The United Nations Commission for Narcotic Drugs, based in Vienna, Austria, voted to remove cannabis for medical use from its Schedule IV status, the strictest drug classification where dangerous drugs like heroin are listed.
The vote comes after the World Health Organization submitted a number of recommendations to the commission regarding cannabis, all of which were rejected except for the Schedule IV removal, according to Kyle Jaeger at Marijuana Moment. The WHO first issued their recommendations to change the status of cannabis last year in 2019.
Dirk Heitepriem, vice president at Canopy Growth, told the New York Times the vote is a huge step forward. “We hope this will empower more countries to create frameworks which allow patients in need to get access to treatment,” says Heitepriem.
The much-delayed vote was close, with 27 in favor and 25 against, and Ukraine abstaining, but support from the United States was pivotal in getting it passed. Still though, the vote is largely symbolic – it doesn’t necessarily clear the way for countries to start legalizing cannabis and governments can still classify cannabis how they see fit.
The vote does, however, provide an important foot-in-the-door moment for cannabis advocates and businesses around the world. The commission’s decision to remove cannabis from Schedule IV means that the UN recognizes cannabis as an effective medicine, opening the door to future progress on the international level and possibly opening research opportunities along the way.
Dr. Markus Roggen is a chemist, professor, cannabis researcher and founder & CEO of Complex Biotech Discovery Ventures (CBDV). Founder & CEO of Ascension Sciences (ASI), Tomas Skrinskas has been at the leading edge of transformative healthcare technologies, including computer assisted surgery, surgical robotics and genetic nanomedicines, for over 15 years.
Leading researchers from the cannabis industry – Dr. Markus Roggen (Complex Biotech Discovery Ventures) and Tomas Skrinskas (Ascension Sciences) – highlight the challenges facing the industry’s current compliance testing standards and the opportunities emerging from the latest developments in nanotechnology and advanced analytical testing. Here are the key insights from the discussion.
What are the current compliance testing requirements for cannabis products? Are they sufficient in ensuring safety and quality?
In the current landscape, Canada’s compliance testing requirements are clearly laid out in the form of guidance documents. Specifically, for pesticide testing, cannabinoid concentration content in products, heavy metals, etc. Compliance testing can be roughly divided into two categories: 1) establishing the concentrations of wanted compounds, and 2) ensuring that unwanted compounds do not exceed safety limits.
In the first category, cannabinoids and terpenes are quantified. Their presence or absence is not generally forbidden but must stay within limits. For example, for material to be classified as hemp, the THC concentration cannot exceed 0.3 %wt., or a serving of cannabis edible should contain below 5 mg of THC. The second category of compliance testing focuses on pesticides, mold and heavy metals. The regulators have provided a list of substances to test for and set limits on those.
Are those rules sufficient to ensure safety and quality? Safety can only be ensured if all dangerous compounds are known and tested for. Take for example Vitamin E acetate, the substance linked to lung damage in some THC vape consumers and the EVALI outbreak. Prior to the caseload in the Fall of 2019, there were no requirements to test for it. It’s not only additives that are of concern. THC distillates often show THC concentrations of 90% plus 5% other cannabinoids. What are the last 5% of this mixture? Currently, those substances have not been identified. Are they safe? There is no concrete way to determine that.
The aforementioned guidelines have the best intentions, but do not adequately address two key obstacles the industry is currently facing: 1) what happens in practice, and 2) what can easily be audited? Making sure people follow the requirements is the challenge, and it comes down to variability of the tests. Testing has to happen on the final form of the product as well as every “batch,” but there is little guidance on how that is defined. With so much growth happening in the industry, how are these records even tracked and scrutinized?
And finally, there’s the question of quality. How do you define quality? Before establishing quantifiable quality attributes, it can’t be tested.
If compliance testing is insufficient, then why aren’t more cannabis companies testing beyond Health Canada’s requirements?
Compliance testing has always been focused on the end product, THC and CBD levels, and consumer safety. As long as cannabis companies are testing to determine this, doing further testing means added costs to the producer. There is a rush to get cannabis products to the new market because many consumers are eager to buy adult use products such as extracts or edibles, and quality is not the biggest selling point at this very moment.
However, there are unrealized advantages to advanced analytical testing that go beyond Health Canada’s requirements and that offer greater benefits to cannabis producers and product developers. Producers often see testing as an added cost to their production that is forced upon them by the regulators and will only test once the product is near completion. For cannabinoid therapeutics and nutraceuticals, advanced analytical testing is critical for determining the chemical makeup and overall quality of the formulation. This is where contract researchers, such as Ascension Sciences, come in to offer tests for nanoparticle characterization, cannabinoid concentration, dissolution profiles and encapsulation efficiency.
A lack of budget and awareness have prevented cannabis companies from advanced analytical testing. However, testing that goes beyond lawful requirements is an opportunity to save money and resources in the long term. This is where companies, like Complex Biotech Discovery Ventures (CBDV), offer in-process testing that provides a deep characterization and analysis of cannabis samples during every stage of product development. If tests are conducted during production, inefficiencies in the process are revealed and mistakes are spotted early on. For example, testing the spent cannabis plant material after extraction can verify if the extraction actually went through to completion. In another case, testing vape oil before it goes into the vape cartridges and packaging allows producers to detect an unacceptable THC concentration before they incur additional production costs.
Which methods are the most successful for cannabis testing?
The most effective method is the one that best determines the specific data needed to meet the desired product goal. For example, NMR Spectroscopy is paramount in assessing the quality of a cannabis sample and identifying its precise chemical composition.
HPLC (liquid/gas chromatography) is the most precise method for quantifying THC, CBD and other known cannabinoids. However, if a cannabis extractor wants to quickly verify that their oil has fully decarboxylated, then an HPLC test will likely take too long and be too expensive. In this case, IR (Infrared Spectroscopy) offers a faster and more cost-effective means of obtaining the needed data. Therefore, it ultimately depends on the needs of the producer and how well the testing instruments are maintained and operated.
What’s next in analytical testing technology? What are you working on or excited about?
In terms of compliance, regulations to standardize the testing is the hot topic at the moment. For nanotechnology and nanoparticles, the big question now is what is known as the “matrix” of the sample. In other words, what are the cannabinoids, and what else is in the sample that’s changing your results? The R&D team at Ascension Sciences is in the process of developing a standardized method for this to combat the issues mentioned earlier in the interview.
The smoke analyzer in CBDV’s lab
Ascension Sciences is also excited about characterizing nanoparticles over time to determine how cannabinoids are released and how that data can be transferred or made equivalent to consumer experiences. For example, if a formulation with quicker release, faster onset and better bioavailability is found in the lab, product development would be more efficient and effective when compared to other, more anecdotal methods.
At CBDV, the team is working on in-process analytical tools, such as decarboxylation monitoring via IR Spectroscopy and NMR Spectroscopy. CBDV is also looking at quantifying cannabis product quality. The first project currently in motion is to identify and quantify cannabinoids, terpenes, and other compounds present when vaping or smoking a joint using a smoke analyzer.
A lack of budget and awareness have prevented cannabis companies from testing beyond what’s required by Health Canada. Compliance testing is designed to ensure safety, and for good reason, but it is currently insufficient at determining the quality, consistency and process improvements. As the above factors are necessary for the advancement of cannabis products, this is where further methods, such as advanced analytical testing, should be considered.
Small cannabis dispensaries face different challenges than those seen with large, multi-state operators. To this end, massive companies like MedMen and Grassroots Cannabis need to accommodate multi-state operations’ compliance challenges. Conversely, small dispensaries must learn to compete with the big box retailers of the cannabis industry.
Small cannabis dispensaries must figure out how to make their size an advantage against larger business entities to stay competitive. To this end, they must critically assess the corporate structure of large cannabis companies like Green Thumb Industries to look for operations and marketing opportunities still “left on the table” for smaller operators.
Luckily, owning and operating a small cannabis dispensary affords creativity and innovation in the workplace. Namely, because small businesses can quickly implement change and pivot to the demands of the ever-changing cannabis landscape. Conversely, due to corporate structures’ difficult navigation, their larger counterparts must go through far more effort to implement operational changes. To better understand how small dispensaries can stay competitive in today’s market, we put together some criteria to examine.
Cross-Training Employee Teams
The fact that small cannabis dispensaries do not have many employees significantly reduces operating costs. However, to capitalize on the savings of a small employee team, you must cross-train your staff. Because if a small team can handle all the required tasks of a shift, you will never waste money on over-staffing your dispensary operation.
A bud tender helping customers at a dispensary
Looking at the specific jobs of a small cannabis dispensary, business owners should ensure that budtenders are trained to handle nearly every business task. To illustrate, you should train budtenders to open and close the store, conduct inventory work, recommend products and operate seed-to-sale software. Not only does this cross-training keep you from overstaffing your dispensary when it is slow, but it also insulates your business during busy market fluctuations.
Please note, once you train budtenders to handle a variety of tasks, you should also pay them more than the industry average. In doing so, you insulate yourself from the high turnover rate that plagues the cannabis space.
Lean Operating Principles
Lean operating is a practice that has exploded in popularity across the business world. To help teach lean operating principles, specialty training companies offer Six Sigma certifications. These certifications help business owners and executives save money on operational efficiencies. Methods taken from Six Sigma can be incredibly impactful for small cannabis dispensary businesses.
According to the ASQ professional training website, “Lean Six Sigma … drives customer satisfaction and bottom-line results by reducing variation, waste, and cycle time, while promoting the use of standardization and flow, thereby creating a competitive advantage.”
Lean Six Sigma principles can be beneficial with inventory control in small cannabis dispensaries. To this end, these businesses should apply analytics to track consumer behavior within their stores. After that, they can use data to create precise sales forecasts and conduct highly accurate product procurement. The end goal being to increase liquidity by reducing money tied up in a bloated inventory of unsold cannabis products.
Personalized Experience
Due to their small size, single dispensaries have the luxury of customizing the retail shopping experience. As such, without the added pressures of corporate oversight, small operators have the creative freedom to make for highly memorable shopping experiences within their stores. In going the extra mile on things like interior design, small dispensaries can help ensure customer retention and benefit from word-of-mouth marketing.
The dab bar at Barbary Coast
For example, Barbary Coast Dispensary in San Francisco, CA, has the look and feel of a high-end speakeasy, making it the perfect match for the Bay Area’s aesthetic sensibilities. The dispensary interior is decorated with a 19th-century touch and features a dab bar, where clients can enjoy the surreal atmosphere while consuming some of California’s best cannabis. A visit to a small dispensary like this will likely leave a lasting impression.
Memorable retail shopping experiences often translate directly to customer loyalty. In turn, this dynamic directly impacts your bottom-line concerning marketing expenses. Notably, a steady base of loyal customers will sustain your business, significantly reducing your marketing costs. In the end, marketing can be directed at retaining clients through loyalty programs and customer engagement – both can be mainly handled “in house” and relatively inexpensively.
Product Differentiation
Small dispensaries can utilize product differentiation to stay competitive in today’s market. To this end, small operators are blessed with the ability to pivot quickly with new product offerings. Conversely, large dispensary chains with corporate structures must go through rigorous steps before launching new products at their stores.
Offering rare or unique cannabis strains is a great way to differentiate
Small cannabis dispensaries can immediately “get out ahead” on new product trends as they arise. For example, you can offer rare cannabis strains or boutique extracts that none of the larger dispensaries carry.
By the time the larger dispensaries in your area catch up on the current trends, you can move on to the next one. We recommend making alliances with some of the top craft growers in your area to make this possible.
Every year, the cannabis industry grows more competitive. As this business evolves from an underground affair to a multi-billion-dollar enterprise, the scope and sophistication of cannabis dispensary operations grows exponentially. Within this ever-changing dynamic, many small dispensaries fear the wayside will leave them.
Yet, if you approach the market with creativity and zeal, you can make the additional market pressure work to your benefit. By focusing on critical facets like cross-training employees, lean operating principles and product differentiation, you can build a profitable and sustainable cannabis dispensary by making small size a competitive advantage.
There is an ineffable logic to the pace of reform these days. Nowhere is that clearer in both the success of voter reform measures in the United States (along with timelines for implementation baked into the language of the same) and developments internationally. No matter that New Zealand decided to take a recent punt on the issue, there are other forces moving elsewhere that have the potential to be far more consequential – and in the short term.
Israel Announced Its Intent To Create A Recreational Market in 2021
There is little news anywhere as consequential as that of the oldest medical market finally succumbing to the inevitable. Namely, Israel has announced that it will allow an adult use market to begin operations probably by the third quarter of 2021. That said, don’t hold anyone to a deadline in the days of COVID-19, which will just as surely have not passed by then.
However, this development means that the entire conversation has moved up a notch – because the Israelis have so much research on the plant at this point.
For this reason, the tiny country is likely to have an outsized impact on the entire discussion – along with conveniently timed medical exports to the world.
Luxembourg Will Initiate Its Recreational Market Shortly Thereafter
It is likely not insignificant that the Israelis announced their intent to begin an adult use market just ahead of the long-announced Luxembourg flip – now on the agenda of the Green Party domestically for several years.
The strategic location of Luxembourg in both the European market as well as the much larger financial one now interested in the vertical cannot be understated. Indeed, the country has already played an outsized role in the development of the medical market here due to the contretemps over the clearing of stock trades in the German market as of 2018.
The double whammy of good news from both markets will also create a buzz internationally that is sure to drive other conversations forward – even if it is to study how both countries approach the issue. And, more to a point, how they differ from Canada, including regulation of their equity markets.
Combined with a more regulated market in Holland and presumably continued “experimentation” in Denmark, and by the end of next year, adult use reform will have hit the continent and in no small way.
Does This Mean The Sudden Potential of Adult Use Everywhere?
As 2020 has shown, in spades, just about anything can and frequently does happen. However, do not expect many more countries to move into the recreational column for the next several years.
Whatever the UN does or does not do about cannabis at the next meeting of the WHO, cannabis the plant remains a Schedule I drug internationally. This means that, for example, import and export of the same across borders, even in Europe, is likely to be problematic and for some time to come – let alone its international travel across say, the Atlantic.
Further from the law enforcement and financial security (namely money laundering) perspective, there are big issues that have to be dealt with finally, internationally, that so far have not – and under the guise of “medical reform.”
For that reason, in other words, do not expect Germany, much less France or even the UK to suddenly switch gears. And remember that both Luxembourg and Israel are small countries.
Bottom line? Adult use reform is here to stay, and will increasingly show up on the map. But the more “blanket” reform, still driving the entire discussion, is broadly, and globally, medical.
Cannabis infused products manufacturing is quickly becoming a massive new market. With companies producing everything from gummies to lotions, there is a lot of room for growth as consumer data is showing a larger shift away from smokable products to ingestible or infused products.
This is the fourth article in a series where we interview leaders in the national infused products market. In this third piece, we talk with Stephanie Gorecki, vice president of product development at Cresco Labs. Stephanie started with Cresco in 2019 after transitioning from an award-winning career in traditional foods CPG. She now heads up product development where she manages R&D for Cresco, a multi-state operation with tremendous SKU variety.
Next week, we’ll sit down with Lisa McClung and Glenn Armstrong from Coda Signature. Stay tuned for more!
Aaron Green: Stephanie, how did you get involved at Cresco Labs?
Stephanie Gorecki:A few years ago, CBD became the most talked about ingredient in the food industry. CBD-infused food headlines appeared in most of the trade magazines. I have always been curious about working in the cannabis space, and not just with CBD, but THC and other cannabinoids. I researched technical seminars and came across the cannabis infused edibles short course put on by the Institute of Food Technologists.
Stephanie Gorecki, Vice President of Product Development at Cresco Labs
I attended the short course in April of 2019. I realized that to be hands-on with cannabis in the near future, I would need to join an organization that was already in the space. The space was highly regulated which meant that research in the mainstream food and beverage space was limited.
Immediately following that seminar, I began to look for opportunities near where I lived. That’s when I came across the Cresco Labs career opportunity. The Director of Food Science position appeared to be a good match. I applied for the position and went through the interview process. Approximately two months after attending that seminar, I joined Cresco Labs.
Aaron: Awesome! It’s a cool story. In your role, how do you think about developing products that differentiate in the market?
Stephanie: There are many opportunities for brand differentiation in cannabis right now. There is a focus on high bioavailability and water solubility and how that translates to onset times once consumed. Many of these technologies utilize ingredient technologies and systems that I have experience with from my past work in the flavor industry.
Gummies and jellies are a great infusion matrix to start with because of their shelf-life stability. There are a variety of formulation techniques that can be used to deliver on product differentiations. There is an abundance of flavor varieties, colors, processing steps and cannabinoid ratios that can be baked into a formula to make that product line unique.
Here in the cannabis space, SKU variety is essential. It’s exciting to be a part of a company where we develop products that appeal to a variety of customer wants and needs.
Aaron: In that vein, what’s your process then for creating a new product?
Stephanie: I’ll start with how we develop an edible. Most of my background is in this type of product development, but the same process is applied to how we develop and extract vape, topical, flower SKU, or ready-to-smoke type products. We follow a similar stage/gate process utilized by most CPG companies.
Marketing typically presents our product development team with a brief on a new concept based on how they’ve read the needs of the market. There are opportunities for us to come to marketing with ideas for innovation, too. The product development team regularly works in our processing facility, so we as a team are aware of the different capabilities of each state and production line. During the briefing phase, we determine what is needed to be achieved and the parameters that the team would like the new product to deliver on.
For edibles, we begin our development work at The Hatchery. The Hatchery is our non-infused product development space that we utilize outside of our processing facility. In this space, we have several pieces of pilot equipment that allow us to scale and create prototypes that are highly representative of what our finished product will look like. For vapes, flower SKUs and RTS (ready-to-smoke) products, development and processing trials happen within our cultivation center.
All infusions are conducted in our licensed processing center. We also conduct stability testing and analytical testing in-house on our products. Our analytical lab is amazing – we have talented chemists and the ability to run GCMS, HPLC, microbiological testing, and many other analytical tests that are important for ensuring consistency and product uniformity.
Aaron: Can you expand on a point about testing? How do you think about testing at the different points in your manufacturing or production process?
Stephanie: Testing comes in several forms. We focus heavily on analytical testing since that does not involve product consumption. Potency uniformity and consistency is critical for edibles. For infused products, we have one shot at hitting our potency – infusion science is extremely important for us. Our gummies and chocolates cannot be re-worked, so hitting our potency range on the first attempt is important. If we miss the target, the product has to be destroyed.
We have methods developed to conduct in-process potency testing where we can. With the processes and infusion methods that we have implemented, we are rarely outside of our targeted potency ranges.
Aaron: Okay, awesome, then, can you walk me through your experience with one of your most recent product launches?
Stephanie: We recently launched Mindy’s Dark Chocolate Peppermint Bark, a limited time offering for our Mindy’s chocolate line. There’s a series of commercialization trials that we will conduct prior to launch. We use these trials as an opportunity to train our production teams on the new manufacturing instructions and processes.
When it comes to launching products, our technical teams are very hands on with new product introductions. Since we cannot manufacture product in one state and ship it to another state, we have to build processing centers and secure the proper licenses in every state that we’d like to operate in. When we have a new product ready to launch in a new state, our team works with Operations on the tech transfer piece. We’re there on-site during launches to oversee and train on the entire process until our teams are comfortable with manufacturing and packaging the new SKUs.
We monitor launches carefully to ensure product looks as it should before and after leaving our facility for sale in licensed dispensaries across the state. When there are opportunities to optimize a process post-launch, we will do what we can to make the process work as well as possible for the teams producing our products.
Aaron: Okay, so next question is, how do you go about sourcing ingredients for your infused products?
Stephanie: We manufacture our oils and extracts in house, and then source other ingredients externally. We have a supplier quality assurance process for new supplier approval, and we have documentation needs that we need each supplier to be able to deliver on.
Several of our suppliers have invested in research and development of products that will help us to meet our deliverables in the cannabis industry. Our suppliers, at times, have provided applications support in order to help with our speed to market and early phase prototyping. These types of partnerships are essential to us being able to make quick modifications and decisions on ingredients such as flavors and colors.
Aaron: Can you give me an example of a challenge that you run into frequently? This could be a business challenge or a cannabis-related challenge.
“I’m a scientist at heart. I look forward to more spending on cannabis research to show how THC and other cannabinoids can be used to treat a variety of conditions.”Stephanie: A big challenge for us and other multi-state cannabis operators are the variations in compliance regulations state-to-state. We have compliance managers in every state who work to ensure we are meeting all of the state regulations. Our packaging reviews are in-depth because of all the language that needs to be included on our packaging.
Each state needs its own packaging with proper compliance labeling. Some states require a cannabis warning symbol of a certain type. If we sell Mindy’s Gummies in 8 flavors and THC mg SKUs in four states, that is 32 different pieces of artwork that need to be managed and cross-checked for accuracy. We have 32 separate pieces of packaging for this one line of products. We have many lines of products with multiples strains (flower and vapes) and flavors (edibles).
Aaron: You mentioned packaging, do you do all of your packaging in house?
Stephanie: We design our packaging artwork in-house. We have a creative team who works on our product artwork, and then a team of cross-functional members tasked with packaging editing and review. Packaging reviews go through multiple rounds before being released for printing. We source a variety of packaging depending on the needs of the product going into the packaging. For edibles, our packaging has to be opaque. Product cannot be seen through the packaging in most states. This is great for our products that are made with natural colors that may be light sensitive.
All of our packaging needs to be child resistant. This limits the amount of packaging variety that we have, but this is a big opportunity for packaging developers. We want and need more sustainable forms of packaging that are differentiated from other packaging forms currently on the market.
Aaron: What trends are you following in the industry personally?
Stephanie: Cannabis trends that are of interest to me personally are fast-onset and water solubility technology. There have also been many discussions surrounding minor cannabinoids and how those can be blended together to drive customer experience.
There are traditional food trends that also impact how we formulate. Our Mindy’s Edibles line is flavor forward. The flavors are sophisticated. In the Mindy’s line, you won’t find a generic orange or grape flavor. Instead, you’ll find a Lush Black Cherry or Cool Key Lime Kiwi Flavor. This flavor development work starts with Mindy Segal, who is the face and talented James Beard award-winning chef behind our Mindy’s Edibles line of products.
Aaron: Okay, so the last question I have for you is, what are you interested in learning more about?
Stephanie: I’m a scientist at heart. I look forward to more spending on cannabis research to show how THC and other cannabinoids can be used to treat a variety of conditions. People use cannabis for many reasons: to relax, to ease aches or pains, etc. It’s exciting to lead part of our technical team during a period of time where cannabis is rapidly growing and is of great interest and increasing acceptance across our country and in the world.
Aaron: Okay. So that’s it. That’s the end of the interview!
While the 2020 Presidential election didn’t exactly end up in a clear landslide victory for the Democrats, there is one group that did well: the cannabis industry.
The results clearly show that the expansion of cannabis is a recognizable part of today’s society across the United States. States like New Jersey, for example, partly thanks to New York and Pennsylvania—which already allow the use of medical cannabis—traffic will start to force the state of New York’s hand and that’s a big chunk of the population of the Northeast.
If the question of legalization was on the ballot, it was an issue that overwhelmingly succeeded in delivering a clear mandate. Adult use of cannabis passed handily in Arizona, Montana, South Dakota and as mentioned above, New Jersey, and was approved for medical use in Mississippi and South Dakota.
With only 15 states remaining in the union that still outlaw the use of cannabis in any form, the new reality for the industry is here. All of these outcomes show promise as the industry’s recognition is growing.
Election outcomes and the position of the average American on cannabis
Americans are definitely understanding, appreciating and using cannabis more and more. It is becoming a part of everyday life and this election’s results could be the tipping point that normalizes the adult use of cannabis. It is becoming more widely understood as an effective and acceptable means to help manage stress and anxiety, aid in sleep and general overall wellbeing.
Voters in New Jersey overwhelmingly passed their adult use measure
This image of cannabis is aided by the many different forms of consumption that exist now: edibles, transdermal, nano tech, etc. No longer does a consumer have to smoke—which isn’t accepted in many circles—to get the beneficial effects of cannabis.
Knowledge expansion is going to move these products across state lines and eventually, the federal government will have to take notice.
Do Democrats and Republicans view cannabis through the same lens?
Cannabis is and will always be state specific. Republicans in general tend to be a little bit more cautious and there are a lot of pundits who believe that as long as the Republicans control the senate, there isn’t much of a chance for federal legalization.
President-Elect Joe Biden & Vice President-Elect Kamala Harris
There is some hope, however, that the industry will get support from the Biden administration. While President-Elect Biden has been on record as being against legalization of cannabis at a federal level, even he will eventually see that the train has left the station and momentum continues to build. In fact, Biden’s tone has changed considerably while he running for president, adding cannabis decriminalization to the Biden-Harris campaign platform.
Ultimately, how cannabis is viewed from each side of the aisle matters less than how it is viewed at the state level.
Cannabis reform under Biden
Biden had an opportunity to legalize cannabis federally in the U.S. during the Obama administration and it didn’t happen. It’s clear that the mandates of the Biden-Harris administration are going to be overwhelmed by current issues, at least in the beginning: COVID-19, the economy and climate change, to name but three.
What will be interesting is if the Biden-Harris administration goes to greater lengths to decriminalize cannabis. For example, cannabis is still a Schedule 1 drug on the books, which puts it in the same class as heroin. Biden couldn’t unilaterally remove cannabis from all scheduling, but his government could reschedule it to reduce the implications of its use.
This could, however, create more problems than it solves:
“It’s generally understood, then, that rescheduling weed would blow up the marijuana industry’s existing model, of state-licensed businesses that are not pharmacies selling cannabis products, that are not Food and Drug Administration-reviewed and approved, to customers who are not medical patients.
Biden rescheduling cannabis “would only continue the state-federal conflict, and force both state regulators and businesses to completely reconfigure themselves, putting many people out of business and costing states significant time and money,” as Morgan Fox, chief spokesperson for the National Cannabis Industry Association, said in an email on Monday.” (Source)
In reality however, there is little chance that Biden will spend any political capital that he has, particularly if the Senate remains in Republican control, dealing with the legalization of adult use cannabis.
What needs to happen for legalization to become a reality
Outside of the law, if Trump suddenly decided to legalize adult use cannabis before leaving the White House, the states would still need to agree on issues such as possession, transportation, shipment and taxation.
It’s clear that further normalization of cannabis use is required—which will likely take a good couple of years—in order for it to become as understood and as simple as wine, liquor or cigarettes.
Beyond that, it’s Congress that dictated that cannabis be illegal at the federal level and it will have to be Congress that makes the decision to change that. Even the Supreme Court has been reluctant to get involved in the question, believing this to be an issue that should be dealt within the House.
What does all of this mean for investment in the cannabis industry?
Cannabis should be part of most long-term investors’ portfolios. Like a group of stocks in a healthy market with the right balance sheets, cannabis is an expanding industry and growth is there.
Whether or not this is specifically the right time to invest, it’s always important to evaluate each stock or each company individually, from the point of view of the merits of the investment and investment objectives, as well as risk tolerance perspectives.
There isn’t any unique or special place to buy into the cannabis industry, unless it is connected to some new real estate or other opportunity that is COVID-19 related. This moment in time isn’t really any different from any other when it comes to the opportunity to own some cannabis stocks. It’s always a good time.
The short term returns of this market shouldn’t be speculated upon. There are just way more factors than the fundamentals of a company that will affect the short-term play. The country is in a transition of power, in addition to much international change taking place that can also contribute to returns in the short term, making speculation unhelpful.
The cannabis market in 2021
The cannabis industry is likely to continue to expand and grow with the select companies acquiring more and more and getting back to their cash flow. Some companies will slowly be going out of business and/or will be acquired by others going into a certain consolidation period of time. Whatever the outcomes in specific tourism dominated markets, the industry as a whole can really go in one direction.
Cannabis infused products manufacturing is quickly becoming a massive new market. With companies producing everything from gummies to lotions, there is a lot of room for growth as consumer data is showing a larger shift away from smokable products to ingestible or infused products.
This is the third article in a series where we interview leaders in the national infused products market. In this third piece, we talk with Liz Conway, Regional President of Florida at Parallel. Liz started with Parallel in 2019 after transitioning from her healthcare IT consulting practice. She now heads up Florida operations for Parallel which runs the Surterra Wellness brand.
Next week, we’ll sit down with Stephanie Gorecki, vice president of product development at Cresco Labs. Stay tuned for more!
Aaron Green: Liz, very nice to meet you. Can you tell me how did you get involved at Parallel?
Liz Conway: Well, I’ll give a little bit of background. Previously, I was working in healthcare technology and in that field, really coming out of health care reform. I was also living in Northern California and so was conscious of a bunch of startups that needed help with highly regulated spaces and policy and how to navigate both the today and the tomorrow of “Hey, we’re trying to build something super fast, but we’re not interfacing with government well enough to know how to build what we’re building and not be set back again.”
And so cannabis actually came to me. I started working with some early stage cannabis IT companies and I was the principal where I founded a firm to do this very thing, which was to help highly regulated companies get through what is today, what is tomorrow, and what can we change. I was really fortunate to be living in Northern California, and I started to help them navigate the California rules.
Then in 2016, when California went adult use, that was just a major time to turn everything on its head and see what we could get. From there, it was history. I started to work with companies, both nationally and in Canada, and met some of the folks with Parallel and was a consultant with them for a while and then joined the team.
Liz Conway, Regional President of Florida at Parallel
Aaron: So, are you in Florida now?
Liz: I relocated to Florida in January 2019.
Aaron: At Parallel, how do you think about differentiating in the market?
Liz: I think that we differentiate in terms of the quality of our product, of course, and I will speak specifically to Florida where our focus is still a medical market. Every day we are trying to manage the vertical from end-to-end so that we can get the products that our people want as quickly as possible over a vast territory. Well-being is such a critical ethos that everything we do comes down to, “alright, what does this mean for well-being and how are we delivering that both in the customer experience as well as in the product?”
Aaron: With regards to differentiation, can you speak to any products in particular that you feel are differentiated in the Florida market?
Liz: In the Florida market, I think that we were the first to launch thera-gels, and the thera-gels really are medicated jelly. You can use it sublingually, or take it as an oral to swallow. From that we developed thera-chews. That line, it’s really great tasting, it’s long lasting, and the effects are getting great reviews from the patients. So that’s one area that I think we distinguish ourselves and we’re a forerunner in the Florida market.
Aaron: So, if you take one of those products as an example, can you walk us through your process for creating a new product like that?
Liz: Well, so remembering that we’re part of companies in other states, because Parallel operates in Nevada, Massachusetts and in Texas. So, we’re not developing products on our own, but we certainly are doing Florida market analysis to say, what should come next, we are listening to our customers, we listen to our people, we’ve got 39 stores across the state. We have a number of employees who are always listening. We also have employees who are part of the medical program who are using the products to address different needs and they are looking at our competitors.
So, we’re doing some competitive analysis. We’re also knowing what it is that we’re really good at, and we take it through a product development lifecycle that involves testing because we are fully vertical. In Florida, we have to always ask ourselves are we able to do this end-to-end and thus far, we’ve been fortunate enough to either build or buy that capability.
Aaron: You mentioned there’s 39 stores in Florida? Are those dispensaries?
Liz: Yeah, they are our stores. There are other stores that other companies have, but we’re the second largest footprint in the state and all over from the very edges of Pensacola down to the Florida Keys, and then over to Miami and up through Tallahassee. So, covering really all corners in the state.
Aaron: Now, with those stores do you also market your products in other people’s stores?
Liz: No. The vertical really means that our stores only carry our own products. We’re marketed in Florida as Surterra Wellness and that’s the name of our stores. Anywhere you go that there’s a Surterra Wellness, you have the same product sets and we’re not allowed to sell other folks’ products. It’s a big difference between Florida and other states.
I’ll tell you one of the nice things is, when I have a product, I know that we grew it. I know every single quality step along the way. I don’t have to go and then look at other vendors and constantly monitor their quality. Everything that we do, we touched it from the very first moment hitting the ground. So it’s nice.
Aaron: Can you walk me through one of your most recent product launches? And if you can, the full lifecycle from the initial marketing briefing up to commercialization?
Liz: Well, I can do some of that. Speaking specifically about those thera-chews – that oral dosing mechanism – we’ve got it in a couple of different flavors. We said to ourselves, “hey, there’s a real need in this market for people to experience something that was like an edible, because Florida just launched edibles.” But we didn’t consider this as an edible because they weren’t allowed at that point. We knew from other states that particularly patients like to dose, you know, with something that is long lasting and flavorful. And so we said, “how can we bring this to market as an oral-dosing product?” And so we conceived the machinery that was able to do it. We had to do quite a bit of tooling.
Prior to that, we did some market testing from our customers and our associates as well as our brand team to say “is this going to be right? Can we bring it to market?” We did the projections around anticipated demand and program growth as well as the cost. We had to figure out what it would it take to adjust the machinery. Will it work? We did some pretty significant testing on that machinery and a lot of flavor testing.
We’re fortunate enough to have one of only four licensed kitchens that can do this kind of R&D in Florida. We’re licensed by the Department of Health for cannabis R&D on an edibles-type kitchen. So we were really fortunate to be able to do that to bring it to market. And from there, it really took on a life of its own. The flavors were tested across all of us (non-dosed flavors, obviously) and we voted on the best products to hit the shelves.
Aaron: When you’re making that decision, how much of the decision was weighted by market demand from your existing customers, and just observing other markets and seeing how products perform in other markets?
Liz: Data is not as prolific as I’d like it to be in cannabis. When you hit the edge of that state line, your consumer is very different, your stores are very different, your marketing capability is very different. So we really had to look across the US and say, “how are products like this performing? Is that how Florida is going to perform?” We did use that state-by-state evidence as well as our own evidence — the response to therapy gels — if we have thera-gels, what type are we selling in terms of dosage and flavors. There are slight differences there in effect-states. And so it was a little bit of both.
Aaron: Next question gets more into like the supply chain. How do you go about sourcing ingredients for your products?
Liz: So again, in a fully verticalized state, we have to source 100% of the active cannabinoid ingredients. Then we have an authorized vendor list that we’ve worked with for other things in terms of flavors and terpenes. Then we have to go back to the DoH to make sure that the other ingredients, whether that be sweeteners, or the kind of wrapping on those thera-gels are okay — the gelatin elements in particular.
“The Florida environment all day long is the biggest hurdle that I think we face.”We use an authorized vendor list. One of the great things that we’ve done recently is to focus our vendor list on minority women and veteran-owned businesses, and so really looking deep in the supply chain to source whatever we can from a diversity of suppliers. I love that original ethos of cannabis to be of the people, by the people and for the people, as well homegrown.
Aaron: Can you give me an example of a challenge that you run into frequently?
Liz: Well, I’ll say in Florida, if you’re growing your own cannabis, it’s way different than if you’re growing it in Colorado or California. So, I’m going to start there. The great news is that after Florida allowed us to start selling smokable flower last fall, we’ve come such a long way. We’ve got new indoor grow facilities. It’s making the environmental issues much, much lower.
“I think that the best thing that we can do is try to look five years ahead and ask what could this look like?”Bringing those on-line is going to bring a much more consistent consumer experience because while I know consumers have a lot of tolerance for variations in their cannabis, but as the industry matures, they’re going to treat us much more like other CPG companies. They’re not going to want that variation. Between that and then Florida’s new testing regulations which also are making sure that the product that’s delivered only meets what’s on the label.
The Florida environment all day long is the biggest hurdle that I think we face. The humidity is much higher here than in other states.
We’re also looking at live resin. What I am watching is the next generation. A lot of live products get us really close to the plant. We’ve done so much to pull out of the plant but where are we going to preserve that original plant in all of its most original formats without having to necessarily smoke the flower itself. We’re working with the Florida Department of Health to help them understand live resin products from a health standpoint.
Aaron: What trends are you following in the industry?
Liz: As you can imagine, as the regional president of a division that goes really end-to-end on monitoring trends in edibles and infused products, medical and recreational, I’m watching the election pretty closely. It will impact banking. It could potentially impact interstate commerce and it could potentially impact research.
I’m also watching things like HR trends, what’s happening in who we employ, our leadership, and how we deal with some of the emerging union issues around the country. I think that the best thing that we can do is try to look five years ahead and ask what could this look like? Where do we put our investment dollars now to meet the future, as well as where do we put our regulatory efforts for the best public policy to have the outcomes that we want consumers to trust us with? I know that’s a really broad answer, but from where I sit, it really is what I’m looking at, across a universe of excitement, but it includes challenges also.
Aaron: The last question is, what would you like to learn more about in the cannabis industry?
Liz: Well, of course, if I had a crystal ball, that would be great. I think the data is always missing. The more data that we could get, there’s so much out there that people are using cannabis for and we just don’t understand the impacts on how is this wonderful well-being product helping so many people because a lot of people don’t like to talk about it. So the more data about our consumers and what they like and what they don’t like, even across state lines, as we could aggregate that in a uniform way. I think it would help a lot of the people who are fearful of cannabis and it would help a lot of us who are in the business, get the consumers exactly spot on what they want, which at the end of the day is why we’re all here.
Aaron: Thank you Liz, that’s the end of the interview.
Five states had cannabis reform on the ballot yesterday for the 2020 election: Arizona, Mississippi, Montana, New Jersey and South Dakota. All five ballot initiatives won by a clear margin, with some races ending in landslides. Stay tuned for coverage on congressional and presidential elections and the impact on the future of the cannabis industry.
For now, here are which states legalized cannabis last night, as well as some details on the five (well, technically eight) state ballot initiatives:
Arizona – Prop. 207 (Adult Use)
Results: 59.8% Yes, 40.2% No
Details:
Legalizes cannabis for adults over 21
Puts a 16% tax on retail sales of cannabis and cannabis products
Develops a process for expunging records of cannabis-related drug offenses
Arizona already has an established medical cannabis program
Mississippi – Initiative Measure 65 & Alternative Measure 65A (Medical)
Results: 67.9% Yes for either, 32.1% No against both
Details:
Both initiatives theoretically legalize medical cannabis in the state.
There is a legislature-proposed alternative on the ballot, which makes things a bit confusing and gives voters the option of voting for both, neither or one of the two.
Initiative 65 would give the state’s department of health a mandate and authority to establish regulations for a medical cannabis program by August 2021. This initiative lists 22 qualifying conditions.
Initiative 65A gives the legislature the power to come up with their own program as they see fit and does not include any sort of deadline.
Legalizes, taxes and regulates cannabis for adults over 21
Requires the state’s department of revenue to license and regulate cannabis businesses
Puts a 20% tax on retail sales of cannabis and cannabis products
Develops a process for expunging records of cannabis-related drug offenses
Montana already has an established medical cannabis program
Initiative 118:
This just allows the language of the initiative to call an adult over 21, instead of 18 as it is stated in the Montana constitution.
New Jersey – Question 1 (Adult Use)
Results: 66.9% Yes, 33.1% No
Details:
Legalizes, taxes and regulates cannabis for adults over 21
New Jersey already has an established medical cannabis program – this ballot measure gives authority to the regulatory body currently overseeing the medical program, the five-member Cannabis Regulatory Commission.
Only applies the 6.625% state sales tax and prohibits additional sales taxes.
South Dakota – Constitutional Amendment A & Initiated Measure 26 (Adult Use & Medical)
Details:
Constitutional Amendment A Results: 53.4% Yes, 46.6% No
Legalizes, taxes and regulates cannabis for adults over 21
This also requires the state legislature to set up a medical program as well as a hemp program by April 2022.
Puts a 15% tax on retail sales of cannabis and cannabis products
Gives local governments authority to allow or ban cannabis businesses
Initiated Measure 26 Results: 69.2% Yes, 30.8% No
Establishes a medical cannabis program in South Dakota
It does list a few qualifying conditions like severe nausea, chronic pain, seizures and more, but it gives the state’s department of health the power to add more conditions to that list.
SD Department of health would have 120 days to set up regulatory framework.
It was 1996. I was four years old. California Proposition 215 passed and for the first time, legal medical cannabis became available. I don’t remember it honestly, but that moment triggered a reckoning of outdated and ineffective efforts to control cannabis, which continues on November 3rd.
The moment in 1996 created for me and my generation of millennials a new, decriminalized lens for which to view cannabis and its potential. In my lifetime, from first experimenting with cannabis after high school and then earning my PhD in plant biochemistry, advancing cannabis research, to starting an agtech company dedicated to the genetic improvement of cannabis, we continue this march toward legalization. But another march hasn’t started yet.
The cannabis we consume today is still largely the same (albeit more potent today) as the cannabis that was legalized in 1996. There’s been little advancement in our scientific understanding of the plant. This can and should change. I believe the future and legitimacy of the cannabis crop in the medical field and in farmers’ fields is on the ballot this November.
Five states have cannabis on the ballot for November 3rd
In 33 states, medical cannabis is currently legal and in eleven of those, including my home states of Nevada and Washington, legalized adult-use recreational cannabis is generating millions in tax revenue every month. But compared to every other commercial crop, cannabis is still decades behind.
We are seeing a glacial cadence with cannabis research. As voters in five more states consider this November whether to legalize cannabis, that same tipping point we reached in 1996 comes closer to being triggered for cannabis research.
Here’s what cannabis scientists, like me, face as we work to apply real scientific methods to the long-neglected crop: I published one of the most cited papers on cannabis research last year, titled, Gene Networks Underlying Cannabinoid and Terpenoid Accumulation in Cannabis. But, as per university policy, we were unable to touch the plant during any of our research. We could not study the physical cannabis plant, extracts or any other substantive physical properties from the plant on campus or as a representative of the university. Instead we studied cannabis DNA processed through a third-party. Funding for the research came from private donors who were required to be unassociated with the cannabis industry.
While we were conducting our heavily restricted, bootstrapped cannabis research, the university lab in the next building over was experimenting with less restrictions on mice using other drugs: cocaine, opioids and amphetamines. (Quick note, marijuana is listed as more dangerous than cocaine, which is a Schedule II drug.)
I get it. Due to the federal prohibition on cannabis as a heavily regulated Schedule I drug, universities cannot fund research without the risk of losing all of their federal funding. While the USDA does not support research and SBIR grants are all but impossible, one government agency does allow research, from cannabis grown only in Mississippi. It’s the Drug Enforcement Agency (DEA) and any research conducted using its crop is as ineffective as you’re imagining. Relevant research is likely impossible using the crop which dates back to a 1970’s strain with a potency that’s about 30 percent of today’s commercial cannabis offerings.
To change this anti-research climate, do what those in California did with Prop 215 in 1996. Vote.
Dr. Jordan Zager, author and CEO of Dewey Scientific
Vote for legalization of cannabis if you’re in those five states where legalization is on the ballot; that’s Arizona, New Jersey, Montana, South Dakota and Mississippi. The more states that align with cannabis legalization, the stronger the case becomes for the federal government to reschedule the drug from a Schedule I controlled substance. Currently cannabis is listed as a Schedule I alongside heroin. The DEA claims cannabis has no currently accepted medical use and a high potential for abuse. Both are not true, just listen to the scientists.
Those outside of the five states putting cannabis on the ballot can still play a role in creating a Congress that is more receptive to cannabis reform. This Congress is the oldest, one of the most conservative and least effective in our country’s history. Younger, more progressive representation will increase our odds of advancing cannabis research.
Cannabis holds far too much possibility for us to allow it to be an unstudied “ditch weed.” THC and CBD are just two of nearly 500 compounds found in cannabis which, when scientifically scrutinized will harvest – I believe – vast medicinal and commercial benefits and the tax windfalls that accompany both. But first you have to vote.
If cannabis and your representatives are not on the ballot, do something millennials have built somewhat of a reputation for failing to do; pick up a phone and call your current representative. Tell them cannabis deserves scientific attention and investment. There’s too much potential in the cannabis plant to wait any longer.
According to a press release published earlier in October, Metrc has won the seed-to-sale traceability software contract for West Virginia. The West Virginia Department of Health and Human Resources, Bureau for Public Health, Office of Medical Cannabis (OMC) made the announcement on October 21.
According to that press release, the main focus for the state’s traceability program is “helping OMC regulators ensure no illicit cannabis products are sold in the medical cannabis market, and also that no legal medical cannabis products are sold unlawfully.”
Regulators in West Virginia are still on schedule to open the medical cannabis market as soon as next year, according to Jason Frame, OMC director. “This is an important step to make certain medical cannabis is available only to West Virginians with serious medical conditions and to prevent diversion of products in West Virginia,” says Frame. “While the COVID-19 pandemic has put many industries across the country on hold, we’re proud to say that it has not stopped West Virginia from meeting its deadlines and laying the groundwork for a safe, regulated medical cannabis market.”
Regulators at the OMC are still working on scoring processing and retail license applications. The OMC says they will begin the process of issuing patient cards in the spring of 2021.
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The vote comes after the World Health Organization submitted a number of recommendations to the commission regarding cannabis, all of which were rejected except for the Schedule IV removal, according to Kyle Jaeger at Marijuana Moment. The WHO first issued their recommendations to change the status of cannabis last year in 2019.
