-known cannabis retailer in the U.S., attempted to change the location of its Nassau county medical cannabis dispensary from Lake Success to Manhasset, New York. This effort was met with outrage and vocal resistance from civic leaders, who objected to the proposed move, despite the fact that it was within the very same county. The stated reason: MedMen’s sought-after location was in close proximity to an elementary school and within the town’s main commercial district. But certainly, the stigma that attaches to the cannabis world (legal or not) was also squarely on the decision-makers’ collective radar screen, which overshadowed the potential tax revenue that MedMen would’ve brought to Manhasset. No surprise, in light of the perceived obstacles and push back, MedMen scrapped its relocation plans.
The moral of that story is this: players in the cannabis industry must effectively make their cases to New York public officials, and regulators, in turn, must make informed decisions that best serve communities throughout the state and the growth of the cannabis sector, more generally. Colorado’s economic success story—both in terms of growth and tax dollars—is a model to emulate.
Common Sense Regulation Is Key
In his quest to legalize cannabis this year, Governor Cuomo will continue to be confronted with his share of naysayers, like those from the County Health Officials of New York who persist in expressing serious concern about cannabis reform. In the face of such opposition, he must make clear that like cannabis plants, cannabis businesses need room to grow—and the benefit of reasonable, common sense regulation—in order to foster a healthy crop of thriving cannabis-related companies . . . and the tax revenue that comes along with them.
According to a press release published today, the National Cannabis Industry Association (NCIA) announced the newest members of their board of directors for the 2020-2022 term. Some of the members are incumbents and have served on the board for several years now and some are newly appointed, marking their first time stepping into roles leading the organization.
The organization’s nominating committee placed five new board members:
Narbe Alexandrian, president and CEO of Canopy Rivers, a major investment and operating platform structured to pursue opportunities in the cannabis sector.
Omar Figueroa, principal of Law Offices of Omar Figueroa, Inc., a long-time cannabis activist and attorney representing cannabis-related businesses throughout California.
Liz Geisleman, vice president of Rocky Mountain Reagents, Inc., which has provided biological and chemical product solutions to a wide variety of industries for over 50 years.
Ryan Hurley, general counsel for Copperstate Farms, one of the largest licensed medical cannabis cultivators in the country.
Chris Jackson, co-founder of Indica LLC and Sticky Ypsi, a cannabis provider based in Michigan.
The nominating committee also re-elected three board members for another term:
Cody Bass, founder and executive director of Tahoe Wellness Center
Khurshid Khoja, current board vice-chair and principal of Greenbridge Corporate Counsel
Manndie Tingler, co-founder and CRO of Khemia Manufacturing and business development officer for Natura.
You can check out the full list along with their bios here. The new board of directors will be deated officially at the Northeast Cannabis Business Conference in Boston, February 19th. The first board meeting with the new appointees will also take place in February.
Every detail counts at an indoor grow facility. Indoor growers have complete control over nearly every aspect of their crop, ranging from light intensity to air circulation. Among the most important factors to regulate is temperature. While ambient air temperature is critical, growers will also want to measure leaf surface temperature (LST).
To illustrate, let’s say you keep your living room at a cozy 76 degrees. Then, if you place a thermometer under your tongue – your body is (hopefully) not at 76 degrees but is likely between a healthy temperature of 97 to 99 degrees.
A similar story can be told for cannabis plants grown indoors. A grow facility’s ambient air is often different than the plants’ LST. Finding an ideal LST for plant growth can be complex, but modern technology, including spectrally tunable LED grow lights, can simplify monitoring and maintaining this critical aspect.
Why Should Growers Care About LST?
Temperature plays a pivotal role in plant health. Many biochemical reactions contributing to growth and survival only occur within an ideal temperature range. If temperatures dip or spike dramatically, growers may witness inhibited growth, plant stress or irreversible damage to their crops.
The leaf is among the most important plant structures as it’s where most metabolic processes happen. Therefore, finding an optimum LST can improve growth rate and the production of metabolites such as pigments, terpenes, resins and vitamins.
Because many plants rely on their leaves for survival, it makes sense that leaves have their own temperature regulation system. Evaporation through pores in the leaf – known as stomata – can cool the plant through a process called transpiration. Up to 90% of water absorbed is used for transpiration, while 10% is used for growth.
The efficacy of transpiration is determined by the vapor pressure deficit (VPD), which refers to the relative humidity in the ambient air compared to the relative humidity in the leaf. If relative humidity is low, the VPD can be too high, which may cause plants to have withered, leathery leaves and stunted growth. On the other hand, a low VPD correlates to high relative humidity, and can quickly result in disease and mineral deficiencies. Higher humidity often results in a higher LST as transpiration may not be as effective.
When it comes to LST, growers should follow these basic guidelines:
Most cannabis plants’ LST should fall between 72 and 86 degrees – generally warmer than the ambient air.
LST varies depending on individual cultivar. For example, plants that have evolved in colder climates can generally tolerate cooler temperatures. The same can be said for those evolved in equatorial or temperate climates.
CO2 availability also plays a role in LST; CO2 generally raises the target temperature for photosynthesis.
How Does Light Spectrum Affect LST?
We know that CO2 concentration, specific genetic markers and ambient temperature all play an important role in moderating LST. But another important factor at an indoor grow is light spectrum – especially for those using spectrally tunable LEDs. Growers will want to optimize their light spectrum to provide their crop with ideal conditions.
A combination of red and blue wavelengths is shown to have the greatest impact on photosynthesis and, thus, LST. Photons found along the green and yellow wavelengths may not be absorbed as efficiently and instead create heat.
Indoor cultivator facilities often use high powered lights that can give off heat
Optimized light spectrums – those with an appropriate balance between red and blue light – create more chemical energy instead of heat, thereby resulting in a lower LST. Using fixtures that are not spectrally tuned for plant growth, on the other hand, can waste energy and ultimately contribute to a higher LST and ambient temperature, negatively affecting plant growth. Consequently, measuring LST doesn’t only indicate ideal growing conditions but also indirectly illustrates the efficiency of your grow lights.
LED fixtures already run at a lower temperature than other lighting technologies, so indoor growers may need to raise the ambient temperature at their grow facilities to maintain ideal LST. Switching to spectrally tuned LEDs may help growers cut down on cooling and dehumidifying costs, while simultaneously improving crop health and productivity.
What’s the Best Way to Measure LST?
There are several tools available for growers to measure LST, ranging from advanced probes to specialty cameras. However, many of these tools provide a reading at a specific point, rather than the whole leaf, leading to some inaccuracies. Temperature can dramatically vary across the leaf, depending if parts are fully exposed to the light or in the shadows.
Investing in a forward-looking infrared camera (FLIR) gives indoor growers a more accurate picture of LST and light efficiency. That being said, growers should not only measure leaves at the top of the plant, but across the middle and bottom of the plant as well. That way, growers receive a complete snapshot of growing conditions and can make changes as needed.
At an indoor grow facility, it’s not enough to only measure ambient room temperature. Of course, this aspect is important, but it will paint an incomplete picture of plant health. Measuring LST gives growers nuanced insights as to how plants respond to their environment and how they can better encourage resilient, healthy growth.
Using spectrally tunable LEDs makes achieving LST easier and more cost-effective. Lights with optimized spectrums for plant growth ensure no energy is wasted – resulting in superior performance and efficiency.
If you were at Davos this year, you heard alot about CBD. The cannabinoid will again be a headliner in business analysis and bottom line reports this year. But as the market matures, globally, what is the real temperature of the industry? And how fast will regional hiccups resolve?
Regulatory Issues Are In The Room
From the US state markets to the EU, hemp is coming into its own, even though almost everyone also refers to it as CBD (cannabidiol).
In the United States, things are even more murky because of a lack of federal reform and the individual rules and regs of existing state markets. To an extent, the market is being “federalized” on the testing front (see ISO for example) and GMP (at the federal pharmaceutical level), producers are beginning to be able to get certified on a global scale. However, the vast majority of the U.S. market is not anywhere close to the regulatory muster now required of even the most-humble commercial hemp farmer anywhere in the EU.
In Europe, the entire cannabis discussion is already far more defined, and as a result, very much likely to set the rulebook globally, especially as so many people want to import here. And this is going to be a bugbear for the next two years. The rules on EU Bio for starters, are still in flux. And where this ties into GMP downstream, those who brave such waters are in for choppy seas for the time being.
Tie this into Novel Food, and this is an area right now that should only be charted by the most experienced navigators, and not just using the stars.
The Battle Is On – Both On The High Seas And The High Streets
For all the desire to bring “whole plant” into the room, (in other words recreational cannabis and medical cannabis with the THC still attached), CBD fever at least has spread in Europe faster than any pending flu epidemic from China.
There are positives and negatives that come with this discussion. Namely, the ever pounding need to commercialize the legal industry and remove all Drug War stigma and barriers from the discussion.
CBD-only legalization is also a powerful answer to those who claim that if CBD is legit, then the police will not chance busting people, no matter how much THC is or is not in the offending substance in question.
These are also the same people frequently who also have a stake in some level of the industry as it legalizes. And this is also where some of the fiercest battles for regulatory control and definition have also begun to happen.
The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.
Where they have come to a head (see Italy), it appears that governments are indeed reconsidering the whole “insurance” if not “home grow” discussion. Not to mention, as a result, recreational after that. The conversation in Italy, of all places, right now, is a good indication of this trend. It is a conservative country in every way, yet it is the first to not only cancel a government controlled monopoly license, but also the largest country in Europe to again tinker with limited home grow of cannabis plants.
Ironically this is also the place where the most dedicated “CBD revolutionaries” have also hit. In places like the UK right now, the lack of appetite for EU regulatory control generally (see Brexit) has resonated, particularly with a pro cannabis crowd sick and tired of more delay on a topic whose day in the sun has finally come. If not more government wobbles on discussion on the medical side (see the recent NHS decision to ignore cannabinoids and chronic pain).
In other places like Europe however, and this certainly showed up at Davos, CBD is a hardy foot soldier if not cannaguerilla from the hills that is beginning to chalk up discussions if not yet wide-ranging sovereign victories.
This is absolutely clear to see in places like the African market (and Lesotho is about to become a hot ticket globally if not within the African continent). Indeed, the first seeds were sown several years ago).
Yes, it is ridiculous that CBD is being banned. And it is also obvious that governments are unwilling to be bankrupted over medical cannabis of any kind or THC concentration, and know they must also seek other ways to deal with the issue.
CBD, in other words, is a kind of Che Guevara that is going to take down a few of the established orders in this revolution that is now global. And for that very reason, taking on a character if not place at the table all of its own.
In general, the industry is setting itself up for the next round of “invasion” just about everywhere. In Europe this is going to be a very interesting next couple of years as cannabis as a crop is integrated into the mainstream via changing rules both on a national and regional level.
There are two possibilities for the now Brexited UK. Either the UK is also going to be an insane madhouse of cannabis innovation, set free from its EU “overlords” or the entire discussion is going to get bogged down in another kind of elite private room. Namely which British company gets mostly monopoly rights on what is left of NHS patients (see GW Pharmaceuticals), and which foreign (probably US or Canadian) company is going to be able to buy market accessone way or another to both the medical market that flows over from this discussion and the budding recreational one. See CBD for starters.
In the meantime, strange hybrids are going to enter markets. British distilled hemp infused rum showed up in German mainstream grocery stores just before Christmas. Chocolate makers are setting out stakes across European states with suppliers attached globally.
In Italy, home grow has entered the discussion again, and recreational count down calendars are also on the walls if not sales projections of everyone in the industry. That said, the strategies and ground covered between now and the beginning of 2022, must be strategically chosen. There is no easy, much less “one” path in. All things cosmetics and tinctures will be difficult paths for years to come – although lucrative markets.
CBD vs THC
This discussion is in the room as a political topic as well as an economic one. Technically, anyone with a working farm and used to producing standards demanded across the EU, should be able to enter the industry at this point. That said, getting in, and getting established is not only expensive but also time consuming. The many quirks and stigmas of the past are still in the room. And as fast as norms are establishing, the rules are changed again.
As much as anyone wants to set out even a stake (medical vs. recreational, THC Vs. CBD), the rules, if not debate is bunted again – certainly this has been the case in Europe over the past few years. In fact, the entire plant must be and always is in the room, even if in discussion with several agencies at a time.
2020, in other words, is going to be an interesting year for the industry, even if the most significant achievements, companies and people are not “seen” much less lauded in any spotlight.There is no way THC can be entirely left out of the discussion to begin with. Starting with alarmed reports about the fact that traces of THC in CBD products can show up in human bloodstreams. Until there is a real understanding about the tolerance levels of THC, and for whom in other words, the CBD market will always be haunted by this bugbear. And when they do, recreational reform of all kinds will also be much easier to support.
That said, you cannot pay overhead with promises about future reform. And in the short term, it is necessary to find your niche, and stick to it.
Europe also is a far more interesting regulatory market. Namely, there are more trials afoot, and more people are exposed to the idea of cannabinoids and how to use them.
How long will this take to resolve? It’s anyone’s guess, but the likelihood is that the next two years are set to be just as interesting as the last several have been, although the ground, as well as the goalposts are also just as clearly changing.
2020 in other words, is going to be an interesting year for the industry, even if the most significant achievements, companies and people are not “seen” much less lauded in any spotlight. Namely a general, mainstream and global population is now being introduced to a wonder if not miracle plant, and in a variety of ways.
That is surely, just in and of itself, perhaps the most important aspect of celebrating at a Swiss resort and playground of elites. Cannabis has “arrived” and taken its sophomore spin at the ball.
To ask this author to identify the top five trends in 2020 for cannabis is akin to asking her to name only five of her favorite Coldplay songs. With so much energy for both topics, a selection of the absolute most favored components of either passion presents quite a challenge. But like the cannabis industry has done for 20 years under its state-legal regime and entirely illegal federal one, this author will endure under the confines of such limitations.
Consolidation
In any new industry this is bound to happen. Particularly one with such massive government oversight and equally massive consumer demand. Original license holders are cashing out. And they should. They were the risk-takers. The originals. They raced to government buildings across the country with boxes of background checks accompanied by teams of forensic accountants, lawyers and lobbyists to walk down a path only recently paved with legalization to seek a license to directly violate federal law. They drew a line in the sand and said, “I’m in.” And the stars have aligned for them to move on in many states due to changes in ownership structures, particularly ones that now provide for out-of-state interests. They deserve to sell that to the next highest bidder for all of the pressure, investment, stress and risk that permeates the foundation of this industry. With state law changes have come multistate operators, many of whom do not necessarily understand cannabis and have probably never used it, but they know an opportunity when they see it. These companies are buying up licenses across the country and creating brand awareness among consumers with an eye toward changes in federal law that would allow for the transportation of cannabis across state lines. Once that happens, the cannabis industry will be treated like every other American producer with massive distribution centers across the country that will mimic the likes of alcohol and tobacco overnight.
Infused Products
The report further found that the edibles category could be worth more than $4.1 billion in Canada and the United States by 2022.No one wants to go to work and smell like cannabis, unless, of course, you work in a grow facility. And even then, maybe you don’t. And employers aren’t exactly excited when employees are present with the distinct aroma when it’s time to clock in. So, what’s a cannabis consumer to do? Eat or drink the product instead. In a world full of energy drinks, dietary supplements, bubbly water infused with fruit (which still doesn’t taste like anything, let’s be honest), it should surprise no one that cannabis is making its debut in a myriad of consumption applications. While most states prevent the mixing of cannabis-infused beverages and alcohol for sale by retailers (consumers can—and do—mix the products on their own), there are no limits on other targets for cannabis products. Most popular: food and drinks.
ArcView Research and BDS Analytics recently identified that consumer spending on cannabis-based food and drink reached an estimated $1 billion in 2017 in the United States and Canada, representing about 11.4% of the total $9.1 billion in consumer spending on consumable cannabis in those two markets. The report further found that the edibles category could be worth more than $4.1 billion in Canada and the United States by 2022.
There are countless food products and infused beverages on the market in America and anticipated this year, which dovetails perfectly with the American predilection for happy hours, brunch, and after-work drinks; minus the hangover, some might suggest. Any cannabis company owner will tell you the future is infused products, whether consumers are buying the oil themselves to infuse at home or asking a company to infuse something for them. The future of cannabis is, indeed, on a menu.
Movement in Washington, D.C.
When the SAFE Banking Act passed off the House floor with 324 yes votes, 91 of which were from Republicans, a collective cheer and wave akin to an invigorated football stadium engulfed the industry. A huge moment. One long-awaited and most needed. Momentum. Movement. Finally, a sigh of relief. One would be naïve to assume such a success in the House will be mirrored in the Senate. It will not. But that sort of statement from one chamber is a message to the other: this issue is not going away. It matters. It’s bipartisan. And employees/owners in the cannabis industry need relief from the heavy hand of the federal government when they go to work every day in full compliance with state law. With every passing day, lawmakers on both sides of the aisle are being educated by the cannabis industry about how to responsibly regulate the products and what true regulation looks like. It’s only a matter of time until these state-level practices are adopted by federal policymakers. Because let’s be honest, elections matter. And 33 states have said yes to cannabis. It’s only a matter of time until the members of Congress from those states take up the issue in a real way. And many already have.
State Legalization
In the last 10 years, 20 states legalized cannabis for medical purposes and 13 legalized it for adult use. Several national polls suggest this trend will only continue in 2020. And unlike the polling in most recent national elections, the predilections on cannabis seem to be accurate. In 2020, adult-use cannabis measures will definitely appear on the New Jersey and South Dakota ballots. Adult-use measures could also appear in Arizona, Arkansas, Missouri, Montana, New Jersey, North Dakota and Oklahoma. Idaho, Mississippi, Nebraska and South Dakota are likely to vote on medical cannabis as well.
Of note, the South Dakota measure would also legalize hemp, which has yet to get the blessing of the Mount Rushmore state. In Mississippi, voters will likely be asked their opinions on legalizing medical cannabis. This is interesting since the University of Mississippi has had the only DEA license to grow their own cannabis for research purposes since 1968, but the rest of the state has been squarely in prohibition with zero allowances for cultivation or possession.
The future is bright for the cannabis industry and its players. For a final ounce of perspective on state legalization, only three states have no legal cannabis of any kind: Idaho, Nebraska and South Dakota. And if Idaho and South Dakota’s polling is any indication, they won’t be on this short list for much longer.
Maturation
Once upon a time, drug dealers applied for legitimate cannabis licenses. They were denied. And some tried to dodge the regulated marked to continue selling on street corners and out of back doors. Some still do. But now we have a cannabis industry with true regulation and what this author likes to call “adult supervision in the room” on the cannabis conversation and those leading it. A week doesn’t go by without a Wall Street investor or Silicon Valley tycoon asking for advice on where to invest in the cannabis industry. Huge retailers are calling to ask if they can sell it. Alcohol and tobacco interests are hugely, well, interested. And the industry is being led by the likes of former baby car seat manufacturers, former food and beverage lobbyists, young entrepreneurs, and tech geniuses. Now that these individuals are invested and committed, they will continue to professionalize the industry by leading on public-facing initiatives teaching consumers how to use cannabis responsibility, how to determine a much-needed standard for impairment, and to overall improve the reputation of a product once fully illegal, and now partially legal, and soon on its way to fully legal.
The future is bright for the cannabis industry and its players. Only daylight ahead and the billows of bureaucratic smoke are parting hopefully—eventually—with regard to the incongruity between state and federal law on the issue. That’s a lot of ink to say that the next few years will be monumental for the cannabis industry. And if you’re a Coldplay fan, you just caught the reference to my favorite song from the legendary Brit ensemble.
Constellation Brands, the beer brewer behind Corona and Modelo, has finally admitted the obvious. Its four-billion-dollar bet on the Canadian cannabis company Canopy Growth in 2018 was a long-term play for market share, not immediate profitability. Indeed, Canopy has yet to turn a profit and its shares are down 30% from this time last year. So far Constellation has lost $71.1 million of its investment in the cannabis industry company leader. That is 19.25% of its total investment in 18 months. In other words, hardly insignificant.
That said, Canopy is not, by any stretch of the imagination, “down for the count.” If their overexpansion plans and statements over the last three years have been, at best, optimistic, they have not done anything broadly different than any of their other major competitors (see Aurora for example). And have still emerged, financial bloodbath although it has been so far, four years after entering the European market at least, with global presence that is not going anywhere. Even if in some markets overall sales are lower than hoped or anticipated.
At least two quarters of real reorganization and reshuffling in every office on every continent the country does business in have at least resulted in a major victory in Luxembourg at least that will bear fruit for years to come. That is a strategic victory worth a few dings along the way.
Starting, almost certainly, in 2021, when changing laws in Europe will also allow the company to bring together its background and reach in the spirits industry to a world that is finally opening to the blending of the cannabis world into the same.
This year, in other words, will almost certainly see the company continue to service its existing steady business in multiple countries – however unfancy that may be. And it is decidedly not glam here. In places like Germany the company is essentially only holding onto market share in the medical market by its purchase of the largest dronabinol maker in the country.
That said, beggars cannot be choosers. Aurora in contrast, is looking at a serious review of its cultivation licenses and practices. In the meantime, Canopy snagged a lucrative contract for a strategic, central country in the European debate – Luxembourg – that no matter how small, that will create at least a trickle of medical sales until the country changes its laws.
One of the things that the Canadian cannabis industry has in spades, and this is absolutely true of Canopy, is accurate business acumen about market entry timing and overall strategy.
No matter how much cannabis industry execs, in other words, have only been positive and upbeat before, this statement by Constellation also signals a change in the way Canopy presents itself externally.
Mistakes have been made. It is time to clean house and move on.
What other new industry in the lifetimes of those alive today, continues to admit its mistakes and pivots less than a decade after its global birth in continual pivot and expansion mode? The only other one that comes close is of course the internet. And these days, more specifically, Internet 2.0.
So, as the world says hello to 2020, Canopy seems to be sending its new year message. Trimming the sails after a wild, wild year, and setting course again, for a greener horizon.
Canndoc, an Israeli medical cannabis producer, just received a shipment of 250kg of dried whole flower cannabis. The company, a subsidiary of InterCure, just signed a strategic cooperation agreement with Canada’s Tilray.
Interestingly the agreement is both for the import and export of flower. So don’t count out a stream coming the other way. Or, more likely, the export of seed and cannatech related to the same.
Everything goes both ways – yin and yang. Even in this industry.
However what this also does is set up Tilray to have an excellent shot at being partnered at least with the first Israeli exporters when local demand is satisfied. And that, given their strategic footprint globally, but particularly in Europe, is a very unique advantage in a cannabis map that is shifting, literally, as the year becomes the new decade.
What Gives With The Ex-Im Discussion Anyway?
Israeli producers have longed for the day when they can bring their considerable tech and research advantage if not plant genomes and medicines to a global market. The medical program in Israel was originally funded largely by American federal money while domestic reform was fought, tooth and nail until the middle of the last decade. And of course so far, at least, despite Illinois clocking over into the 11th recreational state as of January 1 of this year, has remained stalled on a federal level in the U.S.
However, no matter the shifting politics of Israel (where lets not forget, the government is also mired in scandals and it appears the Israeli president, Benjamin Netanyahu delayed the export of cannabis in a deal with the U.S. to move the capital to Jerusalem), one thing was made clear last year by government officials: Israelis come first.
Tel Aviv, Israel
It is likely to be an attitude that spreads – particularly in places like Europe and even more so Germany. So far, the entire market here has been met with imports. This is the first year that there is regular medical production hitting pharmacy shelves thanks to Demecan and the former Wayland (now ICC).
Indeed, Wayland basically did the same thing in Germany as Tilray is doing now in Israel, although the firm had to sink a huge capital expenditure into setting up its cultivation sites. And at far greater cost.
Tilray appears to be hitching a ride on an existing industry to expand its reach, markets and of course, IP. Israeli cannatech, for sure, is going global.
How Could This Impact Other Discussions?
There are two places this development is likely to impact policy discussions outside of Europe where home grow has, let’s not forget, also hit Italy in the last months. But similar ripples are afoot everywhere right now – from Portugal and Spain to Greece. While exporting can be a lucrative game, should it come at the expense of domestic citizens?
The first place this issue has already been a theme is obviously Canada, where this spectre was much in the room last year as the country transitioned to recreational while its top companies also established themselves abroad. In Europe this was mostly done without cultivation domestically except in a few rare instances. See Tilray in Portugal, Demecan in Germany, ICC in Italy and all of the partnerships between the top Canadian cultivators and Danish, Greek and Maltese producers.
The second place this will undoubtedly have an impact, however, is very much likely to be the United States. While most pundits agree that federal reform is at least a year or so off (roughly equivalent with European change of a recreational kind), this discussion is already in the room.
These days, six years after Colorado and Washington State upped the ante, companies may operate separate operations in multiple states, but of course, cannot ship across the border of any of them.
As soon as federal reform hits however, also expect to see these discussions going on at a state level across the United States. With healthcare devolving very much to the states, locally grown cannabis is going to play a major role in all of these discussions (starting with the opioid epidemic). If not, as many expect, an influx of cannabis from south of the border.
Those days, however at least in the U.S. are still several years away. In Israel, however, as Tilray lines up a unique profile across all of said jurisdictions, look for intriguing cannabis developments coming soon, in multiple jurisdictions.
Cannabis legalization has taken the United States by storm, with 33 states approved for medicinal cannabis use — 11 of which are also approved for recreational use for adults aged 21 and over. With new patients and consumers entering the market every day, it’s more important than ever for cannabis cultivators to establish more effective methods for mold and fungal prevention in their crops and to ensure consumer confidence in their brands.
Today, many cultivators address the risk of mold and fungus growth by testing crops for contaminants at the end stage of production. While this helps to catch some infected product before it reaches the market, this method is largely ineffective for mold and fungal prevention during the cultivation process. In fact, recent studies have shown an 80% failure rate in mold and fungal testing in Denver cannabis dispensaries. By relying on late-stage, pass/fail testing, cannabis entrepreneurs also expose themselves to increased risk of lost crops and profits.
Photo credit: Steep Hill- a petri dish of mold growth from tested cannabis
However, emerging sensor technologies exist that can test plants during the grow process, significantly reducing the risks associated with cannabis cultivation while increasing the bottom line for commercial grow operations. By leveraging data from these monitoring sensors along with environmental automation systems that are integrated with data analytics platforms, cannabis professionals can take a proactive approach to achieve the ideal environmental conditions for their crops and prevent against mold and fungal infestation.
Common Causes for Bud Rot in Indoor Growing Systems
Botrytis cinerea — commonly known as “bud rot” — is a pathogenic fungi species that creates a gray mold infection in cannabis plants. An air-borne contaminant, it is among the most prevalent diseases affecting marijuana crops today and can lead to significant damages, particularly when left untreated during post-harvest storage. Bud rot is one of the most difficult challenges cannabis entrepreneurs face: Once plants have been affected, only 2% can be expected to recover. This is because Botrytis cinerea can use multiple methods for attacking host plants, including using the plant’s natural defenses against it to continue infestation.
While difficult to contain, bud rot is very easy to spot. Plants affected with the fungus will begin yellowing, experience impaired growth, and develop gray fungus around its buds. Overall crop yield will be significantly reduced, leading to decreased profit for cannabis cultivators. The biggest contributing factors to a Botrytis cinerea infestation are as follows:
Humidity: Indoor grow facilities that maintain humidity levels in excess of 45% are breeding grounds for mold and fungus. These environments can become perfect conditions for mold and fungal growth.
Temperature: Bud rot typically thrives in environments where temperatures fall between 65- and 75-degrees Fahrenheit, which is why greenhouses and grow rooms are often the victim of such infestations.
Ventilation: Poor airflow is another contributing factor to Botrytis cinerea Without proper ventilation, excess moisture buildup will eventually result in mold and mildew growth.
Strain: Some marijuana strains are better equipped to fend off bud rot infection. In particular, sativa plants have a higher resistance to mold development than their C. indica and C. ruderalis cousins.
Controlling mold and fungal growth in commercial grow facilities is a top priority for cannabis cultivators. Not only detrimental to their profitability and crop yield, infected plants can pose serious health risks to consumers, especially for immunocompromised patients. Consuming cannabis products that have been compromised by bud rot or other mold and fungal infections can cause a wide range of medical concerns, including pneumonitis, bronchitis, and other pulmonary diseases. As a result, growers are required to dispose of all infected plants without the possibility to sell.
Bud rot isn’t the only culprit responsible for cannabis plant destruction. Powdery mildew, Fusarium, sooty molds, and Pythium all contribute to the challenges faced by cannabis professionals. In fact, a recent study conducted by Steep Hill Labs and University of California, Davis – Medical Center found that in 20 randomly-selected samples submitted for testing, all samples showed detectable levels of microbial contamination7. Many of these samples also contained significant pathogenic microorganism contamination. Without proper detection and prevention methods in place, these pesky plant-killers will only continue to terrorize the cannabis cultivation industry.
The Current Cannabis Cultivation Landscape
The data is clear: Current practices for cannabis cultivation are insufficient for preventing against mold and fungal growth. Sterilization and pass/fail testing do not identify the root cause of harmful infestations in plants, therefore leaving cannabis professionals in the dark about how to better optimize their grow conditions for improved crop reliability and safety. In order to prevent against damages incurred from mold and fungal infestation, marijuana growers must be more diligent in their grow condition monitoring practices.
Many cannabis professionals rely on manual monitoring to identify environmental changes within their indoor grow facilities. While it’s important to collect data on your operation’s essential systems, doing so without the right tools can be time-consuming and ineffective. Manual monitoring often relies on past data and does not illustrate the relationship between different systems and their impact on environmental changes. The goal is to assemble data from all the grow systems and create correlations on actual bio-environmental conditions during the grow process to compare to yield results. This is only available when an information management platform is synthesizing data from all the systems within the grow facility and presenting meaningful information to the growers, facility operators and owners.
Especially as the cannabis industry is expected to grow exponentially in coming years, growers need more robust tools for tracking and manipulating environmental changes within their indoor growing systems.
Leveraging Building Automation Systems & Data Analytics in Cannabis Cultivation
A powerful approach to prevent environmental conditions that are known to lead to mold and fungus growth exists in leveraging the data produced from your grow facility’s various automation systems. Most commercial cultivation facilities have multiple stand-alone and proprietary systems to control their indoor environment, making it difficult to not only collect all of this valuable data, but also to achieve the level of grow condition monitoring necessary for mold and fungal prevention.
With some data analytics platforms, such as GrowFit Analytics, data is collected across disparate systems that don’t normally communicate with one another, providing access to the key insights necessary for achieving environmental perfection with your cannabis crops. A viable solution collects vital grow facility system data and relevant bio-environmental monitoring data, and delivers this information in one, centralized software interface. The software then will apply analytic algorithms to develop key performance indicators (KPIs) while working to detect system anomalies, faults, and environmental fluctuations. The right analytics solution should also be customizable, allowing you to track the KPIs that are most important to your unique facility, and to achieve the vision of your chief grower. Ultimately, the software should serve up actionable insights that empower facility management and growers.
Sample data visualization dashboard from GrowFit Analytics showing real-time Temperature and Relative Humidity readings and indicating potential Mold Risk as defined by the Grower.
Collecting reliable data from different grow facility systems and environmental sensors can be a complex process and the information collected illustrates more than just what’s working right and what isn’t. By implementing an advanced data analytics solution, cannabis cultivation professionals can now be empowered to track minute details about their indoor grow facility, providing a safer, healthier environment for their crops and avoiding those environmental conditions that lead to mold and fungus altogether.
An ideal data analytics platform won’t simply collect data to be analyzed at a later date, and simple trending of sensor data is not enough. Information — especially in a commercial grow facility — is time-sensitive, which is why growers should select a system that offers real-time analytics capabilities. Some platforms offering real-time analytics utilize cloud computing, allowing for easy access from anywhere while also providing enhanced security to protect sensitive facility data. The most robust data analytics platforms provide detailed historical data for your entire crop’s lifecycle that provide a “digital recipe” to replicate successful crops, and fine-tune the process for continuous improvement.
Data analytics tools can also impact the bottom line by lowering operational costs. GrowFit Analytics, for example, was born out of a software solution designed to lower energy costs for large complex buildings like commercial grow facilities.
The data and insights provided can help identify opportunities for greater energy efficiency, which can lead to significant utility savings. Grow facilities operate 24 hours/day, with energy expenses representing one of the largest operational costs. With data analytics tools at their disposal, facility managers are armed with the information they need to improve system efficiency, increase energy savings, and improve profitability.
Eliminating Mold & Fungus from the Future of Cannabis Cultivation
By focusing on grow condition monitoring using data analytics tools, cannabis professionals can effectively eliminate the risk of mold and fungus growth in their crops. Leading data analytics tools make tracking environmental changes simple and easy to manage, allowing cannabis professionals to take a proactive approach to mold and fungus prevention. As we look to the future of the cannabis cultivation industry, it’s paramount for professionals to explore the technological advancements available that can help them address their business’ most pressing challenges.
The 280E statute bans businesses from deducting business expenses for gross income associated with the trafficking of Schedule I or II substances. While other businesses can deduct any number of expenses when filing their taxes — employee salaries, rent, equipment, electricity, etc. — 280E limits cannabis companies to only expensing deductions directly related to earning a profit, or the cost of goods sold (COGs).
For example, a dispensary whose square footage is split between 60% sales floor and 40% lobby may only deduct 60% of rent expenses because that’s the portion dedicated to COGs. Transactions do not occur in the lobby, so that portion of the rent is not deductible.
Image: Flickr
So long as cannabis remains a Schedule I substance, companies that produce, sell and otherwise touch the plant in their operations must comply with 280E.
Tips for Tax Success
While taxes can be complex and stressful for cannabis businesses, it is possible to limit the headaches. With tax season right around the corner, here are a handful of tips to ensure a successful filing.
Close Out Your Books. Before tax preparation can even start, cannabis businesses want to make sure to close out their financials for the previous year. It may sound like a no-brainer, but with the extra scrutiny facing companies in the industry and the nuances of 280E, it’s extremely important to have fully reconciled and closed-out books to work from when preparing taxes. Incomplete books can cause delays and add unnecessary extra stressors to the process that could result in penalties or additional liabilities.
Consult a Cannabis Tax Professional. Once books are ready to go, it’s time to consult a tax professional who has experience in the cannabis industry. A cannabis-focused tax pro will be familiar with the intricacies of 280E and and will be able to identify relevant business expenses to ensure compliance and limit liabilities. In addition to 280E issues, a competent accountant will also be able to highlight any other tax code changes that may impact a business. Every business is different — even in the cannabis industry — and since the tax code is large, complex and prone to new rules and interpretations, it’s important to have a strong accountant guiding the way.
Justify Your Numbers. After consulting with a tax professional and identifying relevant business expenses, it’s time to back up the numbers. This is where strong record-keeping comes into play. Ongoing regulatory hurdles limit cannabis firms’ ability to participate in the financial system where, generally, record creation is inherent with each transaction. But in a cash-heavy industry like cannabis, record creation and retention fall on the businesses themselves. This is because cash transactions don’t come with any built-in records. That inherent lack of documentation is yet another potential pitfall for cannabis businesses and taxes since large amounts of cash often raise eyebrows at the IRS. It is up to businesses to provide adequate proof of their tax numbers. Since the IRS will put zero effort into investigating the accuracy of your numbers, it will likely assume the worst when reviewing your filing.
Preparation is King
Taxes can be stressful. But they don’t have to be. Navigating tax season as a cannabis business is all about preparation. By putting in the work and partnering with an experienced tax professional, cannabis operators will be able to avoid penalties, limit their audit risk and stay on track with their business goals.
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